Goodbye Debt! | Two Ways to Earn Back Your Freedom

Debt can be a stressful subject. Here are some ways to begin attacking your payments and accelerating your payoff time-frames. #thewealthmap #money #personalfinance

1. Do Some Math

The first thing you'll need to do is determine your total principal and minimum payments on each and every debt you owe, and list those minimums on an Excel spreadsheet or Word document.

I prefer to use Excel, because I can then use formulas to determine how long it will take me to pay off each debt.

Once you've determined your total principal and minimum payments, it will be important to set aside a portion of your money toward investing.

Investing? I thought this was about debt repayment?

Stay with me.

This will be a common thread throughout my articles, since your investments always have a better opportunity to grow with time on your side.

It is important to get started on both fronts, debt repayments and investing, even if you can only afford to invest $25-$50 per month.

See "compound interest."

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2. Identify Interest Opportunities

A lot of times people end up keeping their credit card debts with the same company and paying high interest rates, when 0% interest transfer cards could significantly lower their overall payments.

Look for 0% transfer opportunities with Citi, Discover, American Express and Chase. You want to look for the longest period of 0% interest, so that you can work on your credit card debt little by little.

Keep in mind that some cards will charge you a 5% transfer fee, but a lot of times the amount of the transfer fee is a lot less when calculated against the total amount of interest you would have paid had you kept your debt at your original credit card company.

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3. The Snowball Method

This debt reduction method requires you to list your debts from the lowest principal to the highest principal amount.

You'll make sure that you are paying the minimum for every debt repayment, that way you do not incur any penalties. Then, any remaining money left over is put on top of the lowest principal. (Don't forget to include your investments, as well.)

The goal is that you feed your psychology small victories by paying off your smallest debts first. Then, with each successive debt you pay off, you add the amount of the previous payment to the next highest debt.

Here's how it looks in chart form:

NerdWallet also has a great page to determine if the snowball method is right for you. Check it out!

Snowball Method | Example

Notice that in the above example you'll pay off over $13,000 in debt in a year and a half!

The best part about this method is that you went from having four debts to three debts in a matter of four months. Then, you cut your second debt's payback time-frame from 14 months to 8.

It is difficult to wallow under a mountain of debts, so any victory you can obtain can be a major motivator. Plus, if any emergency payment situation arises you will have the

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4. The Avalanche Method

When using the avalanche method it will be important for you to order your highest interest payments as your first priority.

This method is best for those that are patient and calculating, and it can save you more money if you have high interest payments.

Once you pay off a debt, you'll use the same approach as the snowball method by stacking each successive payment amount onto the next debt.

NerdWallet has another calculator for the avalanche method, as well. It can help you determine if this method is appropriate for you.

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5. Look to Add Money on Top of "Good" Debts

If you are a homeowner you may want to consider adding $100-$200 or more to your mortgage payment.

This will pinch a little bit at first, but you will be able to save tens of thousands in interest payments in the long run.

For example, if you paid $100 more per month on your home mortgage for 30 years you could cut your payment term down to 24 years!

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You've got this! Go kill those debts off and live your life!

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You can message Adam at wealthmapblog@gmail.com.