2. Avoid debt consolidation plans that promise large reductions in your debt in a short period of time. There are no quick fixes. Debt reduction takes time an effort.

3. Avoid debt consolidation loans that are at higher interest rates than those you are currently paying. Paying more interest will not lower your overall debt.

4. If you choose a debt consolidation through a debt management plan make sure credit counseling agency you choose pays all creditors in a frequent and timely manner, otherwise your accounts could become more delinquent, accruing more fees and sending you deeper into debt.

5. One of most common pitfalls of debt consolidation occurs when consumers pay their credit cards off but continue to use them. Most people quickly max out again and end up with more debt and more pressure than they had before they chose debt consolidation.

If you make sure to choose your lender or credit counseling agency carefully, and know what you are getting into, you will avoid pitfalls and debt consolidation will be a positive step that benefits your overall financial situation.

* Compounding-Money made from an investment that will then be reinvested into same or another investment to generate its own earnings.

* Bonds-Money that is loaned to a company or government at a specified interest rate. The company will usually give some kind of document that states amount loaned and agreed upon interest rate and total amount that will be repaid at a specific time or "maturity date".

* Stocks-Pieces of a company that are for sale. One would buy stocks from a company at a given price in hopes that company would gain a significant amount of money and that they would be able to sell stocks at a higher price.

* Money Market Funds-Money invested in debt by a mutual fund. The goal is to obtain money from interest to debt. The benefit of Money Market Account is that they offer very low investments of less than $1.00.