The First and Second Step to Reducing Debt (and most important!)

If you have credit card debt, there are a few steps that are absolutely essential for you to dig your way out.


1. Sit down with a pen, a piece of paper, your wallet and a phone. Get comfy- You're going to be there a while. Write down the name of every credit card in your wallet. Call up the number on the back of each card and find out your interest rate, your balance, and your minimum monthly payment.


1a. Take another sheet of paper and list the credit card's in descending order by interest rate, the highest being at the top. Click here to go an online calculator to determine how much you are paying in interest every month. Enter each credit card's info into the calculator, (leave the % column blank- just enter the minimum payment). It will present you with a chart of how long it will take to pay off that loan and the interest you will pay each month on the card.


1b. Add up the monthly amount paid in interest for one month for each card. Look at that figure. I'm guessing its in the hundreds. You're paying that every single month for the privilege of buying things you can't afford. If you had that money back every month, what would you do with it? Once you realize how much your spending just to own those credit cards, it will be much easier for you to avoid the temptation of using them.


2. Call back the credit card companies one at a time. Ask each one if it will consider reducing your interest rate. Be pleasant, charming, and adorable. Do this even if you have bad credit. Do this even if you have horrible credit. The worst that they can do is say no. Mark down the new interest rate for any reductions. If they say no, get a free copy of your credit report at annualcreditreport.com by clicking here. Find out what your negatives are: do you have a high credit to debt ratio? Do you have late payments? Work your butt off for the next 6 months to increase your credit score (myfico.com). Call each credit card back in 6 months and ask again.


These are the first two steps to financial freedom. There's more to come, but handle these first.