Debt Reduction

It's called the "Debt Reduction Snowball." You organize your debt and your payments to start paying them down one at a time. You figure out your minimum monthly payments for your debts, organize them from smallest to largest, and start paying off the smallest first (you pay it off the quickest). Once the first one is done, you use the money you would've been paying toward the smallest and start applying it to the next debt and continue in this manner until you're done.

It requires perseverance and discipline. You don't want to simultaneously be incurring more debt as you pay off your debt, and it means being faithful with your payments. Debt is fixed by one of two ways:

1. Spend less than you earn.
2. Earn more than you spend.

The variable most easily adjusted (for the willing participant) is spending less. I know circumstances don't always allow for this, especially with mortgages, utilities, cell phones, families, etc. Getting into debt doesn't take much thought, planning, or discipline. Getting out of debt dose.

This is a great tool (and FREE!). We use it to keep track of my student loans that need to be paid off.

Debt Reduction Snowball Calculator and Payment Plan

Oh! It's counter-intuitive, but it's best to be SAVING while paying off debt. Put a little away each month (even if it means reducing how much you're putting toward your debt payment). In the long run, it's the most prudent. The last thing you want is your car to breakdown and you have NO money to pay for the fix because it's all going to debt. Guess what, if you're like most people, that fix HAS to happen....and it will. It'll just put you more in to debt.