Many people, even those struggling with midlife financial disasters and challenges such as divorce, widowhood, layoffs, and high college tuitions, are able to become debt-free on their own, without using a consolidator, credit counselor, or bankruptcy attorney. Going it alone might take a little more effort, but in the end your debt-management skills will be highly honed and your sense of accomplishment will keep you from getting back into bad debt again.

Plan and Priorities

First, you need to set your priorities; decide what your longer-term goals are. Focusing on longer-term goals such as retirement or starting a business will make the short-term pain of changing your lifestyle in order to pay down debt more tolerable. Most people who struggle with their monthly budget haven't clearly set longer-term goals. They make decisions in the present moment rather than setting aside resources for a greater, but longer-term, goal. Write down your long-term goals. These goals are the reason that wasting money on high loan interest and revolving debt is harmful to your financial security. Write them down and post them where you'll see them often — in your checkbook, on your computer desktop, or even on the bathroom mirror. When you're tired of the sacrifices you're making to pay down your debt, glance again at your goals and remember why you're doing it.

Next, set your sights on your accounts. Refer to your credit report and account statements and make a list of your accounts, their balances, interest rates, and minimum payments. Look back at your budget and decide which of your current expenses are of lower priority right now than the goals you listed for yourself. Add up the money per paycheck or per month that you can apply to debt principal. Get ready to apply 90 percent of that — call it your “pay-down fund” — to your debt and 10 percent to a new savings account. Not putting everything against the debt is part of the strategy for staying out of debt once everything is paid down. The 10 percent that you're planning to save is your personal “freedom fund” that assures you'll never be in debt again.

Pay all your accounts at their minimum payment except the “target” account. Target the smallest account first; pay the minimum balance plus the pay-down fund amount to that card until it's paid. When that card is paid, add its minimum payment to the pay-down fund, then set your sites on you next target, accounts that are over 50 percent of their credit limits. Pay them down in turn the same way you did the smallest account. You'll be debt-free before you know it and your growing freedom fund will keep you from using new debt when you encounter an emergency.

Negotiating with Companies

Contact the companies to which you owe money as soon as you expect you'll miss a payment or need to make a payment late. Many companies will work out a payment schedule with you if you're up-front about your situation. Too many people wait until they've missed a payment or two — or more — before calling their creditors. By that time, the negotiations are much more difficult.

If you're in the situation where you've waited to call your creditor and are now faced with the awful taped messages they play after you've entered your delinquent account number into their phone directory system, it is important to keep your cool. Don't get angry with the call-center representative. Tell them that you would like to negotiate a payment plan. If they can't negotiate, ask to be transferred to a supervisor.

Creditors do not have the right to call you at work or to threaten you in any way. If a creditor is calling you at work, tell them that they've dialed a work number and ask them to stop. (Review the checklist at www.ftc.gov for help managing creditor relationships.)

Focus on paying secured loans first. Loans that use your home or car as collateral are important to maintain. Keeping your utility payments up to date is more important than paying unsecured debt such as credit cards. As a last-ditch measure, many creditors — or collection agencies representing your creditor if the creditor has charged off the account and sold it to the collections agency — will accept a lump sum payment that's less than the total owed. Use this option as a last resort. Keep comprehensive records of all correspondence with the company — yes, don't negotiate by phone with a collection agency — and don't let on that you need to settle quickly. Time is on your side by the time you deal with the collection agency.

Out of Debt: Now Stay that Way

Now that everything is paid off, go back and look at your growing freedom fund savings account. All along, you have been putting 10 percent of your extra income per month into that account. It should have built up to a nice amount by now, something you can be proud of. Double check that you've budgeted so you're sure your fixed expense and variable expense baskets properly cover your expenses. Keep your freedom fund going into savings until you have accumulated an amount equal to between three and six months of total household expenses. When you reach that level, reduce the direct deposit to savings down to a comfortably small amount, say $50 or $100 a month. Now, with that small amount replenishing the account you can feel safe that if you need to use it for emergencies you won't fully deplete it and you won't sink back into debt.