Create Your Own Ultimate
Debt Elimination Plan
by David Berky
The method is simple. 1) Set a monthly amount. 2) Pay
all minimum amounts. 3) Pay extra money toward the debt with the highest
interest rate.
This method will ensure that you pay the least amount of interest and
repay your debts as soon as possible.
The trick to paying the least amount of interest possible is to pay extra
money toward the debt with the highest interest rate. Obviously you want
that debt paid off as soon as you can. Each month it costs you the most.
The trick to paying off your debts in the least amount of time is to set a
fixed total amount to pay each month. The trap many people fall into is
that they only pay the minimum payments. These minimum payments are
designed to keep you paying that high interest rate for as long as
possible.
By paying a fixed total amount each month, as one debt is paid off, you
will have more money to pay towards another debt. This is often called the
"snow-ball" effect.
But first things first.
First, determine you ability to pay. If your total payments are much more
than you can afford, you are in trouble. You may need to contact a
non-profit credit counseling agency. You can find them in your local phone
book or online.
But be careful of companies that want an up front fee. Check with your
local Better Business Bureau for recommendations.
Next you need to make a commitment to stop getting further into debt. Cut
up your extra credit cards or put them where you cannot easily get them.
If you are living a lifestyle that depends on credit, you will soon dig a
hole you cannot easily climb out of.
Stop spending more than you make each month and don't count on future
bonuses, inheritances, refunds or other non-dependable income to bail you
out. If you make $2000 a month you can only spend $2000 a month. Look for
ways to cut back and purchases you can postpone or do without.
Now, let's look at each step of your ultimate debt reduction plan more
closely.
First, determine how much you can afford to pay each month toward your
debts. At the minimum it should be the total of all your minimum payments
for the current month.
You may need to examine your spending for the last several months. Find
things you can eliminate or do without for a while. Postpone purchases,
cancel subscriptions. Anything to free up more money to pay off your
debts.
You may even want to postpone investing for awhile. Are your investments
beating that 18% you are paying on your credit card? If not, a better
investment would be to repay your debts.
Once you have your monthly debt repayment amount set, you need to write
down each monthly debt you are paying. Record the creditor's name, the
current balance, and the interest rate. Then take a separate sheet of
paper and reorder the debts so that the debt with the highest interest
rate is at the top.
Now as each monthly bill comes in pay the minimum payment. Subtract the
minimum payment amount from your set monthly total. After all the bills
are paid for the month, take any extra money left over and make another
payment on the debt at the top of your list.
You can make an additional payment this month or save the money to add to
next month's bill. But don't spend it!
As each debt is repaid, cross it off your list, but keep paying the total
monthly amount you set at the beginning. This will accelerate your debt
repayment and save you hundreds or even thousands in interest charges.
The two keys to your ultimate debt elimination plan are to 1) stop getting
further into debt and 2) set your monthly debt repayment amount. The rest
is easy. You will be debt free before you know it!
***************************************************************
© Simple Joe, Inc.
David Berky is president
of Simple Joe, Inc. which sells the Simple Joe's Debt Eraser PC software.
Debt Eraser can help anyone get out of debt quickly and inexpensively by
creating a Rapid
Debt Reduction Plan. This article may be freely distributed as long as
the copyright, author's information and an active link (where possible)
are included.
|