Look for any extra money in your budget to use towards your debt

Also known as ‘Trimming the fat’ in your budget, nearly everyone has at least one area of expenses they could easily reduce. Take a good hard look at your spending and see if there are ways you could reduce your spending, such as packing your lunch instead of eating out, or renting a good movie instead of going to the theater every weekend and so on. Any extra money you can save this way can be used towards paying your debt off faster. The extra money will be the first to go into your accelerator margin (which is extra money you apply towards your debt payment above the minimum required payment).

Concentrate on the easiest debt to payoff first

Although many financial planners say to pay off the debt with the highest interest rate first, they haven’t considered the human factor. Many people get into debt because of the need for instant gratification. If your highest interest rate debt is a credit card with $5,000 then it may take years to pay it off first. In fact, after several months you may start to feel as though are not getting anywhere and you may just give up altogether. On the other hand if you have a $300 debt, even if the interest rate is low, it may make more sense to pay that debt off first, especially once you add your accelerator margin to the minimum payment. This way you will be able to mark something off of your ‘to do’ list much quicker, giving you more immediate satisfaction.

Put any extra money you found from step #2 onto the debt in step #3

The money that you are able to come up with by trimming your budget, or simply by reducing or eliminating your savings (do not do this to your retirement plan) can then be applied to the debt which can be the easiest to pay off. This will greatly reduce the amount of time it takes to eliminate that debt.

Never reduce the amount you spend on your current debt

Do not reduce the amount you pay towards your credit card, just because your minimum required payment decreases. Even if you are only making the minimum payment now, if you get a ‘Payment Holiday’, just ignore it and continue to make regular payments. These two tactics are used by the card companies to keep you in debt as long as possible.

Once you pay off your easiest debt, use that payment towards your next one.

When you finally retire one of your debts, take the money you had previously been paying towards that debt and add it towards your accelerator margin. This creates a snowball effect (your margin continues to grow as each debt is paid off).

Repeat steps 3 through 6 until you are debt free.