Debt can be oppressive. Eliminate and avoid debt as much as you can.
Watch our workshop on Eliminating Debt
Debt Ratios Guidelines
- The monthly housing cost ratio is best from zero to 28%. Above 28% means you are over-extended.
- Your total debt payment ratio is best from zero to 36%. Above 36% means you are over-extended.
Please use our Review Debt Worksheet to determine your debt to income ratios.
Eliminate Debt
Start by cutting up your credit cards and stop spending on credit. Then, build a debt-killer plan. Sometimes called “debt stacking” or “debt snowballing,” a debt-killer plan can help you quickly and efficiently eliminate debt. (Please download and use our Debt-Killer Calendar as an aid.) It works like this:
- List all your debt balances owed, the interest rates, and the minimum monthly payment amounts.
- Begin attacking your lowest debt balance by paying more than the minimum monthly payment amount. Determine how much additional money you can pay toward that debt each month based on your spending plan.
- As additional extra funds become available, add them to the monthly payment of your lowest debt balance to pay it off even faster.
- When that debt is paid off, take the amount you were paying toward that debt and add it to the monthly payment of your next lowest balance.
- Continue this process until all debts are paid off.
- Make sure that you do not acquire any new debts.
You might also find it helpful to use tools such as Microsoft Excel or http://www.powerpay.org to keep track of your debt payments over time.
It Takes Time
Fully eliminating your debt may take some time. KEEP GOING and work on other steps.
After starting the process to eliminate debt, find your Core Financial Principles Task Checklist and check off “Eliminate debt.”
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