Paying Debt off pt. 1

Once you decide to start paying off your debt, you will have a whole bunch of questions (as did I). If you have specific questions, feel free to comment or send an email. As I mentioned, I had 100 questions when I first started. I tried to inform myself as much as possible, but at the end of the day, you just have to start the process and trust yourself.

Listening to podcasts and reading books/articles is a great way to familiarize yourself with the best steps and approaches to paying off debt. I'll try to summarize a few key points I've learned below:

Firstly, always make sure to pay the minimum on all your debts. Then, focus on putting a little extra towards the ones with the highest interest rates, even if it's only an additional $50. If you're unable to do so, a trick from The Personal Finance Podcast is to split the monthly amount and make two payments a month. By doing so, you'll have made one extra payment by the end of the year (though please plan this out with your other monthly expenses).

One of the most important tips is to pay off debt with an interest rate higher than 6%. Why? According to the financial experts I've learned from, your money would be better invested. Credit card and personal loans usually have the highest interest rates, so check those out first. Once you've located your debts with the highest rates, you should game plan how you'll be paying off this debt. I personally like to think of how quickly I can pay down that debt, as usually that means paying less in interest overall. For the most part, a chunk of your monthly payments goes towards the interest (e.g., your $100 payments might be $25 interest and $75 principal).

Now it's time to figure out how long it will take you to pay off this debt after accounting for your monthly expenses and leaving a little room for fun (I don't believe in self-deprivation, but always don't splurge so maybe set aside $25 a week for some ice cream). Now if you want to try and pay it off in a year, divide the amount of your loan by 12. Are you able to pay this amount with your other monthly expenses (rent or mortgage, car payments, insurance, etc.)? If so, then you're good to go, but if not, try 18 months, and so on.