Running the Gauntlet on Debt: A Plan for Debt Reduction

[Lisa23]

OK, you got yourself here, now what? You’re surrounded by your 44 inch flat screen TV, there’s a new car in the driveway, and you could start a company called Video Game Central. But you’re bottom of the barrel broke. You’re paying the minimum on three of those fancy “Platinum” Credit Cards, and there’s no end in sight.
Even if you can’t afford to seek out professional help, there are steps you can take to climb out of the mire.
1) Make a Plan. Begin with the end in mind. The goal: no debt, and a $1000 emergency fund. (you can insert your own goal here.)

• A) List out all of your debts. Make 3 columns: Total Owed, Minimum Payment/month, Rate of Interest. Add them up.
• B) List out all of your monthly bills. Rent, phone, heat, cable, spending money, etc. Add them up.
• C) Now List your monthly take home income.
• D) Subtract A and B from C.

2) Take Action. If the result of (D) is a negative number, first you cry. Then, consider:

• -a part time job.
• -reducing (B). Can you decrease your cable bill? Move to a lower rent apartment, or get a roommate? Cancel your land line and just use your cell phone? Go out to dinner less?

If the result of (D) is a positive number, Congratulations! That’s a good thing. Enjoy the moment. Then:

• Apply 90% of the money towards paying down the highest interest credit card.
• Put the other 10% into a savings account. You need an emergency fund. Even if it’s $10 lousy dollars, put it in there!
• Play the “Save Game”. Think about ways you can save little bits of money. Buy the Miller Light instead of the Guinness Stout. Whatever you save, put in a container of your choice. I, personally, have a “lucky can.” Add 75% of this to your savings account every month, and blow the rest! You have to have some fun!

3) Over the Top Debt Reduction. If you’re really ambitious about this, you can calculate how many months it will take you to get back on level ground. If it’s longer than you like, try to be creative about ways to reduce that debt:

• Instead of getting a big tax return for that vacation every year, could you change your withholdings and add the extra money each month to paying down your debt?
• Deliver newspapers on the weekends?
• Cutting coupons can add up. Don’t be proud.
• Help me out here. Anyone out there like to share creative ways they’ve reduced their debt more quickly? For another take on debt, check out The Dope on Credit Card Debt and The Dope on National Debt.

4) Finally Remember: It’s for a finite time only! You can do anything for six months, while you’re paying those credit cards off. And once you’re out of debt, for goodness, sake, stay out of debt!













If you enjoyed this article, check out my blog:
Running the Gauntlet on Debt: A Plan for Debt Reduction

[khorrell]

Nice summary for people who are feeling overwhelmed. I especially like the end...it is amazing how a person (including me) can work so hard to get out of debt only to slip back in again.

[purplefdu]

clipping coupons is soon going to become a national pastime with rising food costs. If you want to be proud, expect me to laugh as you pay full price and I save 30-50% or more. I know I saved 66% this week and the guy behind me was so impressed his wife elbowed him and told him to stop bugging me. I handed him my business card with the coupon forum's url on the back.

[MMarquit]

Great post! I actually did my aggressive debt reduction by going from the smallest balance to the largest balance. I did this in order to give me a little confidence booster. After all, I felt GREAT when the first debt was paid off, and it gave me the motivation to keep going.

Also, I took the entire amount I paid on that first credit card (minimum payment plus debt reduction payment) and applied it to the next card on my list. It really snowballed at the end, and I watched my highest balance melt away when I got to that point.

[sheecatt]

Yes! I'm doing the exact same thing! Just in the early stages of it (4 mos). But, we're both seeing the 'Big Picture.' I'm glad to know that I'm not alone in my strategy. ;o)

[sheecatt]

Positive number...which makes it harder. "The more you make, the more you spend" is no joke. But, I've been keeping my eye on things that I see are a waste of money. Slowly, but surely. However, I will go without food before I forsake my appearance. Dior make-up (the best, amazing), lotions, and potions...my hair stylist is a keeper, my nails, facials, etc... I have given up all the other fluff, i.e., waste of money for now, when it comes to fashion. If you look good and feel good you don't need high-end pocketbooks, shoes, jewelry, etc., to look good. Can still be stylish. No more cleaning service, drycleaning is down to a minimum, Febreeze it and in then in the dryer is mostly my drycleaning now... lol. Works. But, I see the Big Picture. I just need to give my actions time to manifest themselves. Once they do, it's downhill. Easy. Once you pay off that first hell card, all that extra money goes into the second highest interest, once that's poof, then alll of that extra extra money goes to the third...etc. Before you know it, you're free at last. It's just hard to kill the first one. >^..^<

[sheecatt]

I fortunately bought into that credit protection program that most credit cards offer. All of a sudden, I am getting divorced, moving, etc. I called them and that shit works, especially if you have a high balance. You don't have to make any monthly payments (how long that is varies depending on the card), no interest is charged on the balance for that lenght of time...the account is "Frozen." Which is great because it gives you time to get yourself together. However, some let you use a "Frozen" card while it is "Frozen." They tend to be the high-interest ones. Do NOT use any card that you have placed on 'Freeze' even if they let you. NO. Cut it/them up. Please learn from my mistakes. I should be out within 3 years. I have 100K and make 150, single...is that possible? Or, am I setting my goals too high?
Hmmm.
Please advise.
Thanx!
>^..^<

[sheecatt]

100 debt, make 150 a yr... ?

[72Tiger]

Originally Posted by sheecatt

100 debt, make 150 a yr... ?

2 years. max. how bad do you want it?