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Brett and Kate McKay<br />
you can save yourself money in the long run, and you might be able to pay<br />
off your debt faster. Follow these steps to begin reducing your debt this way:<br />
Grab a piece of paper and list all your debts in order from highest<br />
interest rate to lowest interest rate. Usually your highest interest rates will<br />
be on credit cards and car loans, and your lower interest rates will be on<br />
student loans.<br />
Focus on paying down the debt with the highest interest rate. Take the<br />
debt nut that you just calculated out and direct as much of it as you can<br />
towards paying down the debt with the highest interest rate.<br />
Continue making minimum payments on the rest of your debt. You<br />
can’t pay one creditor at the expense of others or else you’ll wind up in deep<br />
doo doo.<br />
Once the debt with the highest interest rate is paid off, start putting<br />
the money you were paying on it towards the debt with the next highest<br />
interest rate. When that debt is paid off, start going after the next highest<br />
interest rate, and so on until it’s all paid off.<br />
Option #2: Dave Ramsey’s Debt Snowball Plan<br />
One debt repayment plan that’s popular with folks is Dave Ramsey’s<br />
“Snowball Plan.” Here’s how it works:<br />
1. List your debts in order from lowest balance to highest balance.<br />
Don’t take into account the interest rate. We’re just focusing on the<br />
balance of the debt.<br />
2. Allocate as much of your monthly budget as you can to paying off the<br />
debt with the lowest balance.<br />
3. Once the debt with lowest balance is paid off, you add the dollars<br />
that had been going to that debt to what you’ve been paying against<br />
the next lowest debt. Each time you pay off a debt, the amount you<br />
can apply to remaining debts is a little bigger. Thus, the name “Debt<br />
Snowball Plan.”<br />
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