With the New Year all but here, there's no better time than now to plan for getting rid of excess debt in 2006.

Any time borrowing threatens to spiral out of control, it's smart to take action before you find it difficult to pay off loans or credit card balances.

The best way to control debt is to manage borrowing and spending. Borrow only when necessary, shop around for competitive rates, and pay off credit card balances every month.

And distinguish between "good" and "bad" debt. Good debt is used to purchase an asset that has lasting value, or whose value is likely to increase. Bad debt is used to buy something that is consumed immediately, or with decreasing value.

Although high-rate credit card debt can quickly grow if you carry a balance, credit cards are also handy money-management tools when used wisely.

Take advantage of the interest-free period between when you charge a purchase and the time the monthly balance is due and you have a short-term, interest-free loan.

Credit cards are convenient, help supplement cash flow and may have other features that can save you money-ranging from free purchase protection insurance to travel rewards.

However, careless credit card use can lead to financial difficulty because credit card interest is higher than other types of borrowing.

If you have significant card balances or other high-rate debt, one of the best ways to get it under control is to consolidate borrowing.

You can take out a lower-cost, unsecured personal loan at a financial institution and use it to pay off existing debt.

You'll significantly reduce interest costs and make your financial life less complicated because you'll have fewer payments to worry about every month.

In essence, you'll be rolling a number of separate bills into one payment.

Another option is to pay off high-rate debt with a secured loan-such as a home equity line of credit.

It may even be possible to trade higher-rate personal loans for lower interest-rate debt.

Although this may not work when rates are rising or stable, it is a viable strategy when rates decline and new loans become cheaper than existing loans.

Consider taking out a new loan at a lower rate and use it to pay the outstanding balance on an existing loan. Your financial institution may let you refinance a loan at lower rates; if not, consider borrowing from another institution.

Another money-saving strategy is to use tax-deductible debt whenever possible. Interest on funds borrowed for investment purposes-such as investing in securities or rental real estate-may be tax-deductible. It may also be possible to "convert" non-deductible debt into deductible debt.

For example, you may be able to sell investments to pay down your nondeductible mortgage and then borrow the same amount to repurchase investments.

It's important to note that tax rules regarding interest deductibility are currently under government review.

Additionally, leveraging can be a risky proposition and is not for everyone. Anyone considering such a strategy is encouraged to consult a professional.

If you need help with debt, speak to your financial institution or a financial advisor. Or get help from a credit counselor.

The sooner you get out from under a mountain of debt, the better off you'll be.

- Article provided by Edward Jones investment firm. Edward Jones is a member CIPF. In Barrie, call 792-6721.