But how do you get out of debt? The problem with big debt loads is that repaying becomes more and more difficult – especially as interest snowballs. Given today’s roller-coaster real estate market and the lag time between big-picture economic recovery and an actual uptick in job opportunities and income, the smart money’s on paying down debt now, rather than later.
Easier said than done, right?
We asked Schwartz for his professional advice on getting the most bang for your debt-repayment buck.
1. Lay it all out
"Determine how much you owe by laying out your statements and totaling up the amount you owe on each credit card," says Schwartz. Taking a cold, hard look at how much you really owe can be sobering – yet empowering. You're taking your first step from being in the red to getting back in the black.
2. Prioritize your debts
Pay off the highest-interest debts first, says Schwartz, even if it means tackling "bitty" balances in the hundreds or lower thousands, before chipping away at that whopping five-figure line-of-credit balance that’s keeping you up at night.
"Your highest interest rate debt is your most expensive. You're paying more for those dollars to be loaned to you. To be efficient, pay off the highest interest debt first and then work your way down from there," says Schwartz.
3. Assess where you spend – and where you can save
Your next step will be creating a household budget. But first, find out how much you spend each month, and think about where you can save. (Think also about how you might add to your income each month, too.)
"Write down what you're spending," says Schwartz, from your mortgage and debt payments, to lattés and DVD rentals. By tracking your spending habits, you'll find it easier to identify where you can cut back.
Page 1 of 2 – Learn when you should get credit counselling on Page 2
