Paying Down Debt

DEC 03, 2014

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If you’re currently in debt, every paycheck brings in new money that you can use to pay off old spending. When paying off debt, you can choose to use all of the money that you earn today to spend today, or to save for tomorrow. For most people, paying off debt isn’t complicated you just have to send more money to the people you owe. However, a little discipline and a bit of strategy can go a long way to helping you cover more ground and get more debt paid off in less time.

Ground Rules
When you decide to pay off debt, most strategies to follow fall within two general camps. The first is to stop running up debt. Paying off one credit card while you run up another one won’t improve your overall debt picture. The other strategy is to always make at least the minimum payment on every account. Just because you are focused on paying off one bank card doesn’t excuse you from paying the others each month. Not paying every creditor on time could trigger late fees and result in late payments that show up when you check your credit report ”just the type of thing youll want to avoid as you work to cut down your debt.

Finding Extra Money
Paying off debt can be a temporary situation, since once it’s paid off it’s gone. The more money that you can save up to pay off the debt, the faster it will be gone. Looking at it this way can make it easier to find extra money. You don’t have to go without your morning latté forever just until you pay off your debts. Cutting unnecessary expenses, selling items that you don’t use online or at a garage sale, or even taking on a second job can all provide extra money you can use to pay down your debts.

Paying Strategically
Many financial experts recommend focusing your extra efforts on one account at a time. This strategy requires you to make minimum payments on every account but send all of your extra money to one of them. Once it gets paid off, you then go on to the next account. This helps to concentrate your money, so it can work harder for you.

How It Compounds
Paying down debt makes it easier to pay down other debts. As a simple example, imagine that your monthly minimum payments are $37.50 on a $1,500 balance, $25 on a $1,000 balance and $25 on a $500 balance, totaling $87.50. If you can come up with an extra $125 per month and throw it all on your $500 card, it’ll be paid off in about four months. Then you’ll have the extra $125 plus the $25 you were using to pay the original card; you can add this $150 to the $25 minimum to pay off your $1,000 card. When it gets paid off, you get to add the $175 that you were paying to the $37.50 you were paying on your biggest debt. Once you’re done, you end up with $212.50 a month that you don’t need to spend on debt payments anymore. What a relief!

Debt for Debt
One strategy that might help you pay off your high interest rate debts more quickly is to consolidate them into a low interest rate loan. You may be able to do this with a balance transfer to a low interest credit card or with a line of credit. Lowering your interest rate means that more of your money goes to your debt and less goes to interest. However, if you do this and run your balances back up on your cards, you could end up with more debt rather than less.

The important thing to remember is that you can make changes to pay down your debt and get it under control. Making a plan today can help you avoid letting it snowball into something you feel overwhelmed by.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from, Inc., an Experian company. © 2014, Inc. All rights reserved.