Tuesday, November 28, 2006

Steps to Drive Down Bad Debt

“The rich have more debt than the poor. The difference is that they have good debt, and the poor and middle class are loaded up with bad debt.” Rich Dad

Bad debt makes you poor. Bad debt is debt for something that buys a liability that takes money out of your pocket. In order to take control of your cash flow, you must drive down your bad debt.

Steps to Drive Down Bad Debt By Robert Kiyosaki and Sharon Lechter from Rich Dad's Guide To Becoming Rich Without Cutting Up Your Credit Cards

1. Take Stock of Your Credit Card Debt Take all of your credit cards out of your wallet or purse. Check the various outstanding balances on each one.

2. Pay Off Credit Cards with the Smallest Debt First Take the credit cards with the smallest amount of debt on them, and pay them in full first. Then, once you have paid off those cards, call the credit card companies and cancel them.

3. Pay Off Your Remaining Credit Card Debt Once you have the credit cards with the smaller amounts of debt paid off, do the same with your remaining credit cards. Keep whittling away at that outstanding debt until it’s gone.

4. Pay Off the Mortgage on Your Home When you have the credit card debt melted down, take the extra money you have and start to paying off the mortgage on your home.

Please understand that this is a process that, in most cases, cannot be accomplished in just one or two months. Depending on how much cash you have, this process of whittling down your credit card debt may take several months, or even years. But do it—because it’s a wonderful financial feeling when you no longer are a slave to those monthly bills. Even better, you’ll discover that you now have extra cash each month to pay off other debt.

The best news is that those individuals who have the willpower to follow these simple measures will find themselves financially solid and free of major debt within a matter of a few years. It may sound impossible to you in your current financial situation, but these measures will work for you.

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