What is the best way to lower my debt?
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So this month you pay $20 + $35 to debt #1, for a total of $55. You keep paying just the minimums on the other three, as soon as you can. In ten months you've paid $550 on your debt #1; for the purposes of this example, let's assume that you get this card down to a zero balance, so it's time for debt #2.
If you recall, debt #2 has a $25 minimum payment. But you have $55 a month that you have been paying to debt #1, which is now at your disposal. So you pay $25 + $55, or $80, to debt #2. Maybe that's a larger amount, let's keep the math easy and say it's $1600, so it takes you 20 months to pay it off. But you do, and now you have that $80 at your disposal (not to mention any raise you hopefully have encountered in the next two and a half years).
Debt #3 has a $30 minimum, so you now have $110 to throw at it. And when it's gone, you can take that $110 plus the $35 a month that debt #4 requires and pay it off at $145 a month.
Get the idea now? From a long-term strategic standpoint, you're always best off to pay your highest-interest debt first because it's the one that costs you the most over time. However, you should be able to see from the example that paying your lowest-balance debt first may be better from a tactical standpoint, because it frees up that debt's monthly payment sooner. This gives you more to throw at your second and subsequent debts.
As another recommendation, if you don't already have a savings plan, consider this: after you've paid off debt #1, use only half of what you were giving it every month to pay down debt #2. With the rest, set up an automatic deposit into a savings account. Just have it put right into savings before you even see it, and then try to forget that it's there.
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