FLM Step 13: Jenn Fowler on paying down debt

In honor of Financial Literacy Month, we created a microsite that offers 30 simple steps to financial wellness–one for each day of the month. To enrich the experience, we asked some amazing people to guest post during the month on a topic that is related to the day’s step. Their dedication to financial literacy is truly inspiring! Today, Jenn Fowler writes about paying down debt.

Are you drowning in debt? Does the mailman's arrival with a new stack of bills fill you with a sense of dread? Do you want to take control of your debt, but have no idea where to start?

I'm here to help! Calm down, take a deep breath and get ready to work. It's time to take a good look at your debt and figure out a plan to getting YOUR financial life back on track.

#1-Inspect Your Debt

Take a good look at your debt. How much do you owe? What are the interests rates? Odds are that you have a couple of cards and some loans with several different rates. Which credit card has the lowest? Is it maxed out? Try to transfer as much of the high interest debt onto the lower interest cards. If doing that clears any of the cards-get rid of them, cut them up or at the very least put them away and charge no more!

#2-Negotitate with Creditors

Now it's time to pick up the phone and make a few calls. Call each creditor and see if there is any way to drop your interest rate. Sure, many of them may say no-but then again they could say yes. What have you got to lose, except for a bit of your time?

#3-No More Minimum

If you pay only the minimum balance each month, it will take you a long time to pay off your cards-and you will be paying the maximum amount possible!

This is one of those concepts that is easiest to understad with an example.

Let's say you had unwisely charged up $10,000 on your credit cards. You are paying 14% interest and the card requires a minimum payment of $200 a month.

With those figures it would take you 31 YEARS to pay off your debt and you would have paid a whopping $14,772.15 in interest.

Let's change that up just a little bit and increase your monthly payment to a mere $210. $10-that should barely make a difference right?

Wrong! If you up it to $210 the card will be paid off in 6 YEARS and pay a mere (ha!) $4985.78 in interest. That's a savings of almost $10,000 and 25 YEARS.

Granted, I just pulled that debt, interest and minimum payment out of a hat-but for a reality check, take your REAL numbers and head on over to the the CnnMoney.com Debt Reduction Calculator to check it out. Try looking at how long it will take to pay off your card with the minimum payment vs a fixed payment of just $10 more month. You may be surprised.

I'm sure you can find a way to squeak out an extra $10 a month, can't you??? If you don't know how, don't worry-there will be plenty of ideas here on Blogging for Change during the rest of Financial Literacy Month that will help you out.

#4-Choose a Method

I've proved to you that it is necessary to pay MORE than the minimum on your cards if you ever want to get out of debt. Now it is time to decide what plan of attack you want to take to do that. Of course you must continue to pay the minimum balance on each of your cards-but where do you put the extra? There are two main schools of thought which to attack first: highest or smallest.

Highest First: The highest interest rate card is costing you the most money. So if you apply all extra money to the card with the highest interest rate, you will save yourself the most money. If you want to save that money and can keep yourself encouraged than this is the method for you.

Smallest First: Other people need a good shot of positive reinforcement in order to stay on track and work hard at debt reduction. By attacking the smallest balance first, you can get the "reward" of paying off a card completely in the shortest time possible. This can energize you and keep you on the path of debt repayment.

Which method will work for you is very personal-the one that is most likely to keep you plugging away at debt reduction is the right one for you! So there you are, the basics of how to approach debt reduction! You now have a plan of attack-come back here every day this month to see more bloggers talk about all the different ideas and techniques you can use to put your plan in action.

Jenn Fowler has blogged regularly at Frugal Upstate since 2006 where she encourages folks to "Use what you have, get creative and save". She also co-hosts the talk radio show "Frugal Coast2Coast" every Monday night at 8:30 EST. Her other ongoing projects include being one of the founding members of the Walmart Elevenmoms, a Frugal Living Speaker and a Social Media Consultant with Social Media Matters. Jenn is addicted to twitter ( @jennfowler).


Kim McGrigg is the former Manager of Community and Media Relations for MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

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  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.