1) On a sheet of paper write down the name of each creditor, total amount, monthly payment, and interest rate.
Example:
http://www.jeffhake.com/JNTCompany/images/sheet10-DebtSnowball.gif
- Citi Visa Card , $1200, $47, 17.9%
- American Express, $1600, $89, 19.9%
- Personal Loan, $900, $55, 11.8%
**2) **Prioritize Your Creditors - Rank your debt in order from highest to lowest according to interest rate. This is the order you’ll repay your debts.
3) How much can you pay? - Total your income from all reliable sources including wages, bonuses, or dividends. Then, subtract what you spend each month on required expenses, those items you need for survival. Required expenses include mortgage or rent, utilities, food, transportation, medical expenses, and your current debt payments. This calculation will result in your disposable income. With your disposable income in mind, you can figure out how much you’re able spend to repay your debt each month. Knowing your obligations are already taken care of, think about how much extra money you’ll spend during the month. Subtract this from your disposable income to figure out how much you can spend on your debt.
**4) **Lets make the plan now - Now we know that how much you will be spending to pay off your debt, you can complete your plan. Put all of your debt-spending money towards your highest priority debt. This will either be your smallest debt or the debt with the highest interest rate, depending on the method you choose. Pay this amount plus the minimum payment every month until the debt has been completely repaid. Continue making the minimum payments on your other debts. Once you’ve paid off the first debt, combine the minimum payment from that debt with the extra amount you’ve allocated for repaying your debts and put it towards the debt with the next highest interest rate. Repeat this process until your debts have been completely repaid.
5) Rejoice & give a lavish party !
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