Pay Off Debt
Your quick-start guide.
The secret to being successful when you pay off debt is having a clear picture of where you want to go and the roadmap that shows you how to get there. Getting out of debt requires fundamental changes and hard choices, and we've created this Quick Start guide to the best techniques to achieve fundamental financial change.
1. Create a Debt Pay-Down Plan to Pay Off Debt
Having a personalized debt payment plan is the cornerstone of your financial health. Gather basic information about your debt accounts—balance, payment dates, what interest rate you are paying. Having all your accounts organized in one place helps you see which of your loans charge the highest interest so you can focus on paying this one off first!
2. Appoint a Family CFO
Now you know where to focus…you need to get to work. In order to really accomplish a goal, someone needs to take charge and ensure that everyone is doing their part. In a debt repayment scenario, the person that keeps the family interested and on track is the Family CFO.
3. Create a Financial Structure for Success
The way most people organize their accounts, makes it very hard to manage their finances. It can be useful to make a simple diagram that helps you visualize exactly how your money flows into, and out of, your pockets.
4. Negotiate Lower Interest Rates
You can lower the interest rates on your credit cards. Most of the time, all it takes is a phone call. Our members have shared their tips for Successful Rate Reduction and their tips boil down to:
- Prepare for the call!
- Have facts about your financial situation on hand & realize they will ask you lots of direct questions about what you earn and what other obligations you have.
- Explain your financial hardship story in a clear and succinct way.
- While it's useful to remind them how long you've been a loyal customer, you don't necessarily have a ‘right’ to new or improved rates on your existing balances. So approach it as a negotiation.
Be prepared for the fact that some credit card issuers will be easier to deal with than others, and don't give up if the first card you call says no. The very next card may say yes—and that will be a phone call worth making.
Refinance to a lower rate if you can. Mortgage interest rates are still historically low. If refinancing isn't possible due to diminished property values or job loss, you may be eligible for programs to restructure your mortgage with your lender.
5. Making Hard Choices
Sometimes, simple fixes just aren't enough. If you're way over your head and debt has gotten the best of you, you may need to consider making hard choices like selling real estate, vacation property, second cars, and luxury items like boats and RVs.
Article was originally written for SavvyMoney®.