Motivation for Getting Out of Debt

If you carry a balance on a credit card, you probably know the helpless feeling of dutifully making the minimum payment, only to get your next statement and see how little your balance has budged. A better approach is fixing the amount that you pay each month (instead of paying the minimum amount required by your credit card company, which declines slightly each month), and then, once one debt is paid off, rolling the amount you had been paying on that debt into the monthly payment on your next lowest balance debt. Even better, of course, is to pay more than the minimum. I just found a free online calculator that will show you the motivating results of taking either approach.

Enter the requested information for each of your credit cards, choose “lowest to highest balance,” and then hit “submit.” It’ll show you how much faster you’ll be out of debt if you lock your monthly payment on this month’s minimum and then, once you pay off one debt, you roll the amount you were paying on it into the next lowest balance debt. Next, enter an amount for “extra monthly payment” and you’ll see that adding even $25 to what you’ve been paying will speed up the process even further.

The verbiage above the calculator says to pay off your high interest debts first, but I disagree. The best way to get out of debt is to focus on wiping out the lowest balance debt first. That’ll lead to a quick win, which will motivate you to keep going. So, pay more than the minimum required and apply the entire extra amount to your lowest balance debt first. Once that one’s paid off, apply the full amount you were paying on it to your next lowest balance debt.


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