Debt reduction as a goal

Few things lend themselves better to goal-setting than debt reduction. The goal is very clear: Get the amount you owe down to zero!

This doesn't only apply to people with credit card debt, but also to anyone who has a mortgage (this includes myself). Even though fixed-rate mortgage debt is among the better kinds of debt to have if you must carry it, it still is debt. In the absence of better uses for your money (like perhaps contributing to a 401(k) or building up an emergency fund, or a number of other things) mortgage debt should be retired early like any other kind of non-productive debt.

To get a plan for retiring any debt you might have faster, thy these steps:

1. Assess how much interest you would pay and how long your debt would take to pay off if you paid only the minimum allowable payments. For a mortgage, this information should be on your amortization schedule. For a credit card repayment, it's more complicated, but you can use this calculator if you have three or fewer cards.
2. Look at your expenditures to see how much above the minimum payments you can pay. A good place to start looking for leaks in your budget is your daily “habitual” expenditures, as described in The Automatic Millionaire by David Bach.
3. With this extra amount in mind, do some what-if calculations with the calculators.  You can do this with your mortgage here.  Are you happy with how much interest you'll be saving, or do you want to save more?  Do you want to pay it off faster?  If so, go back to step 2 and look for more places to divert your money toward your debt repayment!
4. Follow through with the plan, and monitor and celebrate your progress.  The numbers that the calculators put out only are numbers.  You have to actually pay the debts off faster!  It's rewarding to watch those numbers go down to nothing, though.  Just ask NCN!

This is of course very general.  The folks under “Debt Reduction Blogs” are of course very happy to discuss their successes and failures along the way, so you can get a more concentrated dose of specific tips and tricks from them.  I invite you to check them out!

Do you have a new debt reduction blog (or even an old one that I've overlooked)?  If so, let me know and I'd love to read about your goals!