Keep Your Eye on the Prize Part Two
Be your own personal trainer and tailor your payback program to your own personal style. Although the biggest savings will come by getting rid of your most expensive debts first, that approach may not work best for you. Consider your options carefully, and choose the one you feel you can stick with:
Maximum Savings: With this plan, you pay just the minimums on all your debtsexcept the one that carries the highest interest rate. You throw as much money as possible toward that debt to get rid of it as quickly as you can. Once that balance is wiped out, you start on the next one.
This methodpaying your highest-rate cards firstis going to save you the most time and money in the long run.
This method for paying off your bills is very powerful. With credit cards, you usually have a minimum payment that’s based on a percentage of how much you owe. So when you make a payment, the next month’s minimum payment is smaller. That stretches out your debt for years. When you instead start committing a fixed amount to paying off your debts, you beat the bank at its own game and speed up the time it will take you to pay off your balanceoften dramatically.
There are two secrets to this method: First, commit a fixed amount toward your loan payments each month until they are all paid off. Say the first month your payments total $250, including the extra money you’ve decided to put toward paying them off. You want to pay a total of $250 every month until they are all paid off. If you have some extra money to throw at them one month, go for it. You’ll just pay them off a little faster.
Second, stop charging! If you have to use a credit card for emergencies or whatever, keep one card separate and try to pay it off as soon as possible. If you start charging on the cards you’re trying to pay off, you’ll find yourself digging the hole deeper.
Quick Results: If you’d like to see some fast results, don’t worry about the interest ratesyou’re better off just getting rid of a bill as soon as you can. Choose your smallest bill and go at it with a vengeance, putting all the money you can toward it until it is paid off. Then go on to the next smallest balance, and so on.
Of course, both of these approaches assume you’ll do everything you can to stop taking on new debt. You simply can’t shed debt if you keep charging.
Starting Over: Sometimes the debt load is so high that there is no other choice but to file for bankruptcy and start over. On the one hand, bankruptcy isn’t the easy fresh start some attorneys would lead you to believe, but on the other hand, it is necessary for many people who are overwhelmed by debts.
