If you are ready to get out of debt – and you like to keep-things-simple – you have come to the right place!Â Here’s my simple plan for no fuss debt reduction.
In just a few minutes, you can create an easy-to-implement debt reduction plan.
Grab a pen, a sheet of paper, and your calculator.Â You will also need login information for your online banking accounts and for your various creditors.Â If you already have a budget – awesome.Â That will come in handy, as well.Â Let’s get started.
Make a list of your debts
This is your starting point.Â Simply list your creditors, current balances, current interest rates, current minimum payments, and current due dates.Â You can use a simple pen and paper – or print out this handy list of creditors spreadsheet that I created.Â You need to know exactly how much you owe, and to whom you owe it.
Decide which debt you want to pay off first – then second – then third…
There are several theories on how your list should be ordered.Â Some prefer lowest balance to highest balance, while others prefer highest rate to lowest rate.Â I prefer a combination of the two – called the debt deluge – but you list them how you want to list them.Â Again, this post is about creating a no fuss plan that you will actually implement.Â Changes can be made, in the months ahead, if needed.
Make monthly payments to all creditors
It is vitally important that you make minimum monthly payments, on-time, to your creditors.Â Avoid late fees and penalties.
Send extra principal-only payment to the first debt on your list
This is where the fun begins.Â Instead of simply making minimum payments and treading water, you are actually reducing your overall debt!Â Remember, it’s also important to have some cash reserves, and to live on a budget.Â Be smart – and work hard to save more and earn more – and send those principal-only payments.
Quick note – Principal-only payment can be sent with regular payment or separately.Â Contact your creditors if you are unsure about how they handle principal-only payments.Â This is especially true when dealing with mortgage payments.
Once you have eliminated the first debt on your list, move to the second
By now, you see where you are headed.Â Not only have you eliminated an entire debt, but you also have extra money (the monthly payments that had been going to the first debt) – extra money which can now be applied to the second debt.Â Continue to make payments and extra payments, ridding yourself of debt after debt, until you are debt free!
I did not invent this particular debt reduction method – but I did use it!Â I am living proof that it works.Â Obviously, there are some other things that you can do to help reduce your debt more quickly (like make payments earlier in the billing cycle or refinance to lower rates or make multiple extra payments each month) – but this no fuss debt reduction plan will get you started.Â No more excuses!Â You rock – and you deserve freedom!
Note to long-time readers – The above post might read as a little familiar.Â That’s because, over the years, I’ve written several like it.Â One of my goals for 2012 is to reinforce, over-and-over, the simple techniques that I’ve used to reduce debt and save money.Â Through repetition, I hope to inform and encourage.Â You guys rock!