Strategies for Debt Reduction

DebtThanks again to all who came out for my Getting Out of Debt: It’s Like Eating an Elephant seminar last week!

Here is a great article from Consumer Reports courtesy of Yahoo that talks about some common sense debt reduction strategies. As I often like to say in this forum, most of the advice that I and others offer on the topic make us masters of stating the obvious. But one thing that never ceases to surprise me is that many people would make different and better financial decisions if the knew the real implications of what their bad decision might cost them in terms of real dollars.

For example, when you get your credit card statement each month and faithfully send in the minimum amount stated on the bill, you’re extending the amount of time it will take you to pay off that obligation by years and years. In fact and as the article points out, making only the minimum required payment on a $2,000 credit card balance on a card with an 18% annual percentage rate (APR) means that it will take you 24 years to pay off the balance. 24 years! OMG!

And keep in mind that, in the case noted above you just guaranteed the credit card company a return of 18% on their investment for the next 24 years. Do you know where you can get that type of guaranteed return these days? Neither do I. But your credit card company does. (Hint: find a mirror.)

Having a solid strategy for attacking your debt and eating that elephant often begins with a simple personal budget and some common sense discipline. If you ever need a firm kick to get you started, I am always happy to oblige.

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