1. Make a List of Your Debts
First, you need to make a list of all your debts. This can be a difficult mind game. You know you owe, you think you know the amount, but actually listing them all can be terrifying.
Your list should include the name of the debt, minimum payment amount, the interest rate, and how much you owe in total.
This list should include all of your debt: credit cards, personal loans, student loans, and mortgage. If you owe money to family and friends you should also include it on your list.
2. Rank Your Debts In Order
Rank your debts in the order you want to pay them off. Some experts recommend going from the smallest amount to the largest since this helps get the momentum going.
Others recommend listing the debts from the highest to the lowest interest rate since this will save you the most money. The order you choose is up to you. You might start with paying off a small debt, and working your way up, or start with high interest and move down. You might even want to try a combination of both.
3. Just Pay Off One Debt At A Time
You still need to make all of your minimum payments. In order to really succeed with your debt repayment plan, you should focus on only paying off the first debt on your list. Put all extra money you have toward this first debt. Just make sure you continue to make all your payments.
4. Move On
Once you have paid off the first debt on your list, it's time to move on to the next debt, while still paying the remaining debts' minimum balances.
Continue to do this until you have crossed all your debts off your list.
When you first start working on your debt repayment plan, it may seem like it will take forever to pay off your first debt, but you will gain momentum as you go, and you'll be surprised how quickly you can pay off the next debt.
5. Build Up Savings
Once you've paid off your debt, now is the time to focus on building up a savings account. This will help prevent you from going back into debt in the future. An emergency fund is one of the best tools that you can use to take control of your finances and avoid going into debt. Start with a $250 fund, then $500, then $1000. Keep building up to your target savings as you can realistically add more.