2torial #0692:
Learn2 Get Out of Debt (continued)

Establish a payment plan

Take another look at your weekly expense worksheet (including fixed expenses) and multiply the total by four. This is what your monthly expenses are. When you subtract your expenses from your total income, you should have some money left over (if not, go back to Step 4 and cut out some more expenses).

Set aside about 15 percent of that surplus as a buffer of expense money for emergencies and months that you exceed your usual expenditures; put it into a savings account. What's left is a basic amount that you can use to establish a payment plan.

Use the money needed for your monthly expenses to pay things off, starting with allocating as much as possible to your high-interest loans and credit cards. Some banks will arrange for money to be transferred automatically on a certain day of each month; consider doing this so you won't have to worry about sending a check (and won't be tempted to skip a month).

If you weren't able to consolidate, make sure you keep up the minimum balance on all of your credit cards and loans while you pay more to your top priority. You don't want to get further in debt on one loan while digging yourself out of another.

Finally, when the credit card bill comes, pay as much over the minimum balance as you can. The less you pay each month, the more interest you'll accrue, keeping you in debt for longer and with a heftier bill to pay. Consult the chart below for a better idea:

Now that you've decided to get serious about paying off your debts, keep a note with the total amount you owe in a highly visible area, like on your computer or refrigerator. Each time you make a payment, update the note with the lower amount. You'll be inspired as you watch the amount decrease--especially on the happy day when it finally disappears.

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