How to Pay Off Debt – the Right Way

Are you up to your eyeballs in credit card debt? You’re not alone. According to Business Insider, the average American household with credit card debt owes upwards of $16,000.

Like anything else in life, the key to paying off your debt is having a plan. Most people blindly pay what they can on their bills, with little-to-no thought on how they are allocating their payments. This ultimately costs them time, frustration, and hundreds of dollars in interest.

Luckily for you, the professional financial planners at American Investment Planners, LLC are here to help. This proven four-step method will allow you to pay off your debts as quickly and efficiently as possible.

Step 1: Stop adding new debt.

If you are serious about paying off your debt, the first thing you need to do is stop adding to it. Leave your credit cards at home the next time you go shopping, or cancel, freeze, or cut them up if you need to.

Step 2: List each of your debts in order of interest rate.

Make a list of all of your debts, including car payments, student loans, credit cards, store cards, and anything else which isn’t a mortgage. Now rank all of these debts in order of interest rate, with the highest rate at the top of your list.

Step 3: Pay all of the monthly minimum payments.

When compiling the aforementioned list, be sure to include a column for minimum monthly payment. This is the amount you will pay every month towards all of your debts, except for the one at the top of your list…

Step 4: Put extra money towards the debt with the highest interest.

This is where that list of interest rates comes in handy. Once you have made the minimum payments on all of your debts, put your remaining money towards the debt with the highest interest rate. Most people pay off their debts in order of total amount owed, starting with the smallest sum. While this allows you to close small accounts quickly, paying off in order of interest rate guarantees you spend the least amount of money possible.

Bonus Tip: Lower your interest rates and consolidate your debt with balance transfers.

A balance transfer is the process of moving your credit card to another bank in exchange for a lower interest rate. When utilized correctly, balance transfers could save you hundreds (or even thousands) of dollars in interest fees. Shop around to get the lowest interest rate for the longest duration possible, and be sure to read all terms and conditions to avoid hefty fees.

American Investment Planners, LLC has been helping families across the country pay off their debts for more than 30 years. Our professional financial consultants will sit down, examine your current debts, and work together to construct a repayment plan that meets your needs and budget.

To schedule an appointment with one of our advisors, please call (516) 932-5130 or email info@americaninvestmentplanners.com.