Debt is a tool, which if used correctly, can provide significant economic benefits, and if used incorrectly, can create emotional stress and cause you to lose control over your financial life. How do you know if you're too deeply in debt? Generally, if you are spending more than 15 percent of your gross monthly income on debt payments, excluding your home mortgage payments, you may have taken on too much debt. Here are some tips that will help you reduce your debt and some reminders of where runaway debt can lead.

How to Reduce Debt

• Always make more than the minimum payment.
• Avoid late fees; make your payment on time.
• Ask your creditors to reduce your interest rate.
• Add up the total amount of monthly debt payments you presently make. As you pay off each debt, continue that same high payment. You will get out of debt much more quickly.
• Set goals for paying off debt and stick to them.
• Avoid acquiring new debt — either spend less or earn more.
• Get a handle on the big picture. Track your spending to find out where your discretionary income is going.
• Consider consolidating your debts with one creditor if your interest rate will be significantly reduced. Note that this action will save you money only if you continue to make the same payment that you were making before you consolidated.
• Contact a credit counseling organization. It may be able to negotiate with your creditors to reduce your interest rate. The National Foundation of Credit Counseling provides budget counseling, educational programs, debt management assistance and housing counseling.

Potential Consequences of Not Paying Your Debt

• Loss of control over your financial future.
• High stress level, depression, loss of self-esteem.
• Added fees to debt balances.
• Harassing collection phone calls and letters.
• Balances grow with added interest.
• Wage garnishment.
• Loss of employment.
• Inability to obtain additional credit.
• Damage to credit rating.
• Bankruptcy.