Getting organized and coming up with a simple strategy is the first and most important step. In it, you don’t just bring together all of the various bank statements, payment stubs, and notices of changes to debt terms lying around the house; you’re actually writing down concrete and straightforward things that need to get some debt control. Only with a written plan can you effectively measure your progress towards debt elimination. Still confused and not sure where to begin?                                                                                                                                                                                

1. Collect all documentation you can find regarding your debt. Don’t pour over it yet; just pile it all into one place.                                                                                                                                                         

2. Take the pile and organize it in groups, according to type of debt (i.e., auto, credit card, housing/mortgage, etc.)                                                                                                                                               

3. Read through it to get a basic understanding of what is owed and to whom. On a separate notepad, jot down important things such as: the principle, the current debt balances, interest rates, whether the rate is variable or fixed, mandatory timelines for payment, minimum payment amounts to avoid additional fees, and any debt prepayment penalties. Also jot down the phone number(s) of the contact(s) for the account. Don’t worry about finding all of information; do your best and don’t be afraid to call the contact phone numbers for each of your lenders to fill in the blanks.                                                                                                                                                                                                               

4. Snowball Method: Within the mandatory guidelines for repayment you can choose between one of two basic strategies: pay off the smaller balances first, or pay off the balances with the higher interest rates first. Paying off the balances with the highest interest rates makes the most financial sense to pay less interest in the interim, but motivation-wise you might feel increasingly confident as you wipe out credit cards to zero balances. In this second case, the snowball method will be optimal:  it entails paying the minimum monthly payment on each of your debts, except the one with the lowest balance, where you apply all of the remaining funds you can dedicate towards debt reduction.                                                                                                                                                                                                           

5. Check your progress every month. Tell a friend, family member, or loved one about your plan and monthly targets so that they can keep you on track, like a coach. Be explicit and clear as to what is owed. Providing your coach something in writing will add to the sense of commitment.                                                      

Tomorrow we discuss step two: various quick and simple options to speed up the debt pay down process.