5 simple steps to a faster debt payoff

Acknowledge what went wrong. The past holds the key to the future, so you have to come to terms with how you got into all this debt in the first place. Did you take your eye off the charging ball and allow the balance to snowball? Or did you use the cards to cover unexpected expenses that should have been paid for with savings? To prevent history from repeating itself, pinpoint the decisions you made that led to your present financial situation, and then make a conscious effort to change the pattern for good.


Breathe easy with a budget. When you don’t know exactly how much money you have coming in and where it’s going, you end up feeling powerless and anxious. Therefore, it’s time to develop a budget that will put you in control of your cash and free up money for your debt. Begin by subtracting your living expenses from your monthly net income. After that, refine your spending by looking for areas of waste and cutting them down or out. Be reasonable, though. It’s easy to say you’re going to cut cable, but then find you simply can’t live without 24-hour World Cup coverage.


Get a goal. Enter your credit card balance and interest rates into a good online debt repayment calculator. Then play with the numbers until you can determine a payout timeframe that fits within your newly developed budget. For example, let’s say you want to pay the entire $25,000 off in 18 months. In that case, you’d have to send about $1,600 to your creditors every month (assuming you have an average APR of 18 percent). Only you know what you can really afford to send, but whatever the figure it is, set it in stone. You will reach your goal by committing to that fixed payment.


Suspend charging. You can’t get out of debt until you make a pledge not to charge anymore. For the next year, I strongly suggest you tuck the cards away in a nice safe spot in your home. If you want to pay for something with plastic, use your debit card. That way you’ll only be using the cash you have in your checking account. When you are ready to charge again, do so slowly and in increments that you can afford to repay in full when the bill comes in.


Forget the loan. It’s fascinating that so many people in debt think that borrowing more money will be the answer to their problems. It really makes no sense. Yes, I know you’re thinking that maybe you can get a big, new loan with a better interest rate that you have now to consolidate all of your debt, but the chance of that actually happening is slim to none. At present you have a negative credit rating and an overabundance of money owed. The only loan you’ll qualify for is one with poor terms. In short, forgetaboutit.

On to your credit score: Your debt is sure to be considerably lower in 12 months, which will help raise your credit score. Steady, on-time payments will increase it further. When you begin to borrow and repay money again (but this time keeping the balances to zero) you’ll really see it zoom up.

So are you ready to pay that $25,000 down while building your score? Stick to my plan and you can do it — and I’ll bet in fewer than three years.