Paying off Debt: A different approach

Before it gets out of hand, you want to have a plan to pay off the debt you have been accumulating. Do not wait until you are in the situation that your monthly income is less than your expenses. It can take years to overcome, and often your credit score is ruined in the process. Have a plan today that helps you manage your debt, pay it down, and keep it down.

If you are simply having a problem learning how to make a budget, you should be able to find many free services in your area that provide experts to help you with that plan. One of the services that is used quite often and can be extremely helpful is Consumer Credit Counseling non-profit agency. Do not try to find them online until you have reached them by phone and asked for their website. If you try to search, you may come up with many “debt consolidation” services that are nothing more than loan shark operations.

A true credit counseling service is not for profit. They are going to sit down with you and go through every single bill that you owe and look at your monthly expenses and help you come up with a plan to pay your bills and get debt paid off. One of the biggest reasons to use their service is that they can often reduce the amount you pay for interest rates, stop over-the-limit fees, stop late fees, and other helpful things so you have more money to put towards paying off the debt rather than spinning your wheels paying extra fees every month and the principle amount never goes down.

If you are savvy and have good willpower when it comes to budgeting your money, and you just want to buckle down and pay off debt, a great way to start is to make a list of all your debt. Include amount owed, payoff amount, minimum monthly payment, and payment due date. Once you have a list, get a poster board and list them in order from the highest pay off amount to the least payoff amount. Start from the bottom and work your way up.

This technique is a little different than what some financial advisors will tell you. Often times they want you to go to the highest interest rate first. However, once you pay off the smallest debt, you will have a little more in your budget to put towards the next bill. Once you “snowball” your payoffs and you have more and more that you can allocate to the next biggest debt, you can then shuffle your payments around to where you can also pay a little more on the highest interest rate debt.

Besides, this technique gives you much quicker satisfaction when you can quickly draw a big Sharpie line through a debt to show that it is paid off.

During this process, no matter which debt payoff system you use, you must be willing to cut up your credit cards, and hide away your debit card. Do not carry it with you. Once you work out your budget and you have a certain amount that you need to contribute for gas, groceries, and spending money, keep the allocated amounts in cash in three separate envelopes. Mark them for what they are, and only use it for that purpose. This way, if you use up all your spending money, you aren’t dipping into your gas or grocery money. Using a debit card sometimes is all too easy. You think that you can just juggle around your gas and grocery money for something you want, but then suddenly you realize you are going to need to borrow $20 from a friend just to make it through to payday.

Don’t put off having a plan for paying off your debt and creating a manageable budget. When you have a personal finance chart to live by, you more quickly see your worth grow. This will keep you on the right track to grow your wealth and live sensibly now so that later you can enjoy life like no one else. While everyone else is in bankruptcy court and hasn’t had a vacation in years, you are sipping margaritas on a Caribbean island enjoying the fruits of your hard work.