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A Plan To Dump Your Debts

One of the biggest problems facing more and more Canadians is excessive credit card debt. It is very tempting to buy more now and pay later. It is also becoming easier and easier to qualify for more and more credit.

How many letters from the credit card companies do you get in a week?

    So as we all come to terms with this common problem, how can we put a plan in place that will help you get out of debt? I recently read Financial Peace by Dave Ramsey. In his book he talks about the strategies to get out of debt and stay out of debt. One strategy called “Debt Snowball” I believe could be especially useful:

    Step #1 - List all of your credit card debts with the smallest balance first and the largest balance last. Also list your payment and interest rate on each card.

    Step #2 - Now you pay off the cards in the order they are listed. Start with the smallest balance first. Put any extra money on the smallest balance to get it paid off.

    Step #3 - When the smallest balance is paid off, start working on the next smallest balance and add the original payment from the first card paid to the second cards payment. You continue adding the payment from the previous card when it has been paid off to the next card.

    Step #4 - When all of your credit cards have been paid, add your credit card payment to your car payment or your mortgage - whichever is the least.

    Step #5 - When all of your debts are paid completely, add your debt payments to your emergency fund or investments for your retirement.

    According to Dave Ramsey the strategy works because you get to see some success quickly by paying the smallest balance first. Success encourages us to continue with the process. Working the plan will lead to your future financial success.

    Of course it is also important to stop spending on your credit cards at the same time!

    For more information, call or email Laurie Tregaskis, CFP at 403 290-0940 or ltreg@telus.net