If you’ve been following, you know that at one time I was in debt up to my eyeballs. It took years of dedication, struggling, habit adjustments and hard-learned lessons, but I am finally debt-free! (Now to work on my savings…) While paying off my debt, I learned a lot about my financial weaknesses and the challenges of paying off debt. I also learned that organization plays an important role in becoming debt-free. Here are the steps that worked for me:
1. Gather all papers. To get a handle on my debt, step one was collecting all statements, promissory notes, and other information and separating it into piles by account (this can be done digitally as well). 2. Write down what you owe. I noted the amount owed, interest rate and minimum monthly payment for each account, and added them up to see my total debt. 3. Create a filing system. Since I still get paper statements for my accounts, I used a plastic file folder with pockets to house my account documents. For those of you who receive billing statements electronically, create folders for each account. Then commit to filing each statement within a day or a week of when it comes in. 4. Make a plan for paying it off. This step requires some financial savvy. I looked at my income, determined the maximum amount I could make in payments each month, and consolidated some of my accounts. In many cases, paying off your highest-interest debt first is the best way to go. Find out more tips for paying off debt here. These Credit & Debit calculators can also help. 5. It can take a few shots to get it right. Often a plan for paying off debt, like a budget, takes some adjustment over the first few months. After the first month of using your new system, consider how it’s going and make any needed adjustments. 6. If you get off track, no worries—just get back on. As I was paying off my debt, I would have the occasional setback. If you’re doing great and find that you slip into old habits one month, try not to let it throw you off track. Take a deep breath, look at your plan and give it another go.
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