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4 Rules to Get Out of Debt

If you’re in debt, you have to get out. The best way to do that is to put together a plan — but remember a plan is only as good as your ability to stick with it. Just like diets, all of them work; the true test is sticking with one. No matter how effective the plan is in theory, if the regimen is outlandish and impractical, you will not stick with it.

When evaluating a get-out-of-debt plan, you should look for one with these characteristics:

—No. 1: It is easy to prepare.

—No. 2: It is simple to understand.

—No. 3: It can be reduced to writing.

—No. 4: Its results can be measured.

—No. 5: It has a specific finish date.

I have developed the Rapid Debt-Repayment Plan, which fits these criteria and consists of four rules. If you will diligently apply these rules to your unsecured debts, you will get out of debt in record time.

RULE NO. 1: NO MORE NEW DEBT

Unless you are willing to stop adding to your unsecured debts, you’re really out of luck when it comes to debt-proofing your life. Furthermore, if you don’t stop adding to the problem, you’ll be like the homeowner with the kitchen fire — except instead of putting out the blaze that’s ready to destroy the entire structure, you’ll be pouring gasoline on it. It might be manageable for a while but you’ll be on your way to a full-on raging inferno. The rule is simple: No more unsecured debt.

RULE NO. 2: PAY THE SAME AMOUNT EVERY MONTH

Whatever your minimum monthly payment is this month, fix it. That means even if your creditor will accept less next month, you decide that whatever it is this month for each of your unsecured debts that you’ll pay that same amount until you are out of debt.

RULE NO. 3: ORGANIZE YOUR DEBTS

Line up your debts according to size, putting the one with the shortest payoff time at the top and the one with the longest term at the bottom.

RULE NO. 4: ADD YOUR FIRST PAYMENT TO THE NEXT

As one debt is paid, take its payment and add it to the payment of the next debt in line. This is where the rapid part of this plan kicks in. With much larger payments going to that second debt each month, it will reach $0 in record time. Then take both the first and second payments and add them to the third debt’s payment until it is paid, continuing until all are paid.

If you haven’t already asked the following question, you probably will at some point: Wouldn’t it be better to line up my debts according to interest rate, with the highest in the first position rather than the debt that will be paid off most quickly?

Theoretically, that might be the way to go. Some financial experts advise that, in fact. But I have worked these plans every which way possible and still believe that the potential difference in interest is so minor compared to the benefits of using a plan that has a high probability of success. The RDRP is a plan you will stick with because it has big emotional payoffs along the way.

So, here it is, a New Year with its clean slate. Isn’t it about time for you to get out of debt? I did, thousands of others have and you can, too — and you can count on me to be right here cheering you on all the way!


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Mary Hunt

Mary invites you to visit her at EverydayCheapskate.com, where this column is archived complete with links and resources for all recommended products and services. Mary invites questions and comments at https://www.everydaycheapskate.com/contact/, "Ask Mary." Tips can be submitted at tips.everydaycheapskate.com/ . This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of EverydayCheapskate.com, a frugal living blog, and the author of the book "Debt-Proof Living."

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