Financial Planning

Being in debt is a negative situation that will not go away, and usually becomes worse, if it is ignored. The debt will follow an individual from one city to the next and eventually will make quite a negative mark on the credit report. To prevent one’s financial life from going into a tailspin, this debt should be eliminated as quickly as possible.

The fastest way to get out of debt is to pay off high interest rate credit cards first. Order the cards from the highest to the lowest interest rate. Transfer as much money as possible from the high interest cards to those with lower rates. Take advantage of special low interest offers from creditors regarding balance transfers.  Pay off the remaining balances on high interest rate cards as soon as possible. At the same time, pay the minimum balances, or more if possible, on the other cards.

Once the large interest rate balances are paid off, begin paying more than the required minimum payments on the other cards. Pay off the cards in order of highest to lowest interest rate. The longer it takes to repay these balances, the more interest is accrued. Eliminate other unnecessary expenses to free up more money for payment on these cards.

Dip into the savings and investment accounts and use them to pay off these balances. If these accounts are earning a lower rate of interest than the rate on the credit card balances, use the money to pay off the debt. It is never fun to drain savings, but it may be necessary in order to get out of debt. After the debts are paid, there will be a lot more money to invest in these accounts.

Paying off high interest rate credit cards, transferring balances from high interest to low interest cards, and using savings and investments are just a few ways to get out of debt. The process may involve some scant living for a while, but it will be worth it when there is no more red on the books. Once the debt is paid, the individual should establish a realistic budget and stick to it to avoid getting back into a negative financial situation.