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<<I need some sound advice on how to begin a credit card debt elimination plan for myself. I decided to set a goal for myself of 24 - 36 months. Then I divided the current balance(s) by 36. My question is this: should I have included the current interest rate in this formula? In other words, once I determinded the monthly rate of 36 equal payments, should I have multiplied that by the current percentage rate? Would this accelerate the payment of the principal or is this unrealistic? Although it would be tight for the first few months, I am willing to stick with this until I see the mountain of debt disappear. Does anyone have a better solution?>>

This isn't exactly the answer you were asking for, and several things may not apply to you, but others may find useful.

The Motley Fool has a credit/Debt area it is located at .

A good book on this:
How to Get Out of Debt, Stay Out of Debt and Live Prosperously -- Jerrold Mundis
You can find this at or your local library.

Useful software.
Debt Analyzer

A definition so we can agree on what we are talking about. A debt is any unsecured loan. If a creditor would lose money if you didn't pay it is a debt. A mortgage is not a debt since if you didn't pay, the creditor takes your house and doesn't stand to lose money. A credit card is obviously debt, past due utility bills are also debts.

As you are paying everyone back you may have to talk to the various creditors. Don't lie to your creditors. No matter how much they insist/whine about what you must do, DON'T promise anything you can't deliver. If you say you will drop a check off Thursday come hell or high water make sure they have the check Thursday.

Now a plan of attack. This is my adaptation of the previously mentioned book.

Step 1: Don't make things worse. Quite simply don't get any more debt. Don't use a credit card.

Step 2: Make a list of all your creditors, minimum payment, monthly interest, interest rate, and amount owed.

Step 3: If you don't have an emergency fund pay something to yourself in some form of savings (savings account, money market, EE bonds, ...). You will need this fund so that when the refrigerator dies it can be replaced without going into more debt (see step 1).

Step 4: Try to make AT LEAST the minimum payment to all creditors. If there isn't a minimum payment (the loan from your brother) pay some monthly payment. If you have more than the minimum paymanets that can be used to retire debt, send it to the creditor with the highest interest rate (or the most annoying creditor). If you don't have enough for the minimum payments try to at least cover the monthly interest and penalties, and talk to the creditor.

Step 5: Keep track of everything. A journal page for each creditor is a good idea. You will know exactly what you promised, and you can keep track of the balance of the account and see it going down. Keep track of every account you liquidate, positive reinforcement is always nice.

Step 6: As you retire debts use the money you were paying to them to pay off the next highest rate debt.

Things I have left out of this is keeping track of where your money goes (I already knew). And makeing a spending plan (budget) (I already had a rough one). The budget I use is a mixture of products, product classes, and stores. For example I plan on spending $60 on gas, and $200 at Sam's club. Notice that I didn't specify that $20 of the Sam's trip was for laundry producets.

Does this work:
It's working for me. I haven't used a credit card in two years, and have liquidated several debts. It's hard to say when I will be debt free, but it looks like three to four years. For the first time my wife and I are going in the same direction.

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