Get Out Of Debt

What follows is a simple technique to tackle a personal debt situation with is getting out of control.  Do you have a mortgage, personal loan, credit card debt and other forms of debt as well?  I’ve been there before and I used this method to pay down my borrowings and save heaps on money in interest payments.

I don’t recall where I first heard about this system, but I found it so efective I thought I’d share it here.  You need to start by making a list of all of your debt along with the interest rate and the monthly repayments.  Now order the list with the highest interest rate at the top and the lowest at the bottom.
At this point you’ll need to take stock of your finances and make sure you are at least making the minimum repayment on each of your loans.  If not, you’ll need to balance you budget - cut your spending to less than what you’re earning.  Ideally you will be in a position where you are making the minimum repayments and have a little cash left over at the end.

To implement this strategy, you will need to do the following.  Continue to make the minimum repayments on each of the debts.  Then put any extra cash against the one at the top of your list from above - that is the one with the highest interest rate.  Each month continue this pattern until the most expensive debt of paid off.

The next step is to take the amount of the repayment you were making on the top item on your list and apply it to the second one on the list - in addition to the minimum repayment.  This is the key to the whole strategy and it can’t be over-emphasized.  Make sure you take the extra cash and pay it off the next most expensive debt.

In this way, you’ll work down the list from most expensive to leasst expensive untill all of your cash flow is going to your one remaining loan - which in most cases will be your mortgage.  You should start to make real progress now and this should keep you motivated.

It’s what we all want isn’t it?  We all want to live debt free - to remove the burdon of the debt repayment each month.  But how can we achive it?  Let’s be realistic - it’s difficult for the average person to go through life without accumulating some debt.  The key is not to let it get out of control.

Like most people, I owe money.  I strive to minimize the amount owed and I try to borrow in the most efficient way possible, but I still need that extra finance from time to time to provide for my family.

That’s what Get Out Of Debt (is it a coincidence that the initials spell GOOD?) is all about.  As I struggle to keep my borrowings under control, I will post what I hope are useful articles to help other people deal with debt.  Hopefully together we can all reach our goal to be debt free before we’re to old to enjoy it.

Be warned though.  As this is a personal blog, I am likely to wander a little (okay - maybe a lot).  In fact who knows what sorts of strange ideas may enter my head in the coming weeks and months?  Certainly not me.  But that wont stop me from from bashing away at the keyboard in an effort to free my thoughts and let them roam cybespace untethered.

One of the reasons I chose a blog format to do this is that it makes it easier for others to contribute and share their own ideas.  So don’t be shy - let me know what you think.  I welcome any new ideas and criticism (hopefully constructive).  I don’t mind if you just leave a comment and tell me to pull my head in.

With all of that now said and this intro post out of the way, I’ll now need to think of some real stuff to write about.  Let’s get started on our "journey" (don’t you hate management speak?) - let’s get out of debt!