Debt Destroying Tips

Ready to get out of debt and regain control of your finances? Use these great debt destroying tips to eliminate debt as quickly as possible.

• Contact credit card companies to try to bargain down interest rates. This could save a lot of money! Just call the toll free number on the back of your credit card and tell them that you are working to become debt free and need their help. I’ve seen rates drop from 29% to 9%! This will not only drastically reduce the amount of interest you pay over the duration of the loan, but also lower you minimum monthly payment required.
• Prioritize the order in which you will pay off your creditors. Pay the minimum amount possible on all debts except the one that is the highest priority. Focus on just one at a time. There are two schools of thought as to what order you should pay off creditors. Regardless of which you pay off first, a mortgage is almost always last on the list. As a matter of fact, it can often be unwise to pay off your home early rather than to invest for the future. So, which debts do you pay off first? Here are the two strategies we see:
  • Pay off the highest interest rate first. Financially speaking, this is the fastest, most efficient way to eliminate debt. Personally, I think this strategy makes the most sense.
  • Pay off the smallest balance first. There are a few people who think it is best to pay off the smallest balance first. Why? Because they feel that people need “victories.” In other words, it makes them feel better when a debt is paid off and it energizes them to continue on to the next. The important thing here is to understand your personality. Do you need these “victories” or do you just want the fastest way out of debt?
• Consider refinancing your home if you have equity built up. This can be a great way to get a lower interest rate on your debts that the interest may be partially deductible. Only do this however if you are committed no never using credit cards again. Often times I’ll see people who refinance their home to pay off debts only to fall back into the bad habits that put them in the situation in the first place.
• Consider selling frivolous items. This could be anything such as a boat, gun collection, golf clubs, jet skis, etc.
• Scale back. Larry Burkett always talked about “needs, wants, and desires.” For example, you need transportation to work, you want a new car, you desire a Mercedes. Larry taught that while you’re in debt, stick with your needs. Cut out the wants and desires.
• Stop investing. If you’re adding to a 401(k), IRA, or other investment program, you should consider stopping for now. If your debt is charging 19% and your investments earn 8% long-term, you are going backwards. Instead, you could use the money to pay off your debt even faster.
• Create a budget. Organizing your finances with a budget will help you to identify problem areas. It will help you to plan for your future goals. A quick web search will reveal several free guides to create a budget as well as free software programs and smartphone apps. You can also check out our free Excel spreadsheet for simple budget needs.
• After your high interest rate debt is paid off, it’s time to build an emergency fund. Contact us to get started.
• Once you’ve established some cash reserves, it’s time to begin investing. Contact us to get started.