The problem with debt is that it is very difficult to save for the future while you are paying off the past. How can you put money away when you are paying high interest rates and fees on a credit card? For example, if you have $5,000 in credit card debt and you only pay the minimum payment each month, you’ll pay more than $37,000 over 50 years, just to pay off the $5,000.
If you have a small debt problem, you may be able to budget your way out of it. You can use the debt list in this program and start figuring out how long it will take you to pay off your debts at your current level. Then if you are able to free up more money as a result of your budget work, re-calculate how long it will take you to pay off your debts with these changes. Go through our budget section to see how much money you can free up, and see how much faster you can get out of debt.
Here’s how to do this.
Plug the debt total, interest rate, and dollar amount you are able to pay (from your budget work) into the debt calculator to estimate how long it will take you to pay off. (This number will change with a change in the amount you are able to pay, the interest rate, or if you acquire more debt. (can we put a debt calculator here or link to one. Can we use the one from the “Small Debt Challenge” section of the Credit Counseling for Bankruptcy filers program, looks like:
Debt Calculator
There are different strategies to paying off debts. You may want to concentrate on your debt with the highest interest rate because it’s costing you the most money. After you have paid it off, move on to the debt with the next highest interest rate. If that seems too difficult, you may want to attack the smallest debt first just to claim a victory and get have to deal with one less debt. After you’ve paid off the smallest debt, move on to the next smallest debt. This will give you an idea of what you are up against. For some of you, it may be a do-able plan. For others, you may be too far over your head in debt. We talk about what to do if this is the case in the financial crisis section.