We have talked some about saving money on bills and in every day life. What we haven't touched on just yet is getting rid of debt. With all the tips I have mentioned you should be saving at least $25 a month by now! That is nothing to sneeze at! You are finally building a foundation!
Now, I would like to offer a way to make that $25 a month grow and grow very quickly! I am not talking about putting it in a piggy bank or investing. Well, I am talking about investing but not in the way that you see it. I am talking about paying off your debts with it!
Some of you just read that and thought "What are you talking about?" You probably think I am crazy! O.K. I might be crazy but lets talk about it for a minute or two. How many credit cards do you have? How much do you have in student loans? How much do you owe your buddy at work, or your mom or your dad?
Today try and make a list of every single debt you have. This will be a daunting task. You need to know how much you owe! After you list every single debt, organize them into the smallest to the largest. Remember, $5 for lunch your buddy loaned you last week is a debt. So, list ALL the debts you have!
Now, here is the fun part. Take that $25 you have saved due to the tips you found here and apply it to the smallest debts you have. Keep doing this until the smallest debt is paid off. This is in addition to the minimum payment.
For example lets say you have a credit card with $500 credit limit. It is close to maxed out. If you look at your statement, 1/3 of your minimum payment or more is interest. That means 2/3 of your payment is principle. This of course is best case if you have a low interest rate. So your minimum payment is probably somewhere in the $15 to $20 range. So, you take your $25 and add it to your minimum payment and you can pay that card off in much less time. If you just pay the minimum it will take no less than 36 months to pay off $500 and you will have paid over $200 interest in 3 years on a mere $500!
Interest will eat you alive! So, get rid of it! Pay off all your credit cards and cut them up! If you were to take your credit card payments and put them into a savings account you would EARN money! Call me crazy if you want but I am down to a single credit card and it will be paid off in two months. After it is paid off I am going to apply what I used to spend on my credit card to a savings account and I will have money that is earning ME money, not the credit card companies.
Think about it and let me know how you feel about it!
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