This post is part of a series on money related goals that are common personal finance resolutionsas we kick off a new year in 2010.
In preparing for battle I have always found that plans are useless, but planning is indispensable. -Dwight D. Eisenhower.
I’ve used this quote in a post before, but it is a really good one regarding the importance of planning.
Eliminating debt is like fighting a battle in a way.
Debt is the enemy and you have to eliminate it.
It is not always easy, but by careful planning, you can increase the odds that you will be successful. It is not the plan itself, but the act of planning that will allow you to achieve your goal of being debt free.
You can write down the best plan in the world, but if you never look at it again, it is useless. If circumstances changes and you do not go through the act of planning again, your original plan will also be useless.
Your debt is not going to go away by itself- there is no magic “debt fairy”, regardless of what some companies advertise on TV, that will sneak in your house in the middle of the night, and magically pay off or eliminate your credit card debt, or any other debt, for that matter.
A Simple Way to Plan Out Debt Reduction
Figure out how much you owe and create a list of debts
List out all of your debts, including balances, interest rates, and monthly minimum payments. Then, order them by the highest interest rate first (what pf blogger Flexo at Consumerism Commentary calls the debt avalanche method), or by lowest balance first (Dave Ramsey’s debt snowball plan).
Math will tell you that paying off the highest interest rate debt first will save you the most money (debt avalanche). For some, though, paying off and eliminating the smallest debt first (ala debt snowball) will provide an emotional boost to keep you going as you eliminate debts one-by-one.
In the end, it doesn’t matter which method you use, as long as you plan it out and stick to it!
Find a way, any way (legal, of course), to pay more than the minimum on the debt on the top of your list.
To pay off your debt as quick as possible,you may need to both:
1.) Make more money, and
2.) Cut back on expenses to free up cash to pay towards the No. 1 debt on your list.
Use frugal living and money saving tips to make this extra payment as big as possible.
After you have the No. 1 debt on the list wiped out, you take what you were paying on that one and move that payment over to debt No. 2 (which is now debt No. 1 on your list), increasing the payment you were previously making on that debt.
Repeat until complete!
The trick is to keep at it, and review and update your plan of attack regularly, at least monthly, but preferably much more often, and when you get a debt paid off. Tracking it on a spreadsheet will make it a little easier, but a pen and paper would work out fine too.
Plan your attack on debt starting today!
Similar Posts:
- Tweaking the Debt Snowball to Fit Your Life
- Debt Reduction or Debt Elimination- Do the Words You Use Make A Difference?
- Creating an Aggressive Credit Card Debt Elimination Plan
- Going from Debt to Wealth- A Closer Look at Dave Ramsey’s 7 Baby Steps Plan
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Have to agree with you, eliminating debt is like fighting a battle, if you do not create any plan of eliminating your debt then you will sure end up filing a bankruptcy. I have actually done some of the listed advices and it really works. Great article.
Thanks !
A plan is definitely a must for getting out of debt. Then taking action on that plan is the key. Every little bit helps, so don’t wait for the “perfect” plan, because it won’t happen.