January 15,2009
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#1 2009 Resolution: Lower Debt, Pt.2 –
– Douse the hottest flame and watch is shrink.Create a visual incentive: The best way to win a race is to watch the finish line. The best golf swing is to focus on the next destination. So it is with most long-term goals. Achieving the projected credit card debt reduction goal also involves the incentive of seeing the desired goal continually get closer. There are several on-line management programs to help with this. A very robust planner that helps with credit card debt can be found at "DebtGoal.com". A simpler and less extensive management planner can also be found at this site. It is called Snowball. The site has a nice tutorial that's very straight-forward and easy to understand. The nicest part is the easy guidelines given and the intuitive charting that goes along with the package. Watch your credit card debt dwindle before your eyes each successive month.
Of course, the focus of this article series is reducing credit card debt but, these packages will help escape all kinds of other debt, too. Sometimes reducing another type of debt more quickly can accelerate the reduction in the credit card debt. If you know the guidelines, you can do the same by creating your own spreadsheet (like XL or Lotus), complete with forecasting and graphs. Here are some of the guidelines:
Squelch the blaze: There's usually one APR that burns more of your fuel then the others. Squelch that one first. After calculating the minimum total amount of outflow (based on all the minimum payments combined), subtract that from all of the combined inflow (income). Hopefully, there's something left. The general rule of thumb from that point is to apply all that remains immediately toward the highest APR you're paying on. Use common sense, here but also disciplined judgment. If you're using a software forecasting package here, forecast the declining balance to project how long it will take to reduce this balance to your goal (preferably zero). If it still comes out to be several years away, a different approach may be in order. (Credit card debts are usually only months away, while auto loans usually take years.)