5 Tips to Help You Become Debt Free

5 Tips to Help You Become Debt Free

Debt can be one the of most difficult things a person can deal with. It can cause an incredible amount of stress on not only yourself but also for the people around you. The good thing is being able to eliminate debt can be much easier than you think. It just takes a little bit of planning and an ounce of patience.

1.  The first thing that you need to do is make a list of each credit card and debt vehicle that you have.  Then with each of these make sure you list the corresponding amount owed, the interest rate and the minimum amount due.

2.  Next you need to arrange these in order starting with the one that has the highest interest rate.  You are going to want to pay this one off first.  By eliminating the debt with the highest interest rate you will allocate more on your cash to principal reduction and not to wasting it on interest.

Example:

3.   The next item on the checklist is to sit down and figure out how much money you can reasonably afford to spend on debt reduction each month.  A lot of my readers tell me that they can only afford to pay the minimum balances on their credit cards if they want to still be able to pay their rent/mortgage and their car payments.  Well did you know that if you only pay the absolute minimum balance each statement period it will take you nearly 15 years to pay that bill off in full.  That is not the way to become debt free without the stress.

Once you figure out how much you can reasonably afford you will want to subtract the minimum balance of all your debts from this number.  That will be the extra amount that you will want to pay towards the debt with the highest interest rate.

Example:

4.  Continue to do step three each month until you are debt free on that highest interest rate balance.

5.  Repeat these steps for each of your bills on the list until you are completely debt free.

Once you have a plan of attack and stick to it, debt reduction is not as stressful as most people think.

  1. Antionette Blake, 02 April, 2012

    These are great tips!

  2. Life [Comma] Etc, 10 April, 2012

    Greetings from the Carnival of Personal Finance! These tips are a great way to get started!

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