Debt Is A War! Do You Want To Win?

When you’re paying back debts, a little strategy can make a difference of hundreds to thousands of dollars. The best strategy is simple, but effective.

Write Down Your Debts in Detail: What, How much,  What’s the interest rate? You should have no trouble finding this information; it should be right on the bottom of your monthly statements. Remember, you can’t manage your situation strategically if you don’t even know it. Remember to include your credit cards (with the different rates and balances for purchases and cash advances), other cards, loans, mortgages, and even money you’ve borrowed from friends and family. Every bit of debt counts and you’re trying to get it down to absolute zero.

Bad Debt Vs. Good Debt: Go through your debts and mark them ‘good’ or ‘bad’. You might think this is odd, but some kinds of debt are nowhere near as bad as others. A mortgage, for example, is an investment in a house, paid over a fixed term – there’s no real risk of paying a ridiculous amount of interest or never getting it paid off, like you could with a credit card.

Good debts: mortgages, student loans

Bad debts: credit cards, store cards, car loans

As a rule, good debts are for a fixed amount of time and allow you to buy something valuable that you cannot afford. Bad debts are ‘revolving’ and are just used instead of cash. (A Mortgage is your best friend! Call our office for more details!)   

Prioritize, Prioritize, Prioritize… Cross your good debts off your list for now – you shouldn’t think about paying them off until you’ve got your bad debts paid off.

Now, arrange your debts in order of interest rate, with the highest interest rate at the top. (Chances are that the debt at the top will be a credit card. Try to transfer as much money as you can from the high-interest cards down the list to the lower-interest ones.)

Once you’ve done that, focus all your energy on repaying the new top debt. Pay the minimum on everything else, and throw as much money as you can find at the problem.

Get a Budget! Try keeping track of where your money goes for a month – you might find that you’re spending loads on something you don’t even want or need.  You’ll be shocked how fast your debts can go down if you put the money you’d usually spend on “STUFF” and put that towards your debts. Do the Math: 1 trip to McDonalds cost the average person $10. 4 times per month that’s $40. 12 months a year = $480.00

You have to be aggressive against that top debt and determined to defeat it. Consistency is key.  Don't get discouraged! This is a war. You’re on the attack, and you want to win against your debt. Don’t you?