How to Make a Plan to Be Debt Free

You've had enough of interest rate changes, monthly maintenance fees and overlimit fees, and you've decided it's time to get a plan to be debt free. Nice job. You're going to join over half of all Americans who have a no credit-card lifestyle. Now that you've resolved to do it, how do you find the debt-free promised land? It's going to take perseverance and patience, but you can take steps to help you down the path to a debt-free life.

Instructions

1




Use a spreadsheet to list all debt.

List your debts, using a spreadsheet program or paper. Include the amount owed, interest rate and monthly payment. Having all this in one place will allow you to make critical decisions about your plan of attack.

2




Save $1,000 fast.

Save $1,000 fast. Financial guru Dave Ramsey recommends this step because during your journey to a debt-free life, the washing machine is going to break down or your muffler is going to drag behind your car. If you don't have an emergency fund, where will you go for funds? Probably back into debt. To avoid this, put $1,000 into a money-market account separate from your main bill-paying fund.

3




Explore debt consolidation opportunities.

Consolidate your debt. Can you find lower interest rate opportunities? If so, explore these opportunities. Don't apply for debt unless you're nearly sure you'll get accepted and use the credit. Credit scores are partially based on the number of credit applications.

4




Prioritize your debt.

Prioritize payments. Choose a small account with a high interest rate and pay all extra dollars to this bill. Make a minimum payment to all others until this account is paid. Once this account is paid and closed, add this payment amount and all extra dollars to the minimum payment of the next highest interest-rate debt. This allow you to make larger payments over time to your largest debts.

5




Pay cash for purchases.

Use a "cash only" strategy. Consolidating debt payments won't matter if you don't change your spending habits. Don't use credit cards to make purchases. By sticking with cash, you'll know that you'll be able to afford any purchases you make. Cut unnecessary cards and close unused credit accounts.