Step 1: Know what you spend.Track expenses for a month in a notebook or spreadsheet. All expenses – even Starbucks runs in the morning and that extra pack of gum you get at the gas station. If you don’t know where the money is going, it’s hard to see where you may be overspending. It may surprise you – and show you where you might be able to cut back and put more money towards paying down debt. You should also list all your debt, along with the interest rate and payment on each amount owed.
Step 2: Make a plan.Suze Orman, Dave Ramsey, and others have tried and true plans that have worked for many people in their efforts to overcome debt. Programs like Crown Financial (www.crown.org) and Financial Peace University (www.daveramsey.com) are offered in many areas to teach people how to manage their money responsibly. Pick one. Try Dave Ramsey’s “snowball plan” – pay as much as you can on the highest interest rate (or smallest balance) until it’s paid off. Then add the payment you were making on that debt to the next highest interest (or next largest) balance, and so on. The idea is to let the payments “snowball” so you can pay off all that debt faster! (One warning – beware of Credit Counseling organizations. Some require large upfront payments and will not help you at all – they will just take your money. Look for a non-profit organization if you go that route.)
Step 3: Stick to the plan.It might be tempting to fall back into those bad spending habits, but if you keep track of what you spend and have a little patience and perseverance, you will be out of debt before you know it! Then you can think about college, or retirement, or whatever you really want to spend your money on, without worrying about debt.
Debt is not a bad thing. It’s how we buy homes and cars, finance school or vacations, or buy that special birthday or Christmas gift. But planning ahead and saving up works just as well. And you won’t have to worry about how you will pay it off later. Isn’t it time to make your money work for you instead of the other way around?