What would it feel like to be debt free?
What if you didn't have credit card payments or car payments?
It takes a lot of will, discipline, and courage to pay off your debt, but it can be done. I have personally witnessed dozens, and heard so many inspiring stories about the journey of different families paying off their debt. If you are inspired to pay off your debt, I will share the steps for success with you.
The first step is to take an honest look at what you owe. Grab the statements for every credit card and loan (not loans on your home) that you carry a balance on. Enter the creditor name, balance, interest rate and minimum payment information in the Savvy Debt Annihilator.
So you ask, what loans or credit cards should I pay off first? I advise families to start with the lowest balance method (see below) but don't get stuck on this now. Regardless, if you are focused on paying off your debt you will come out ahead. It doesn't matter where you start! Just enter the debt you want to pay off first at the top of the Savvy Debt Annihilator worksheet and then the second, then third, etc. Don't let this decision delay your debt annihilation. Keep it as simple as possible and start today.
Find the extra money this month to put towards paying off your debt. I want you to keep paying the minimum amount due on all your debts EXCEPT your debt listed at the top of your Savvy Debt Annihilator. On this debt I want you to pay not only the minimum amount due, but also include the extra amount of money you find available. Continue to pay at least this much each month on your first debt until it is paid off in full.
After you have paid off your first debt in full, focus your attention on your second debt listed on the chart. Apply at least the minimum you were paying on your first debt PLUS the minimum due on your second debt. After you have paid off your second debt then move on to the third debt on the list. Keep doing this until you are free of your debt.
Lowest Balance First: I usually advise paying off the lowest balance first. My experience has been you see the progress you are making quicker by paying off the lowest balance. This leads to a positive, empowering feeling about what you are trying to accomplish and that momentum carries you. The psychological effect of seeing the number of debts disappear more quickly is priceless in providing the energy to follow through. The argument against this method is you may pay more interest in the end than Highest Interest Rate First method.
Highest Interest Rate First: This strategy results in the lowest total amount of interest paid. Depending on the balance of your highest interest loans, it could take you longer to see your first loan/debt completely paid off. If the difference in the total interest is not significant, then you may get more satisfaction from the Lowest Balance First method.
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