First off, get it out of your head that you have no control over your debt and you have to follow all of the rules on your statements. You don’t! Finance favors the creative. This has been the most revolutionary lesson for me. You can approach your finances with creativity and benefit greatly from it. Let’s talk specifics!

Wealthy people do not let debt cripple them. They leverage it, restructure it, move it around like chess pieces. Non-wealthy people either pay off their debt in small, high-interest increments, month-by-month, statement-by-statement, or they ignore the statements altogether and get buried in quicksand. Let that not be any of us, dear reader! You have more power than you think. Let me help you believe this.

Let’s say you have unsecured debt such as high-interest student loans, medical bills, personal loans, store cards, etc. Let’s take a blowtorch to this because it is causing you and your family stress and you’re sick of it!

Step 1: List out all of your debt, no matter how painful this step may be. This is the suckiest part. My husband and I once did body shots of tequila before opening our tax bill. Feel free to copy this pain-relief strategy. Whatever it takes but you have to do this.

I have a spreadsheet to help you with this because – like I always say – everything makes more sense/cents with spreadsheets!

Step 2: Put your debts in order of interest rate, not balance. In other words, sort by Column D. You want to know where you are paying the most money for money. Interest rate is more important than balance at this point.

Step 3: Start to move this debt around to minimize interest payments and accelerate pay-off schedules. Here is where you can have some creativity. Just a few ideas:

• Can you transfer some of your higher-interest rate debts to a lower-interest credit card or loan account? Call your credit card company or bank. Ask if they have any specials on balance transfers. I recently transferred a few credit card balances to a card I wasn’t using because my bank offered zero interest for a year for a flat fee of $400. I only found out about this offer by meeting with my banker in person. That debt had been sitting on high-interest cards and I wasn’t able to pay them off right away. I was happy to pay the flat fee of $400 because it was A LOT less than I was going to pay carrying that balance on the compounding-interest cards. I made the transfer, paid off the balance within 6 months, and saved myself about $1,000 in interest.
• Can you set up a payment plan with your medical bills or overdue utility bills? Call the creditor! Call the minute you feel a Spidey Sense of trouble! They want to get paid a lot more than they want to send you threatening snail mail. Ask for a zero-interest payment plan or the very best they can offer. More of them are willing to work with you than you might expect. (One important note of caution here: If you do not do this, your creditor can either sell your debt to a third party or take you to court to garnish your wages. This is where the danger comes in because this happens more often than not to low-income people who don’t know any better. This story is heartbreaking because these people were preyed upon for their ignorance and shame. They simply did not understand what they were getting themselves into, nor how to get themselves out. This is why proactivity is always the preferred method for debt. Call the creditor, document everything! Please don’t learn this the hard way!)
• Find a low-to-no interest temporary loan or credit account. Do you own a home with some equity? Do you have strong earning potential? Consider a HELOC or PLOC. Often these loans have low-introductory interest rates. Our HELOC has 1.99% interest for a year so we moved our car payment balances over to the HELOC to avoid paying the 4.2 percent interest that we had been paying. That is a lot of dodged interest!
• If you cannot start to move your own debt around because you either cannot qualify for a new account or credit card, or you feel your debt is just too big of an avalanche for you to manage yourself, then you should consider a DMP, or debt management plan. This is when a credit counselor helps you come up with a plan to get out from under all of this, works with your creditors, and sets up payment plans. There is usually a flat fee for this service.

Step 4: Now that you have consolidated your debt to the lowest-interest options, re-do your worksheet to reflect your new consolidated balances and interest rates.

Step 5: Now set a budget for debt repayment. How much can you afford towards debt pay-down each month? Try to be ambitious with this number.

Step 6: Using that budget, figure out how much to pay each creditor. You want to put the maximum payment down on the highest-interest debt, even if that is the smallest balance. So here is how to set your budget:

• Sum up all of your monthly payments (Column E).
• Add $10 to each payment because you cannot let this interest compound at its maximum. Even $10 over the minimum knocks down your compounding interest.
• Sum up all of your monthly payments plus the extra $10 (Column F).
• Take the maximum amount you can allocate to debt from Step 5 above and subtract it from the sum of all of your monthly payments + $10, (or in Worksheet Lingo: Subtract B10 from the sum of Column F. This is done for you in B11 unless you added rows for additional debt accounts).
• Pay the remainder towards your highest-interest debt account. All of it. That will knock that debt out quickly and then you repeat the process for the second highest-interest account on your list.

Is this system brilliant? Yes it is! But I can’t take credit for it. I read it in a Suze Orman book. #ProfessionalCrush

Now about that debt, I probably don’t have to tell you that it won’t go away if you make bad spending choices. I don’t want to lecture you on that because 1) I’m not your mother; and 2) You would not have made it this far on this blog post if you weren’t serious about getting out from under your debt. I believe in you and your willpower and your ability to do this. Someone has to and that someone is me!

Does this help? Feedback please!