Debt is something that plagues almost all of us, in one form or another. Whether it’s just a mortgage or car payment, or credit card debt that is weighing you down, it’s no secret that debt can be devastating. It usually seems to start small, but if you aren’t careful, it can snowball out of your control. No matter what amount of debt you have, even if it’s only a few thousand dollars, you should have a plan in place to get out of debt, no matter how small.
Budget out minimum payments
Take into all of your debt, and figure out what your minimum payments are every month. Let’s say that you have one credit card that has a minimum of $35, another is $105, and then you pay $1400 for your mortgage and $200 for your car payment. Swap these numbers out for whatever minimum payments you have for your various types of debt. So, you have to set aside $1740 to put towards debt every month. That’s what we’ll start with.
Set aside a little more than you need
You can technically get out of debt by making these minimum payments everyday. But you’ll be making payments for the rest of your life. We recommend finding a way to set aside a little bit more than is necessary every month. It doesn’t have to be a lot. Maybe round it up to $1800, instead of $1740. The amount you add onto it can vary each month, depending on what you’re able to do. Maybe one month you get a bonus at work, and have an extra $200 to put towards debt.
Start with the smallest debts
Prioritize your debts from smallest to largest. Pay your minimum payment for all debts every single month, but then with the smallest, pay extra. Again, however much you are able. Eventually, by using this method, the smallest debt will be paid off. So, let’s say that you pay off your smallest debt after 6 months. You were paying the minimum of $35 every month, and whatever extra you could afford. Now, in the coming months, add that $35 + whatever else you can, to the next smallest debt. The idea is, with these larger payments, you’ll pay off your debts in order from smallest to largest. Eventually, you’ll have just the largest debt, which is $1400 a month using our previous numbers. But, you’ll keep paying that $1800 a month, to get that debt paid off faster.