|CREDITOR||AMOUNT BORROWED||Balance||Interest Rate|
On Rung 4 – You Organized Your Debt, listing them from lowest to highest. Take out that sheet of paper or Excel spreadsheet. Your lowest debt should be at the top of the list. Let’s say that your lowest debt is $1,500 and your highest debt is your mortgage. In between you might have a car loan, student loan, etc.
On this rung, you are only going to be attacking consumer debt. This is all your debt, except your mortgage debt. For now, leave mortgage debt off your list. You are going to attack that debt later.
You budgeted the amount of money you are paying on each debt in your budget/spending plan. Let’s say that you’ve been paying $46 monthly on your $1,500 debt. However, on your next highest debt of $4,000, you’ve been paying $100 and for the sake of this example let’s say that the $100 is a little more than the minimum payment due. What you need to do instead of paying a little more than the minimum on your next highest debt is to pay the minimum on your next highest debt and all the other debt. Please don’t panic. What you are going to do will get you out of debt faster than you think.
Continuing with our example, your minimum payment on the $4.000 is $77.40. This means you have $22.60 extra in your budget. No, you may not order a pizza or go out to eat. You want to take that extra $22.60 and apply it to the $1,500 along with the payment you were making before. Also, if were paying more than the minimum on other debt, pay the minimum and take the extra money and apply it to the $1,500 debt. You were originally paying $46.32 on this debt, now you are going to be paying $68.92 or maybe more.