Sixty Seconds to Freedom from Debt
By JR Rooney
May 4, 2008
Imagine for a minute being free of debt -- no more sleepless nights over mounting credit card balances, no more ball-and-chain of debt feeding your anxieties, and no chance of threats from dreaded collection agencies. You can do it! Here's the scoop -- in one minute flat.
0:60 Resolve to spend less than you make! Make it a habit as fundamental as brushing your teeth. Realize once and for all that if you can't pay for it today -- you can't afford it.
0:55 Distinguish between Bad Debt and OK Debt. OK Debt has an interest rate well under 10% -- preferably with some tax advantages also. In the best case, what you bought with borrowed funds will appreciate in value. Home mortgages and
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Out of all your cards, pick the one or two major credit cards that feature the lowest annual interest rate. Resolve to use those cards for emergencies only. As for all the other plastic pals in your wallet, remove temptation by taking them out of your wallet. Throw them behind a major appliance, freeze them in a bowl of water, or decoupage them to a shoe box. Do whatever it takes not to use them.
0:41 Gather the latest bills from all Bad Debt accounts. Line these up on the kitchen table. Find the minimum monthly payment for each account and then add these up to get an overall monthly minimum. Pledge to pay this overall minimum PLUS a hefty additional chunk every month -- enough to make a solid dent in the outstanding balance of at least one account. If you can't pull this off, you'll have to make a drastic move to increase your income or lower your expenses. It's harsh, we know, but it's also an inescapable fact.
0:34 Pick the card with the highest interest rate and: Attack! Next, order the latest bills according to annual interest rate charged. Apply the "hefty additional chunk" (beyond the minimum) to the highest rate account(s). Repeat this process monthly until the last stinking card is paid in