Help Paying Off My Debts

You can rip the statements up. You can pretend you didn’t get them and leave them unopened. You can light them on fire in a big pile in the back yard, but they will still come back to haunt you. Unless you actively try to eliminate debt, it will keep knocking on your door, each time growing bigger and bigger.

If you have decided that its time to be free of the debt monster check out the following steps and soon you will remember what it was like to live without the shadow of debt lurking in the corner.

Make a List of Your Debt and Check it Twice
The first step is to organize all your debt obligations. Get together those statements that you’ve been avoiding and lay them out on the table. Next, you need to draw up a simple table. Your table should have the following columns:

• Company / Financial Institution
• Amount owed
• Interest Rate
• Payments Made
• Balance Outstanding

Of course, the fun part is to start filling in the columns with the information. You will only be working with the first three columns until you start paying down the debt.

Once this is done, you should come up with a color code system that works for you. Try creating different ranges for the interest rates. For instance, if you realize your interest rates are 8%, 10%, 12%, 15%, 23% and 29% you can categorize into three groups of rates less than or equal to 10%, less than or equal to 15% and over 15%.

Assign each interest rate category a color, maybe going from red for the highest rate, green for the mid-range and yellow for the lowest group. Highlight the rows according to the category. This will dictate the order in which you should focus on paying down the debt.

Find Ways to Channel Money into Debt

Even the tightest budget has some room to pay a little more than the minimum payment on debt obligations, even if this means taking out a loan at a lower interest rate to do it. The following list itemizes some ways to find that ‘extra’ cash to pay down debt.

• Take out a home equity loan. If you are able to tap into your home’s equity you can probably get access to some cash at a rate that is much lower than your highest debt category. Warning: this option turns unsecured debt into secured debt which should be considered before borrowing money to pay off existing debt.

• Borrow from friends and family. If you haven’t already tried this route it could be time to bite the bullet and ask for a loan from those around you. You should be careful that it is properly recorded and you can give a realistic idea of when you can repay it.

• Use up your savings. People are usually unwilling to let go of the safety net of their savings to pay down debt, but it really doesn’t make sense to hold on to a money market balance that might be earning 4% at the most, when you have debt outstanding at almost 30%!

• Borrow against your life insurance. This is essentially borrowing your own money, but then again, so is holding on to a savings account with an outstanding loan at the same institution. Borrowing against life insurance is normally a lot less expensive than taking a commercial loan.

Motivate yourself to Pay

Everyone is motivated in different ways, so you have to experiment a bit to find something that works for you. Do whatever it takes to keep you on your path toward debt free living. If you need to tape pictures of your children on the inside of your wallet to remind you not to spend unnecessarily… do it. Alternatively you could write a positive message on your bathroom mirror reminding you to chuck away more into debt payments or you can post up pictures of things you would like to do after you are free from monthly debt payments.

Paying off debt may seem extremely difficult if your approach is unstructured. If you develop an organized plan of making payments and you can actually see the balances going down, it becomes an emotionally rewarding experience.