Okay, so you're ready to attack your debt once & for all - yes! Here are a couple of questions to answer before you get started to make sure you are well positioned to attack the debt:
- Have you created a list of all of the debts that you owe? If not, that's okay - create four columns & label them "Name, Balance Owed, Interest Rate & Minimum Payment".
- Have you thought about & decided your attack plan? Are you going to pay the debt with the highest interest rate first, what about the lowest balance so you can start making progress? What if you have IRS debt...should that be higher than others?
- If I hit a bump in the road am I going to have to go right back into debt? Check out the tool below to determine where you stand with your emergency fund. If you start paying down debt without anything in an emergency fund you could find yourself adding to your balances halfway through attacking that debt. You may not need a full 3-6 months of expenses in your emergency fund, but it's all a personal preference. If you are nervous about only having a couple thousand in the bank then save to a number that is comfortable for you. It's more important for you to be comfortable with the savings number before attacking debt because you'll be more likely to follow the plan if you're comfortable.
- Do you know how much extra money you'll have each month to throw at your debt?
- Is your budget realistic or is it too aggressive? You might get frustrated halfway through if you consistently miss your budget because it's too aggressive.
- Why do you want to attack the debt? Yes, I know this is "fluffy", but it's a big deal to sacrifice to pay off debt. With a strong "North Star" it helps when you hit those days where you just want to forget the plan you're on.