Money Management

Your Get Me Out of Debt Plan:
Steps for Creating Your Plan

Your get me out of debt plan continued from Getting Out of Debt

As mentioned before, You reduce and eliminate your debt when you have a step by step plan and you follow it as it was designed.

It's important to understand how important it is to make sure that your Get Out of Debt Plan is SMART, let's look at steps 5 through 9 of your get out of debt plan.

Remember as you are creating your "get me out of debt" plan:

How important it is that the plan be easy to follow,
Come up with Ideas to eliminate credit card debts - mainly the principal of your debt
You are in control of how well the plan works for you.

Steps 5 Through 9 for Creating Your "Get Me Out of Debt" Plan

Pay the Minimum Payment of each Debt each Month

You must pay the minimum payment as calculated by the credit card company. If the debt is not for a credit card and you have negotiated a repayment plan then include the negotiated monthly payment. You don't want to increase your debt by adding late payment charges to it and you want to show the credit card companies that you are honoring your contract with them. List out all minimum payments. Any amount that is left over is used to pay off the rest of the debt.
Start with the Lowest Balance Card

Once your secured debts in arrears have been paid off, debts that your wages can be garnished for, and any necessary expenses are paid off, take the extra amount of money you have dedicated to paying off your debt and pay off the lowest balance first. Put the maximum you can to the lowest debt, finish paying it off and then move to the next debt. Paying off the lowest balance will give you a sense of accomplishment and something to celebrate.
Create a Schedule of How Long it will Take to Pay off Debt

Calculate how long it will take to pay down your debt. Write on the top of your plan "WHY" you are paying off your debt. (see our Things to Remember when Reducing your Debt) Remember that each month you are charged interest and it is compounding. The minimum payment doesn't usually cover the interest charged to your account. Create a schedule and determine how long it will be. Will it be 3 years? 5 years? 1 year? How long it will take you to pay off the debt will greatly depend on how many extra payments you can make against your card. Check out our ideas on paying off debt quickly.
Continue Until All of Your Debt is Paid off

Continue working your getting out of debt plan by paying the minimum payment on your outstanding balances and pay the extra to the lowest balance as per your schedule you worked out in Step 7. Each milestone you hit - Celebrate! It is important both to your motivation and sense of accomplishment to acknowledge when you hit your milestones!
Once Your Debt is Paid Off

What do you do when you have accomplished your "get me out of debt plan"? First - CELEBRATE! Then continue on with your overall personal finance money management game plan for your money. Most importantly though, is to take that extra money each month that you are not paying your debts off with, and start an emergency fund to make sure you don't go back into debt. Check out our spending plan's (coming soon) to see how to create a plan for your money that allows you to have whatever it is you want, and not go into debt to get it!