Use this easy method to cancel debt and increase your savings
It’s easier said than done, but you can manage it. You may have looked at your accounts and thought that it is too big of a hill to climb. But, every journey starts with a single step.
The first rule of paying off debt is to stop accumulating debt!
I know this sounds simple, and it’s easy to say; but, you have to focus on it and manage your spending and expectations. That doesn’t mean that you can’t go out or do anything fun, but you can’t pay for it with credit!
I was told by a much older, former coworker that “no one is going to pay you anything until you’re forty!” You don’t have a trade or specialty until about 40 years old and have little experience. Once you get that experience under your belt, your debt will be easier to manage. But, prior to this point, you're not earning your full potential and you must limit your spending!
If you are young and don’t have any debt, good for you. In this case, contribute to a savings account that’s not with a bank but through a self-directed IRA or a company 401(k) plan to take advantage of compounding interest.
If you do have debt, then the second rule is to pay off your debt incrementally. You will need to start with a plan to pay it off.
Here’s the plan:
Step 1: Start by listing out all your debts from highest to lowest balances.
Step 2: Take the lowest balance, and then add as much to that payment as your budget allows. Over time, you will pay off this account.
Step 3: Once you have paid off your first debt, take the entire payment from the first payment (including the increase that you applied to it) and add it to the monthly payment of the next smallest account.
Since it is likely that you are paying only the minimum on all your balances, continue to do so while you add as much as you can to the lowest one. It may take a month or a year, but eventually, it will get eliminated!
As you can see, it’s pretty easy with only three steps. By using the payments you made from the previous credit balance, you will accelerate the payoff of the next card. It can almost be addicting by seeing the accelerated decrease…