Do you know what the worst part of being in debt is? The feeling of overwhelming hopelessness that comes along with making payments month after month and watching while those totals don't seem to get any smaller!
I was very surprised when I was reading through a book on debt management one day and found out that paying as much as I could on each account each month was actually the most inefficient way to pay off my debts I could possibly have chosen. Instead of that, the book suggested making minimum payments on every account but one each month and funneling all of my extra money into that account. Once that debt was paid I'd take the amount I was paying on that, add it to the minimum payment I was making on the next one, pay that off and move all that money to the next…and the next…and the next.
That way I paid off my debts one at a time, but I got them out of the way a LOT faster.
To give you an example, let's say I was paying on two credit cards and a student loan, all of which had minimum payments of $10 a month but balances of $1,000 apiece. I had $150 to spend on those payments each month. Instead of paying $50 per account I paid $10 a month on my student loan and $10 a month on one credit card and $130 a month on the other card. At the end of 8 months (give or take) I had that card paid off and started paying $140 a month on the other card and $10 a month on the loan. When that was paid off I started paying $150 a month on my loan.
Voila! No more debt.
What are your best debt busting tips?
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