As mentioned in a previous blog, i just got a new job. Hoorah for me. It’s great. With this new income, i will need to create a new debt payoff plan.

So while at work the other day, i started creating a plan. I realized that this new plan allows me to pay off ALL of my debts by July 2010. My old plan had me just out of credit card debt by Dec 2010.

The new income i am making will be almost double the income at my last job, so this allowed me to plan for a much quicker pay off method.

What it breaks down to is me paying $1,200 a month, all towards debt. Then in about six months it will all be gone. I used very rough numbers, i over estimated and i over exaggerated interest payments so i could be out of debt sooner.

Essentially what it breaks down is all my debts.

• Credit Card- $3000
• Line of credit- $500
• Auto Loan- $3000
• Parent Loan- $800
• Technically a second Auto Loan for $3500 (I do not count this because it is being paid by someone else)

Within the first month, the Line of Credit will be gone. (that is my highest interest Debt) at the same time my parent loan will be chopped in half. Then the next month, my parent loan will be completely paid, then it will be $600 a month to my credit card and Auto loan until they both are paid in full July 2010.
I will go into more detail soon, i will include a chart with all my payments laid out for more ease of understanding.

Now, we talked about constructing a plan earlier, but I am going to walk you through it. How can you pay off your debts if you do not know how much you owe? Good Question, so this is where we will start.

If you do not know how much you owe, this is probably the reason you sleep at night. Well get ready to lose some sleep. Log into your bank websites, open all your bills, or call your banks if you are having a hard time calculating how much you owe. They should make it pretty clear. Once you have all the info, compile it all into one list like such.

Now don’t wince, you knew this day would come, and it’s the first step to getting rid of it. Face it! You are a big kid now and this number was your doing. Now it is time to digest a little more info. For example, paying only the minimums (4% of the balance) on all these cards, and assuming you do not spend any more with them, will take 14 years and 8 months to pay off all three cards with a total of $7,149.95 paid in interest.

You probably did not think about this when you were at the club swiping your plastic to buy, that cute chick that was using you, drinks.

Let’s face it, none of us did.

The next step is to create a payoff plan.

This tip will benefit all the Bi Weekly paid employees.

2 months out of the year you will receive 3 paychecks instead of 2. You might have noticed this before, but thought nothing of it as you spent it on DVDs, video games, and extra clothes for summer. What you need to do is put all of that extra income towards your debt. Think of it as a bonus, solely meant for debt payoff.

A check of $500-$1,000 (depending on your pay and hours) would destroy a major portion of your debt. Think about it like this. Your budget (you have one right??) only requires two pay checks for bills, savings, investing, and extra expenses. This is the case because 10 months out of the year you only receive two pay checks.

Not only will you feel good about getting $500+ off your “Debt Chest” but it will lower your Credit Utilization Ratio, improving your credit score, and making you look better to lenders.

I know you are on your way out of debt, that is why you are reading my site constantly and listening to everything I say, and you might justify trying to spend the money, but if you plan for the money to go straight to paying off debt you will not even miss it.

You can make it on two paychecks a month, so when the month rolls around where you will get three, plan to pay off debt with it, and do it. Using this exact tip, i destroyed my highest APR Card, which happened to by my lowest balance. It got that card out of the way and I felt great.

A major factor preventing millions of people from getting out of debt is not knowing where to start. I will admit that I am lazy and overwhelming projects rarely get done without proper motivation. I bet everyone can agree with that. Even I become overwhelmed and don’t know where to begin, so I don’t make progress. I was so sick of being in debt, so I created this site as motivation for myself.

Getting out of debt will require starting work, or it will never happen. Sending monthly payments for more than you actually spent will become routine and you will live in the clutches of a billion dollar corporation. Saving yourself and changing your life might seem overwhelming or too hard. I can assure you it’s not, and it actually requires less work than you think and mainly demands discipline. Disipline might be hard to come by because we got ourselves into this situation by lacking the restraint to spend money.

By taking small  coordinated steps, you can be on your way to being debt free in under an hour of your time. If you have time to watch Greys Anatomy tonight you can start getting out of debt in the same time.

• Know how much you owe.
• Decide on a method of paying off debt.
• Stop spending with credit cards.

If you do not know how much you owe, this is probably the reason you sleep at night. Well get ready to lose some sleep. Log into your bank websites, open all your bills, or call your banks if you are having a hard time calculating how much you owe. They should make it pretty clear. Once you have all the info, compile it all into one list like such.

Decide on a method of paying off debt. Sure you could just throw money at different bills but it is not very strategic. Would you prefer paying off the highest APR card first? Would it feel good to get the lowest balance card off your chest? Just like construction workers need blueprints before they build anything, you need a plan to pay off your debt. Adam Baker of Man Vs Debt likes this approach. In my case, my highest APR credit card happened to be my lowest balance, so I crushed that first and foremost. I am currently dominating my last card with all the funds I have available.

Lastly, stop spending with your credit cards. Cancel subscriptions, ditch your card, reach for cash/debit when you spend. Using cash will actually save you money in two ways. Statistically you will spend 12-18% less when using cash, and you will not be paying the interest as you would when using a credit card.