Devising Your Own Plan To Eliminate Debt

If you have realized that you want to get out of debt, more than likely you have already been trying to determine how to make it happen.  If you have not yet begun, now is the perfect time.  What’s horrible about debt is it will not disappear unless you make it.  In fact, when it is left alone, it only gets worse.  It will grow quickly, making it harder and harder to eliminate.  The moment that you have determined that you are in too much debt, you should immediately devise a plan to eliminate it.          

Add Your Debt Up

Before you are able to devise any plan for eliminating debt, you first must know the total amount of debt you actually owe and to which creditor.  The best and easiest method to determine your total debt to each creditor is to view your credit history.  There are new laws in place that require all three credit reporting bureaus to provide your credit history to you free of charge.  The reports do not include your credit score, but they do tell you everything else.  You may obtain your free copy from all three bureaus at www.annualcreditreport.com.      

Once you have your free report, you should note your total current debt to each creditor listed. 

However, not every creditor reports to all three credit bureaus, so it’s possible that you might have a creditor not listed on any of your reports.  In that case, you should use current statements and bills to add any debt to your notes that is not listed on your report. 

How Much Are Able To Pay?

Next, you must fairly assess how much you are able to pay towards your total debt every month.  To accomplish this task, you devise a reasonable budget.  Start by adding up all your regular bills for the month.  Then make reasonable estimates on how much you are likely to spend on gas, groceries, entertainment, and any other common expense.  This will help prevent you from using your credit cards in order to pay for these expenses.  Next, calculate how much money is left over.  This is the amount of money that you are able to put towards your total debt once everything else has been paid for.  

Devising the Plan

Once you have your total debt accounted for and a budget, you are ready to begin devising a plan that works best for you to eliminate your debt. 

If do have any delinquent accounts, bring them up to date.  You may be able to work with some creditors in order to lower the amount which will bring the account up to date.  Keep in mind, that this will not lower the total amount you owe that creditor if they do lower the past amount due.

Pay off your highest-interest accounts first.  Use all the money that you allocated in your budget towards this debt first. 

Pay off your lower-interest accounts next.  After your high interest accounts are paid off, use all that money towards your lower-interest accounts.  

Keep track of the important details regarding the amount to be paid towards each creditor every month.  This will help you keep track of when each account will be completely paid off.