When John asked for guest bloggers, I jumped at the chance to write an article. I am a big fan of Adult ADD and Money!
I like for things to be super-simple. I created a super-simple method for getting out of debt. (Please note: The METHOD is simple. The WORK is hard!) The following applies to those of you who are current with all of your bills. If you are not current, your first step is to get current. In April of 2005, I had nearly 12K in debt. In February of 2006, I was debt-free. In March of 2006, I had 1K in savings. In October of 2006, I had 20K in savings. For those of you who are counting, that's a $32,000 turn-around in less than 19 months. I used the following super-simple method:
1. Pay your monthly minimums on all of your credit accounts. (Auto payment, CC payment, H.E.L.O.C. payment, etc.) 2. Pay your monthly bills. 3. Stay on your budget throughout the entire month. 4. Put as much extra cash into your savings account as you can. 5. At the end of the month, send a single extra payment (as MUCH as you can!) to the credit account with the lowest balance. 6. Rinse and repeat.
Note on step 5: You CAN send the payment to the credit account with the highest interest rate, but I like the psychological "jolt" of paying off those pesky little debts first.
That's it. Pay your minimums, take care of your monthly obligations, save up all extra money, and put it towards your lowest credit balance. In no time you will be debt-free.
Notes: Even when getting out of debt, I always kept a cash-cushion of $1500 for emergencies. For ANY debt reduction plan to work, you must develop some sort of personal budget! When I built up my savings, I used the exact same method, but I didn't have to send any minimum payments to credit accounts, and, at the end of the month, I got to KEEP the extra money that I had saved.
John, Thanks for the opportunity to write an article, NCN