I posted this article a few months back, but with all the financial pressures that have arisen since, it seems like a good time to re post it.

It’s great to decide to get out of debt, but not many people know the most effective way to go about it. Here are some tips from a financial planner on how to deal with debt.

 

  1. List all your debts in descending order, from highest to lowest. Making a list is important as it helps you to measure progress and therefore not get sidetracked because you get discouraged. Re write your list each month to measure progress.
  2. Every month, pay off the minimums on all your debts, but throw everything extra that you can at the smallest debt first, so you get the satisfaction of seeing it paid off. At first, progress will be a bit slow, but as debts get paid off, you’ll start seeing quicker progress because you’ll be paying less interest.
  3. Then work your way up the list, throwing everything at the next smallest debt. (This goes against the most common advice, to pay off the debt with the highest interest first, but this method works better as it is psychologically more effective).
  4. Leave your credit cards at home so you don’t undo your own good work by some “retail therapy.”
  5. If you HAVE to take a card, take just one, wrap it in a bit of paper, and put a rubber band round it, so you’ll think twice before using it!

 

Want to learn to manage your money even better? Then read “The Richest Man in Babylon” by George S. Clason. The book began in 1926 as a series of informational pamphlets. Banks and insurance companies began to distribute these pamphlets, which were eventually compiled into the book. It’s been continuously in print ever since, and is listed as one of the 50 “Success Classics” because it makes good old fashioned common sense!