Financial Fitness Task 12: Make a Plan to Pay Off Your Debt #30DaysofGOOD

No one likes debt. Here are three steps to get out of it.

Things are easier said than done, or so the old adage goes, and we couldn't agree more. That's why we do The GOOD 30-Day Challenge (#30DaysofGOOD), a monthly attempt to live better. Our challenge for January? Financial Fitness.

Make a plan to pay off your debt.

What's worse that having zero dollars? Having negative dollars. That's why we need to try as hard as we can to get rid of any outstanding debt. Depending on how much debt you have and what type it is, this may take a while. But as long as you have your paperwork in order and a plan in place, you're well on your way. There are different schools of thought as to how to go about paying off debt, depending on balances, interest rates, and category of debt. You can start by paying off the debt with the the highest interest rate, in order to minimize total interest paid. Or start by paying off small balances first to build momentum and eliminate some accounts entirely. Here are some other tips to help shed those balances.

  • If there's one pesky credit card that you can't quite bring down to a zero balance, cut it up or freeze it in a block of ice. Pick a date by which you want to have the debt paid off, and calculate how much you need to pay monthly to do so.
  • Don't ignore student loan debt. You don't need to go crazy paying more than your monthly due, since the interest rate is probably lower than that on your other accounts, but don't let that deter you from paying it off. Unlike credit-card debt, student loans cannot be discharged in bankruptcy, so you'll always be on the hook for the money. If you haven't done it yet, think about consolidating your student loan debt in order to lower the rate, extend the term, and lower your monthly payment.
  • So as not to incur more debt, start paying off the full balance every month.
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Come back tomorrow for the next task in our financial fitness challenge.

Propose an idea here for a project or workshop that promotes financial fitness in your community. The top-voted idea will win $500 to implement the project.

Photo via (cc) Flickr user alancleaver_2000

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