6 Simple Steps For Making a Plan for Paying Off Debt Quickly

Do you have credit card debt? Are you looking for a way to pay off debt quickly? If you have consumer debt, you are not alone.

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Statistics state that half of all US households carry credit card debt with an average amount that exceeds $15,000. And with the current economic situation, that number will most likely rise over the next year.

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So, what can you do to get rid of credit card debt? And what can you do to pay it off fast? Most credit card debt is nothing more than a ball and chain.

Credit cards have their purpose, but carrying high balances is not one of them.

Credit cards are tools of convenience and are not meant to be an extended loan. Anyway…it might be a good idea before you get started to review what was charged on the account and see if you can spot any bad habits.

If so, this would be a good time to make a plan to change that as well. It does no good to go through the effort of paying off debt just to run the balances up again.

If you are looking for a way to pay off consumer debt, following these six steps will get you on your way to being debt-free.

Find Out Where You Stand

As debt begins to mount, it becomes easy to stuff unopened bills in a drawer hoping they will somehow take care of themselves, but unfortunately that will not happen.

Before you can get out of debt, you must know where you stand. This means you will need to get the bills out of the drawer, open them.

You cannot fix what you cannot see and that starts with getting all of your debts front and center so you can see your current financial state of affairs.

1. List Your Debt

Make a list of all of your debts. Make sure your list contains the total amount of what you owe, how much your minimum payment is and when the payment is due.

You can use a spreadsheet, a printable budget tracker, an online tracker or piece of paper will work for that matter. You just need to get all of this information down in one place so that I can be referred back as needed.

2. No New Debt

Now you know what you owe. It is time to make a promise not to incur any more debt while you are trying to pay off your consumer debt.

The goal is to reduce your debt as quickly as possible. That will not happen if you keep using your credit cards. If cutting them up is the only way that you avoid using them, DO IT! Some people suggest freezing them.

This step could be difficult if you do not have an emergency fund. If you follow Dave’s advice and can stash $1,000 aside, you will be able to manage small unexpected expenses without using plastic. That is the goal here.

3. Negotiate Lower Interest Rates

The first thing you will want to do is to try to negotiate lower interest rates. Most credit card interest rates are at least 14% with many of them as much as 30%.

You read the horror stories on the back of your credit card statements about how long it will take you to have your account paid in full if you make only the minimum payment each month.

Call your credit card companies one at a time and ask them to lower your interest rate. There is nothing wrong with letting them know that if you do not get a lower rate you will be forced to file bankruptcy.

The difference between paying 12% and 25% on $1000 in debt with a repayment amount of $50 each month is $121 in interest with a 23 month repayment period compared to $307 in interest and 27 month repayment period.

Getting your interest rates reduced will save you money.

4. Create a Repayment Plan

What this amounts to is selecting an order for repaying your credit cards. Some people suggest focusing on the card with the highest interest rate first.

Others say you should pay off the card with the smallest balance first. Paying of the highest interest card first will cost you the least in the long run. Some people find crossing items off a to-do list motivating.

That is why paying the lowest card off first is sometimes suggested. Pick the repayment order that works best for you…the one that is going to motivate you to get it done.

Pay minimum payments on all cards except the one you have chosen to focus on. Pay as much as your budget will allow on that card.

Follow this process each month until the focus account has been repaid. Pick the next card that will be your focus card and repeat the process.

Each time you pay a card off, you will choose a new focus card and you will add the previous payment amount to the minimum payment of the new focus account.

5. Reducing Your Spending

Look at where your money is going and figure out how you can cut back on your spending. Every bit that you can eliminate from your spending is that much more that can go towards paying off your debt.

Challenge yourself to cut unnecessary spending by a certain percentage or dollar amount. You will be surprised where you can cut expenses if you really try.

One of the quickest ways to come up with more money for paying off debt is by cutting your expenses.

6. Find or Make Extra Money

Start by looking at what you have in your home that you can sell. You can take a picture of a household item and have them for sale online in a matter of minutes with sites like eBay, Facebook and Let Go.

You don’t have to sell all your worldly processions, but if you have items that have never been taken out of the boxes…this could be a sign that is time to downsize.

You might address why you bought things and never took it out of the boxes as well.

If you don’t have things to sell, start thinking about what you can do that will bring in extra money.

Work extra hours at your current job. Take a part-time job. Start a business that does not require a large start-up fee. Can you write? Can you tutor? Look at the skills you have and figure out how to use them to make money.

Take any extra money that may come your way (income tax return, bonus, gift money) and put it towards paying off your debt.

Final Thoughts – Pay Off Debt Quickly

Develop a healthy obsession with becoming debt-free. Cutting your spending and increasing your income are the keys to paying off your debt quickly.

There is so much peace in being debt-free and not having to worry about money.

You may have debt now, but that does not mean that you have to keep it. Make it a priority to be in control of your own destiny.

And that happens by being in control of your finances. Credit cards have not always been part of life and people survived just fine. Remember, credit cards should be used to benefit you and not to finance a “keeping up with the Jones’s lifestyle.”

If you don’t think you can do this on your own, a debt management can be a perfect solution. A debt management company can help you get lower interest rates and set up a repayment plan.

Find out more about how a debt management company can help you get out of debt quickly. It is time to start working for your benefit and not to pay off credit cards.

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