But before considering any of that you have to figure out where you are exactly.
Step 1: Gather all those dusty envelopes and jump on in
Make a list of all your loans, interest rates and minimum payments.
Step 2: Download or Create a Debt Calculator Spreadsheet.
I am working on templates of my own, but in the interest of time and saving you money here is one available for free. Click here to download
This spreadsheet is great because it outlines two popular ways to tackle your debt.
- Snowball - Paying off your loan with the smallest balance first. You may pay more interest, but this can help if you are interested in reducing the number of individual loans you have.
- Avalanche - Paying off your loan with the highest interest first. This results in paying the least amount of interest, but can be a little disheartening if that loan has one of the biggest balances.
Step 3: Create a Budget
Itemize your spending by Monthly Bills, Needs, Wants and Savings.
Here is my budget breakdown.
- Monthly Bill Payments: Car, Insurance, Rent, Phone, and Student Loans
- Needs: Food, Household Goods, Gas and Doctor
- Wants: Netflix, Shopping, Hobby Supplies...
- Savings: Anything that is leftover, hopefully
Step 4: Track Your Spending
I have two methods and they seem to compliment my lifestyle very well.
- Good old pencil and paper - I carry a pocket notebook everywhere!
- Mint.com - a free, easy and secure way of tracking all of your financial accounts in one location.
- Monitor accounts, set budgets, track goals, bill reminders, shop for car insurance and so much more.