Work your way out of Debt

Make a budget -- just a list of regular expenses you can work with in the future. And make some form of saving a part of it. Donations are also a good thing to begin right now.

An Emergency Fund is the first step in getting out of debt. It will make your life go easier when those irregular, unexpected emergencies arrive. When your savings gets big enough or a credit card can be reserved for emergencies only -- that will serve as your emergency fund. Keep it there for true emergencies -- not just personal desires. When you must take any money out of your emergency fund -- your top priority becomes replacing that amount back into the fund for later.

Next put some money into savings. Work up to an IRA because you can get increased earnings and extra tax savings. You should be paying taxes by now of course, it's part of a real financial plan. This will help to establish your financial history and will pay off in the future.

But, before doing too much investing -- I recommend investing in a sure thing! Don't believe the news or the financial advisers -- their is only one guaranteed sure thing!

Guess what it is -- and feel how good it will feel to be betting on a SURE THING!

Your one true sure bet is getting out of debt. Here's the best way to do it:

Pay the minimum amount on each of your debts and savings except the one with the biggest interest rate. Pay all you can on that one alone until it's fully paid off!

Tips:

Make a list of all your interest bearing debts.
Include the amounts you owe, the minimum payment and the interest rate.

Change your budget with this plan to get out of debt:

a) Change the Category name for the item with the highest interest rate to "PIG" (Piggiest Interest Grabber).

[note: Not the biggest debt, but the biggest interest rate is the PIG!]

b) Increase that payment amount to the most you can afford by decreasing your other payments and savings to the minimum allowed. Pay off the PIG as fast as you can! (The first one can take years -- but the results will accelerate to the finish!)

c) When that item is paid off -- use those dollars and add in the budgeted amount for the next highest interest rate item. Then work on that new PIG!

d) When you have no more PIGS on the list, put the entire amount into savings.

That's the secret to retirement and savings --
a simple to follow long term plan:

Pay off your biggest interest rate item first
AS QUICKLY AS YOU CAN!

Then cross it off and do it again.


Glen :-)