Research shows that two-thirds of people who want to get out of debt don’t have a plan.  Yet, these people are often surprised when they don’t make progress on their debts.  Most people in debt only make minimum payments, even when they could make higher payments.

Why is this?  Simply put, it’s harder than it looks to create a useful plan and without such a plan, it’s easier to just make the minimum payment that the bank suggests.  Combined with the fact that it’s hard to live without making some credit card purchases the balances just don’t come down.

DebbtGoal makes it easy to create and follow a plan to pay off your debt as quickly and efficiently as possible by:

1. Setting a constant monthly payment
2. Optimizing payment across accounts
3. Adjusting for purchases

Sets Constant Monthly Payment

Did you know that if you make only the minimum payment on your credit cards, you actually pay off less principal each month?  To understand how this works, consider a credit card with balance of $1,000 and an APR of 24%.  Assuming that your minimum payment is 4% of balance in each period, your payment schedule will look like the following:

In each month, you actually pay off less principal!  No wonder credit cards want you to make the minimum payments—since you pay off less each month, it can take up to 25 years to pay off a credit card.

However, if you hold your payment constant, the math is much different.  Instead of paying off less each month, you pay off more.  Using the same example, your payment schedule would look like the following:

In 3 years, you will have paid off your credit card, without paying any more than the starting minimum payment.  However, if you only made minimum payments, you would still have roughly half your debt left after 3 years.  And it will keep going…for years and years leading you to pay nearly twice as much in interest.

DebtGoal makes it easy to set a monthly payment that will hold your payment constant over time over all your accounts, even as the minimum payments change on your statement.

Optimizes Payments Across Accounts

If you have only one account, it’s not necessary to optimize your payments—you just hold your payment constant.  But if you have more than one account, it’s possible to optimize your payments.

If you start by setting a total monthly payment at the sum of your minimum payments, you’ll free up cash as your minimum payments decline.  You can get out of debt more quickly by allocating as much of your payment as possible to your highest-interest account.  This approach, known as Debt Stacking, pays off your highest-interest debts as quickly as possible, freeing up more cash over time for paying off debt.

Calculating this optimized payment strategy each month can be complicated, but DebtGoal makes it easy by linking to your online accounts, downloading your information, and updating your plan as your information changes.

Adjusts For Purchases

In today’s economy, it’s often hard to manage without making some credit card purchases.  However, these purchases will throw off the best of plans.

Unless you adjust for these purchases, you clearly won’t make the progress that you want.  DebtGoal takes the hassle out of this process by automatically importing your purchases and adjusting your monthly payment amount to compensate for these purchases, keeping you on track to get out of debt.

SAN FRANCISCO, May 11 /PRNewswire/ — FinovateSpring — DebtGoal™, the leader in online personal debt management, joined nationally recognized personal finance expert Jean Chatzky today at FinovateSpring 2010 to announce a new debt management program to help consumers take control of their debt.

DebtGoal created the Pay it Down! ™ application that is included in Chatzky’s new online personal finance program The Debt Diet™. DebtGoal also announced the launch of NegotiateMyRate.com, its new free tool to help credit card borrowers negotiate rates with lenders. NegotiateMyRate™ is open to the public and crowd-sources data from borrowers about success they’ve had lowering their APRs.

DebtGoal’s sophisticated SmartPay Plan™ algorithm is the core of the Pay it Down! app. It instantly calculates a customized debt repayment plan that provides the fastest and most efficient way to pay down debt, based on a member’s APRs, due dates, late fees, and other relevant data.

By linking to the member’s online accounts, DebtGoal can refresh plan details automatically every time customers make a payment or purchase – thus eliminating the 5-10 hours per months that borrowers spend creating and managing a plan on their own.

“Jean Chatzky’s sound financial advice shaped many of our early ideas as we created our SmartPay Plan,” said Scott Crawford, DebtGoal CEO. “Until now, people have had to apply what they’ve learned from financial experts like Jean on their own.

Often, the calculations and paperwork required to create a schedule that compensates for changing payments and interest rates over multiple loans is too much work. It’s so hard for people to consistently do on their own that as a result they do nothing. Including DebtGoal’s SmartPay Plan algorithm in The Debt Diet helps bridge the gap between advice and action.”

“The Debt Diet is designed to meet people where they are—whether they’re just beginning to think about their debt or are already trying to tackle it but feeling hopeless and overwhelmed,” said Chatzky. “The addition of DebtGoal’s Pay it Down! app gives Debt Diet users a valuable resource on their journey toward financial freedom—dynamite instead of a pickax as they attack their mountain of debt.”

The basic Debt Diet Pay It Down! app is available at no additional fee to Debt Diet members. The standard version, which automatically updates the user’s repayment plan when interest rates and balances change, will be available for an additional fee.

DebtGoal’s new free NegotiateMyRate site harnesses the power of crowd-sourced data collection to empower credit card borrowers to negotiate more effectively with their lenders. DebtGoal will leverage its large community of members to track the results of these negotiations, and will use the results to encourage other borrowers to negotiate with their lenders. DebtGoal has found that this knowledge can help borrowers reduce rates by 3-11%, enabling them to pay off debt more quickly.

“Since balance transfers involve significant fees, and opening a new card can impact your credit score, negotiating lower rates is generally the first step most personal finance experts recommend to those trying to deal with debt,” said Crawford.

DebtGoal also offers tips, tricks and guides for finding “extra” cash to help pay down debt faster. Its progress trackers keep consumers motivated by showing how they track against their target debt-free date, and the online community gives people a forum to share their debt challenges and successes.

Taken together, the SmartPay Plan, NegotiateMyRate, and Accelerator Actions combine to provide a holistic system helps borrowers understand their financial tradeoffs, make decisions that are aligned with their goals, and create a plan that can save them thousands of dollars in interest and takes years off of their debt.

About DebtGoal
DebtGoal is the industry leader in online personal debt management. Targeting the do-it-yourselfer, DebtGoal is helping its members organize, optimize and pay off nearly $1B in debt with its proprietary SmartPay Plan™, which calculates an optimal pay-down plan based on a member’s preferences and budget. With its low monthly price and focus on helping subscribers build credit by repaying what they owe, DebtGoal represents a dramatic departure from previous debt solutions that charge high fees or significantly harm credit. For more information about DebtGoal, visit http://www.debtgoal.com.

About Jean Chatzky
Jean Chatzky, an award-winning journalist, bestselling author, and nationally recognized television personality, has created a global platform that is making significant strides in helping millions of men and women battle an epidemic with a devastating impact—debt. Chatzky is the financial editor for NBC’s Today, a contributing editor for More magazine, and a columnist for the New York Daily News. She’s also the author of numerous bestselling books including Money 911, Pay It Down! and Make Money, Not Excuses. As one of America’s foremost authorities on personal finance, Jean has appeared on Morning Joe, Oprah, The View, Larry King Live, Sesame Street and numerous other television programs. For more information, visit http://www.jeanchatzky.com.

This is the second article in a two-week series on setting effective New Year’s goals for getting out of debt. You can share your debt resolution with others here. You can share your debt resolution with others here.

Previously, we talked about the reasons for putting debt reduction in your list of New Year’s resolutions, including better heath, relationships, confidence, and security. Perhaps most important, eliminating consumer debt can save the average borrower about $4,000 per year in interest costs.

How would you feel with an extra $4,000 per year? Would it change how you get along with your spouse? Would you feel less at risk financially? Would you have more self-confidence?

If the answer to any of these is yes, start today. We know that the process of paying off debt can be daunting, so we’ve laid out nine essential steps that we’ve identified through working to help others pay down debt. It’s not as hard as you think and we’ll walk you through the essential steps in upcoming posts. But in case you can’t wait to get started, here are the 9 essential steps:

1. Stop using your cards
2. Get organized
3. Set family priorities
4. Get SMART. Set SMART goals for debt reduction
5. Make a plan
6. Simplify for success
7. Tell your goal to others
8. Ask for support
9. Track your progress

Through the remainder of the next two weeks, we will discuss these techniques for getting out of debt. Be sure to follow these posts as we show you how you can buck the odds this year and take steps to build a debt-free future.

We wish you all the best in the upcoming New Year.

Scott Crawford is CEO of DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

This is the first article in a two-week series on setting effective goals for getting out of debt. You can share your debt resolution with others here.

The New Year is almost upon us and with it comes the inevitable introspection when we decide our priorities for the upcoming year. We consider our dissatisfactions and dreams and put pen to paper to create a list of things that we imagine with make us happier, healthier, or better in relationships.

Last year, Franklin Covey reported that getting out of debt was the top resolution, topping the perennial weight loss heavyweight. Similarly, MyGoals.com reported that the debt reduction was the top financial goal for 52% of respondents.

How did we do against our debt reduction resolutions in recent years? Not so well according to government stats: for example, 2008 aggregate consumer debt was up 2.3% to $2.6T and credit card debt increased 3.7% to $876B.

For 2010, with the credit crisis and after-effects of the economic recession, you may be thinking of making debt reduction your resolution. If you are, you’re not alone. According to a May 2008 Transamerica survey, debt reduction is the top financial goal for households with less than $100,000 in annual income and it was also the top use for the government stimulus checks earlier this year.

If you’re thinking about making debt reduction your New Year’s resolution for 2010, we enthusiastically encourage you to “Just Do It!” Here are a few benefits:

1. Better financial future: The road to your financial future goes through your debt. In the short term, paying off consumer debt will save the average borrower $4,000 per year in interest. In the long term, it will position you to achieve other financial goals such as retirement or college for children.
2. Better health: Several recent studies have documented the impacts of debt stress on heath and relationships. Debt stress can lead to sleep loss and has even been linked to preterm births.
3. Healthier relationships: Eliminating the stress of debt frees you to focus on your relationship and removes the bickering that occurs over competing goals.
4. Confidence: By just starting the process of paying down your debt, you’ll find yourself feeling more in control of your life and the satisfaction of making progress.
5. Security: Debt forces us to live on the edge, at the risk of hitting a slight economic speed bump that can send us into a tailspin. Without debt, you will be better able to weather economic hiccups.

This year, you can improve your life by taking steps to eliminate debt. Over the next two weeks, we will discuss the best techniques for getting out of debt. Be sure to follow these posts as we show you how you can buck the odds this year and take steps to build a debt-free future.

We wish you all the best in the upcoming New Year.

Scott Crawford is CEO of DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

New Year’s resolutions run the gamut from the outlandish (sky dive, climb a mountain) to the traditional (lose weight, help others more). An atypical resolution that will make a difference this year is more than a one-line “pledge to get out of debt” – it is a straightforward plan to do so.

Promising to end debt a boring and cliché resolution? Be stylish and realistic in your pledge and design a good plan. Here’s an idea:

“My 2010 resolution is to improve my personal finances and the first step is to aggressively eliminate my outstanding debt. Once I am completely free of debt, I’m going to save up for and pre-pay a tropical vacation to celebrate. Staying out of the red is going to be a cornerstone of my lifestyle moving forward. I pledge to the following plan:

a) Write all of my debt down on paper, with the name of the lender, outstanding amount to be paid off, and terms of repayment.

b) Prioritize the debts from most to least pressing to pay off. (Number them)

c) List my monthly expenses and income. Set up a budget that trims unnecessary expenditures and comes up with a consistent amount that I can contribute towards monthly debt reduction.

d) Start this action plan with the month of January 2010, with a modest reward for myself if I follow through with the game plan for each of the first six months of the New Year.”

Research shows that half the battle is proving that you can set up a plan and follow it.

If your debt is enormous, this is not a reason to avoid the most important resolution you can make. Simply adjust the resolution to represent a pledge to eliminate a large percentage of it (e.g., 50%) within the next year.

The best part of using a New Year’s resolution as a promise to eliminate debt is that you can let your promise be known to friends and family in a way that feels less difficult because everyone makes a resolution. It feels good because it comes off more as a declaration than a confesssion.

Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.