If you are on a journey towards creating Wealth and Financial Freedom there are two things you can do to get there faster. You can increase your income, which is by far the easier and bigger option, and you can cut your costs.
And if you have existing debts, then often these add unnecessary costs to your budget. This means if you can reduce or eliminate your debts, or at least your bad debts anyway, then you have more money for investment and creating Wealth.
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So what is the best way to go about this?
Well firstly it helps to know exactly what you are dealing with, so write down a list of all your debts. Make a note of the creditor, the amount, the interest rate and your monthly payment.
Next look at how much you can allocate to paying down your debts. Include your existing monthly payments plus any more you can comfortably add.
From this total pay the minimum to all except the smallest debt, pay all the rest towards the smallest debt.
This way you will pay off your smallest debt fairly quickly.
Once you have paid it off use all the money you were using for that to pay the next smallest debt. Keep doing this until all your debts are paid off.
Of course you may if you are disciplined choose to start paying off the most expensive debt first. This is also OK as long as you can stick to it, and will reduce your costs the most whilst you are repaying.
Psychologically for most people it is best to pay the smallest first so that you can see the results quickly!
A useful website you can go to for free help and resources on reducing debts and saving on costs is Martin Lewis' Money Saving Expert.
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