a debt elimination plan
by David Berky
The method is simple. 1) Set
a monthly amount. 2) Pay all minimum amounts. 3) Pay
extra money toward the debt with the highest interest
This method will ensure that you pay the least amount
of interest and repay your debts as soon as possible.
The trick to paying the least amount of interest possible
is to pay extra money toward the debt with the highest
interest rate. Obviously you want that debt paid off
as soon as you can. Each month it costs you the most.
The trick to paying off your debts in the least amount
of time is to set a fixed total amount to pay each month.
The trap many people fall into is that they only pay
the minimum payments. These minimum payments are designed
to keep you paying that high interest rate for as long
By paying a fixed total amount each month, as one debt
is paid off, you will have more money to pay towards
another debt. This is often called the "snow-ball" effect.
But first things first.
First, determine you ability to pay. If your total payments
are much more than you can afford, you are in trouble.
You may need to contact a non-profit credit counseling
agency. You can find them in your local phone book or
But be careful of companies that want an up front fee.
Check with your local Better Business Bureau for recommendations.
Next you need to make a commitment to stop getting further
into debt. Cut up your extra credit cards or put them
where you cannot easily get them. If you are living
a lifestyle that depends on credit, you will soon dig
a hole you cannot easily climb out of.
Stop spending more than you make each month and don't
count on future bonuses, inheritances, refunds or other
non-dependable income to bail you out. If you make $2000
a month you can only spend $2000 a month. Look for ways
to cut back and purchases you can postpone or do without.
Now, let's look at each step of your ultimate debt reduction
plan more closely.
First, determine how much you can afford to pay each
month toward your debts. At the minimum it should be
the total of all your minimum payments for the current
You may need to examine your spending for the last several
months. Find things you can eliminate or do without
for a while. Postpone purchases, cancel subscriptions.
Anything to free up more money to pay off your debts.
You may even want to postpone investing for awhile.
Are your investments beating that 18% you are paying
on your credit card? If not, a better investment would
be to repay your debts.
Once you have your monthly debt repayment amount set,
you need to write down each monthly debt you are paying.
Record the creditor's name, the current balance, and
the interest rate. Then take a separate sheet of paper
and reorder the debts so that the debt with the highest
interest rate is at the top.
Now as each monthly bill comes in pay the minimum payment.
Subtract the minimum payment amount from your set monthly
total. After all the bills are paid for the month, take
any extra money left over and make another payment on
the debt at the top of your list.
You can make an additional payment this month or save
the money to add to next month's bill. But don't spend
As each debt is repaid, cross it off your list, but
keep paying the total monthly amount you set at the
beginning. This will accelerate your debt repayment
and save you hundreds or even thousands in interest
The two keys to your ultimate debt elimination plan
are to 1) stop getting further into debt and 2) set
your monthly debt repayment amount. The rest is easy.
You will be debt free before you know it!
© Simple Joe, Inc.
David Berky is president of Simple
Joe, Inc. which sells the Simple Joe's Debt Eraser PC
software. Debt Eraser can help anyone get out of debt
quickly and inexpensively by creating a Rapid
Debt Reduction Plan. This article may be freely
distributed as long as the copyright, author's information
and an active link (where possible) are included.