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Controls To Help Your Plan Work
Controls To Help Your Plan Work
If you stick to a spending and saving plan, it can help you stretch your family's money resources and live
better on the money you have. A spending and saving plan can help you see how to use money to pay
bills and get more of the things that you need and want. A plan allows you to decide what is important to
your family and to make choices before spending your money.
You can make your money go farther by developing habits or routines that help you control your money.
For example, which of these actions might work for you?
Pay all bills the day the money arrives
Buy all necessities on the day you get the money
Have all the bills in one place, ready to pay when the time comes
Put all money to be used later in the week or month in a safe place
Have a list of all the things you plan to buy this month and know about how much you can pay for
each
Grocery shop once a week or every two weeks. Keep grocery money in a special fund or
pocketbook. Spend no more in the designated period of time
Pay an "average" amount on heating/cooling fuel each month to avoid large bills due at one time.
Decide who will be responsible for handling the money, or divide the tasks up among the adults
and/or children responsible for buying certain things
Set up an "envelope system" to help you track where your money goes. Label each envelope
with a specific spending category such as housing, food, transportation, clothing, entertainment,
personal care, and credit/loan payments. At the beginning of each month, put the money you
have budgeted into the appropriate envelopes. When payments are due, withdraw the amount
needed.
Prioritize Repayments
Credit card companies require a minimum payment each month. The next step in reducing
credit debt is to be sure you can make the minimum payments on your credit cards. Look at your
spending and see if you need to make cuts to find the money to pay your credit card bills.
If you pay only the minimum payment required each month, it can take a very long time to
clear your balance. For example, if you have a $3,000 balance at 18.9% interest and you pay
$50.00 toward the balance each month (a typical minimum payment), it will take you 15 years and 6
months to pay off your debt. And it would cost you $6,279.85 in interest charges.
Plan to do more than just pay the minimum. In the example above, if you paid $60.00 each
month instead of $50, it would take you 8 years and 4 months to pay off your $3000 and cost you $2,947
in interest charges.
Develop a plan
To reduce your credit card debt you need to plan how you want to do it. First, gather all
your credit card bills together. Then look at your different debts and set priorities for your repayments.
Which debt will you pay first? Choose strategies from those discussed below. Once you have a plan,
you are on your way to reducing your debt.
Debt Elimination Strategies
Choose strategies to cut your debts as soon as
possible
• Pay high-rate cards first At higher interest rates, more of your monthly payments go toward finance
charges. Quickly paying off balances on your credit cards with high rates can free up
cash to pay other bills.
OR
• Pay off cards with the smallest balances
first Paying off cards with small balances gives you extra money to pay on the bigger
balances.
• Make PowerPayments
Once you pay off a bill, next month add the amount you’ve been paying to the check you
write to your remaining creditors. For example, let’s say you pay $30 a month to
Sears. Once it is paid off, you add $30 more to the check you write for your VISA
account. Then when you’ve paid off VISA, add that amount, including the $30 from the
Sears account, to the check you write to pay your MasterCard amount, and so on until all
the accounts are paid in full.
Many experts believe that paying the credit cards with the highest interest first is best. You then go to the
credit card with the next highest interest and so on. This will save you some money in the long run. If you
want to see results quickly, we recommend paying off the credit card with the lowest balance first and
then go to the next lowest balance, etc. Whether you start with the highest interest rate credit card or the
one with the lowest balance it will ultimately achieve the same results.
One of the key points to make this system work is that you need to make a commitment not to use the
credit cards. Each purchase will throw you further behind.
Roll Down Method of Controlling Debt
This method is basically taking a set amount of money (the minimum payment for that debt plus
whatever you can spare), paying off a debt, then taking that same amount plus the amount
you are paying to the next debt and paying that debt off and so on until you get all your debts
paid off. Using this method in conjunction with the other techniques in this guide, you will be able to
quickly reduce your personal debt. There are many variations on this method. They depend on such
things as your interest rates, amounts owed to each creditor, and whether they’re secured or
unsecured debts. The basic premise of this method is that once you get a debt paid off, you take what
you were paying to that creditor and put it towards paying off the next one in line and never reducing
the total amount you are paying to all your creditors until you are debt free. Determining which order to
pay your debts off in is the tricky part. Normally it would be advantageous to pay your highest interest
rate debts off first, then the next highest, and so on, until they’re all paid off. Although this sounds like
the best course of action, sometimes it is not. Instead of giving specific examples that probably won’t
exactly fit your situation, here are the general steps to follow:
1. Make a list of your debtors, the amount you owe and the corresponding interest rates.
2. Try to figure out how much extra money you can put towards paying off
your debts.
3. Add the extra amount you can afford to each payment for the highest interest
rate debt until you come to a date when it’s finally paid off.
4. Add the amount of the payment you were making on the previous debt to the payments for the
next debt, starting on the date in which you got the previous debt paid off. Continue this until it’s
paid off.
5. Repeat step 4 until all debts are paid off.
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