You now have a sheet of paper with your list of debt accounts. Re-order your list so that you have your accounts listed lowest balance to highest balance. Nest, write down your monthly minimum payment for each account. Add your minimums together. This is your total monthly minimum payment amount for all of you debt. This is a very important number to know. Why? Because, no matter what happens during the month, it is vital that you make your minimum payments on all credit accounts. Missing even one payment can cause your interest rates to soar, and even being just a few days late with a payment can cause harm to your credit and add fees and penalties to your accounts. You always need to make the minimum payments for every account. (Please note: This information is for those who have enough money to pay their bills and get out of debt. If you are in a situation where you are unable to make your minimum payments, and/or you are facing a bankruptcy or foreclosing, PLEASE seek the advice of an actual personal finance expert. I’m just a dude at a computer, and I write to folks who have the money to pay-off their debts but who do not know where to begin or the process to follow. If you are highly in debt and facing financial crisis, please seek professional advice and help.)
At the conclusion of step 2, you should now have a chart that looks something like this:
|Debt Reduction Master Sheet|
|ABC Charge Card||$500.00||11.99%||$25.00|
|XYZ Charge Card||$1,000.00||12.05%||$50.00|
|Zippe Auto Loan||$3,000.00||13.99%||$300.00|
|Yippe Auto Loan||$12,000.00||0.00%||$500.00|
Now you know the exact nature of the battle that is before you. You have taken all of your debts, and you have “combined” them into one master debt, without actually consolidating your loans. You did this without benefit of a so-called debt consolidation company. You know your balances, your rates, your minimums, and your monthly totals. Now, you are ready to attack, attack, attack, attack.
Pitfalls for stage 2:
1. Concern over interest rates. Again, you are going to work on your rates, but that comes in the next few steps. You have to crawl before you can walk.
2. Wow, I pay that much a month towards debt! Yes, I know, it can be shocking to see just how much of your income goes towards paying for stuff that you’ve already used or used up.
3. This is too complicated. Hmmm… So far all we’ve done is to put on paper the actual nature of your debt situation. If you think this is tough, wait until you actually have to start making the payments!