While debt elimination, retirement and emergency savings are all essential to eliminating financial stress, getting rid of debt should be your number one priority. Certain kinds of debt (mortgages, student loans, etc.) can actually be good in the sense that they help you build your credit rating. If you have excellent credit and you feel like your rates are too high on your "good" debt, you may be able to cut costs simply by restructuring your "good" credit loans at lower rates.
When it comes to "bad" credit -- revolving credit or credit cards -- however, the only solution is to pay it off as quickly as possible. Here are some tips for accelerating debt reduction:
- Consolidate credit card balances onto the lowest-interest card possible
- Always pay more than the minimum balance.
- If you are paying off more than one card, always pay the maximum amount possible on the card with the highest interest rate.
Once you've tackled your debt, you should find yourself, finally, with extra money at the end of the month. We talk about saving strategies next.