5) Get out of Debt

collection_agency_250x251After you have evaluated where your income is going, there is a very important next step.


You and your family need to come together and agree that getting out of debt is more important than any other purchases.   Once you are aware of where the dollars are leaving you can commit to eliminating some things and redirecting dollars to freeing your self from debt.

Getting out from underneath the oppressive burden of Debt is not only liberating, but it is like giving yourself a raise. You get to keep more of your money.  Once free, invest that same amount so that it can pay you.  It reverses the cycle of money leaving your pocket to money being directed back to you.

But you need a plan. It takes tremendous emotional commitment and self control to get clear of debt and not find yourself there again.

Remember: this is much more of a mental issue than a financial one. It takes true commitment to delay purchases until you can pay cash. But it is worth it. Stick to the plan. You can do it if you really want out.

Before you waiver, let me remind you of the pain. Revolving interest on your credit card balances is to be feared. It grows your debt, devours your payments without making much of a dent in the balance, and makes the debt almost impossible to kill.  Statistics say that it can take 13 years to pay the average American credit card balance.  Where has happened to the shoes, toys, restaurant meals 13 years later? Whatever purchase is made with a card can take YEARS to pay off and can double the initial purchase price when you finally do. This is the single biggest thing you can do to improve your financial position.


1. What are your current bills? Write it down, lowest to highest. List the total balance,  and minimum payment for each.  Download and Print this worksheet

2.  Attack the lowest bill first, the first on your list. Pay as much as you can until its gone. Kill it. Pay the minimums on everything else.

3. Assume the debt you just killed had a minimum payment of $25. Now that it is paid off, take that $25 minimum and add it to the second minimum payment on your list, example $75. The first bill’s minimum of $25 is added to the second bill’s  minimum of $75, total of $100.  Now pay $100 on the second one until it is gone. Dead. Done. Pay the minimums on the rest.

4. Got it? Now take that $100 and add it to the third one’s minimum payment. That is your new payment to the third debt, and paying the minimums on everything else.







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