1. First things first, stop using your credit cards. Cut them up, throw them away, flush them down the toilet. Do whatever you have to do to stop using them. You won't be able to pay off your credit card if you keep spending on it.
2. Call all your creditors to try to reduce your interest rates. This is much easier to do with banks versus department store cards. Do a little research to find out what promotions other banks are offering and then call your bank and ask them to match or beat what you've seen. Also find out about any extras that are on your card that may be causing your interest rate to be higher. If you have any annual fees get rid of them.
3. List all of your debt except your mortgage from smallest to largest balance. Make minimum payments on all your debt and put any extra money you can find onto the smallest balance. Once you've paid off the smallest balance, take the minimum payment and the extra money from the first debt, and apply that to the second smallest balance until that's paid off. Now take the money you were putting towards the second smallest balance and apply that to the third smallest balance and so on. Notice that every time you finish paying off one debt, you are applying more money to the next smallest balance because you are taking the previous minimum payments, plus the extra money and applying that plus the minimum payment you were already making to the next smallest balance. This will help you pay off your debt faster than you think. I've done it and it works.
The reason why I suggest paying off the smallest balance first, rather than the highest interest rate is because when you pay off the smaller balance, you will feel great that you paid off a credit card or a loan in full. This will motivate you to keep on going. It's much easier to pay off a $2000 credit card, than it is to pay off a $10,000 card. Besides you'll get to that $10,000 in no time with this approach.
If you are having a difficult time finding extra money to throw onto your loan and credit cards, try this exercise. Make a list of everything that you spend for one whole month. I mean everything, if you spend five cents write it down. Don't cheat or the exercise won't work. After the month is over review your list. Look for items on the list that you didn't need to buy. You'll probably notice some impulse buying, or if you're like some people that do this exercise, they catch themselves buying things they don't need because they remember they have to write it down, and don't even bother with the purchase. The extra money comes from not buying some of the items you find on the list.
2 comments:
Very good tips:D I've been doing the same thing with my wife and it's helping us out a lot. We're well on our way to credit card free!
Way to go Aaron! You two will be out of debt in no time.
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