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re: Tips for paying off debt?
Posted on 6/25/15 at 8:39 am to King of New Orleans
Posted on 6/25/15 at 8:39 am to King of New Orleans
Step 1 - Create a payment plan:
Plan to pay off your credit card debt first as others have said. If you wish to pay the least amount of money overall go in this order:
1) Pay off credit card with highest interest rate, and proceed to next highest rate until debt is gone.
2) Pay off student loan with the highest interest rate. Rinse and repeat.
This is the order I would take, but the alternative is to knock out the credit card debt with the lowest balance. In that case you could free up extra money faster to pay towards the next debt. Credit card should be tackled first primarily due to it usually being a higher interest rate and it does not offer the tax benefits that student loan interest does.
Step 2 - Create a budget (probably should be Step 1):
As for preparing yourself to make the next step from living in debt to sitting on a comfortable amount of savings, begin to reevaluate all of your monthly expenditures. Creating a budget, logging expenses, and having the ability to analyze them at the end of the day really can help you excel from living in debt to building emergency savings. Things will begin to click such as paying bills on time, and not feeling guilty when you splurge on a nice meal from time to time. Another thing is to reduce any fees you might be getting charged by your utilities. Are you doing paperless billing? Have you set up auto-pay? Some companies reward you for choosing these options.
Step 3 - Break out the credit cards:
Now that you are debt free, make sure you use your credit cards to work for you. Get a rewards card (at least a cash back rewards card) that accrues rewards for each purchase. You will continue to improve your credit, all the while you are collecting rewards. And research the benefits of your card. Several institutions will offer purchase protection amongst other things when you use their card to make a purchase. Credit cards can be a good thing, but you need to be in a position to pay your statement every month before fully utilizing their benefits.
Plan to pay off your credit card debt first as others have said. If you wish to pay the least amount of money overall go in this order:
1) Pay off credit card with highest interest rate, and proceed to next highest rate until debt is gone.
2) Pay off student loan with the highest interest rate. Rinse and repeat.
This is the order I would take, but the alternative is to knock out the credit card debt with the lowest balance. In that case you could free up extra money faster to pay towards the next debt. Credit card should be tackled first primarily due to it usually being a higher interest rate and it does not offer the tax benefits that student loan interest does.
Step 2 - Create a budget (probably should be Step 1):
As for preparing yourself to make the next step from living in debt to sitting on a comfortable amount of savings, begin to reevaluate all of your monthly expenditures. Creating a budget, logging expenses, and having the ability to analyze them at the end of the day really can help you excel from living in debt to building emergency savings. Things will begin to click such as paying bills on time, and not feeling guilty when you splurge on a nice meal from time to time. Another thing is to reduce any fees you might be getting charged by your utilities. Are you doing paperless billing? Have you set up auto-pay? Some companies reward you for choosing these options.
Step 3 - Break out the credit cards:
Now that you are debt free, make sure you use your credit cards to work for you. Get a rewards card (at least a cash back rewards card) that accrues rewards for each purchase. You will continue to improve your credit, all the while you are collecting rewards. And research the benefits of your card. Several institutions will offer purchase protection amongst other things when you use their card to make a purchase. Credit cards can be a good thing, but you need to be in a position to pay your statement every month before fully utilizing their benefits.
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