By Miriam Caldwell. Money in Your 20s Expert
Miriam Caldwell is a freelance writer with a specialty in personal finance. She believes that you can lay a solid foundation by starting to manage your finances in your twenties.
Once you have decided that you want to get out of debt you need to set up a debt payment plan. It is important to realize that by applying your extra money to one debt at time. you will significantly speed up the debt repayment process. If you work hard you will be surprised at how quickly you can pay off your debt
Second, you will need to rank your debts in the order that you want to pay them off. Some experts recommend going from smallest to largest, since this helps to get the momentum going. Others recommend listing the debts from the highest to the lowest interest rate, since this will save you the most money.
Third, you will need to decide how much extra money you have a month to pay towards your
debt. You may need to cut back spending in other areas so that you have the money to put towards your debt repayment plan. You may also decide to take on a part-time job or to pick up overtime hours. You can also sell items to earn extra money for your debt payment plan. Additionally, you may want to apply all the money you receive from gifts, bonuses or tax returns to your debt.
Fourth, pay all the extra money on the first debt on your list, while paying the minimum on all other payments. Once you have paid it off move to next debt on your list, paying the extra plus the current minimum payment. Continue to do this until you have crossed all the items off of your list.
Fifth, put most of the extra money you now have into savings. Soon your money will begin to work for you. Make sure that you cut up and cancel your credit cards as you finish. That way you will never need to do this again.