Accelerated Debt Reduction – Can Save Thousands Of Dollars
The concept is simple, find some ‘extra’ money (or get a second job to create extra money every month) and apply that extra money to one of your debts. Start with the smallest one first while still making minimum payments on all the others. This method takes a little time but after a while it will really start to gain momentum.
Once you’ve got your first debt paid off you take all the payments you were making on that debt, the minimum amount as well as the extra amount you were putting on it, and apply all that to the next smallest debt you have. Just keep repeating this cycle and by the time you get to your biggest debt you will have freed up a lot of money (all the money you were paying for the minimum payments on the other debts) to apply to your biggest debts.
While simple in theory, accelerated debt reduction does take a little planning to get off the ground. The first step, and for many people the hardest, is to get a firm grasp on your current financial situation. You need to have a very clear, and possibly bleak, snapshot of just where you are at financially right now.
To get this picture, you have to write down every single debt you have. For right now only include unsecured credit card debt and don’t worry about mortgages and car loans (though you can use this method to pay off those loans early too and save yourself a bundle in interest payments). Once you’ve got a complete list of your debt write down all other monthly expenses such as house payments, car loans, utilities, gas, groceries, vet bills, prescriptions, membership dues, subscriptions,etc.
Make sure your list is complete. You can look over your checkbook register for the last several months to jog your memory and make sure you haven’t forgotten anything. In order for this to work your list has to be very accurate and complete.
Next, list out all your income for the month. Then just subtract expenses from income to see where you are at. If you come up with a positive number that means that you spend less than you make, and that’s good. Just take that left over every month and apply it to your first debt to get it paid off.
If you come up with a negative it means you spend more than you make and you’ll have to find a way to cut expenses or bring in more money, or both. Once you’ve done that you can apply that extra money to paying down your first debt. This method will help you get out of debt even though it will take time and discipline. This is the best method of accelerated debt reduction because it’s simple and free to do and you can get started today.