YOU can create your own ultimate debt elimination plan.

YOU can create your own ultimate debt elimination plan.

The method is simple: 1. Set a monthly amount. 2. Pay all minimum amounts. 3. Pay extra money toward the debt with the highest interest rate.

This method will ensure that you pay the least amount of interest and repay your debts as soon as possible.

The trick to paying off your debts in the least amount of time is to set a fixed total amount to pay each month.

By paying a fixed total amount each month, as one debt is paid off, you will have more money to pay towards another debt. This is often called the "snow-ball" effect.

But first things first.

First, determine your ability to pay. If your total payments are much more than you can afford, you are in trouble. You may need to contact a non-profit credit counselling agency. You can find them in the phone book or online.

But be careful of companies that want an upfront fee. Check with your local Better Business Bureau for recommendations.

Next you need to make a commitment to stop getting further into debt. Cut up your extra credit cards or put them where you cannot easily get them.

Stop spending more than you make each month, and don't count on future bonuses, inheritances, refunds or other non-dependable income to bail you out. If you make R2000 a month you can only spend R2000 a month. Look for ways to cut back on purchases you can postpone or do without.

Let's look at each step of your ultimate debt reduction plan more closely.

First, determine how much you can afford to pay each month toward your debts. At the minimum it should be the total of all your minimum payments for the current month.

You may need to examine your spending for the last several months. Find things you can eliminate or do without for a while. Postpone purchases, cancel subscriptions.

You may even want to postpone investing for a while.

Once you have your monthly debt repayment amount set, you need to write down each monthly debt you are paying. Record the creditor's name, the current balance, and the interest rate. Then take a separate sheet of paper and re-order the debts so that the debt with the highest interest rate is at the top.

Now as each monthly bill comes in pay the minimum payment. Subtract the minimum payment amount from your set monthly total. After all the bills are paid for the month, take any extra money left over and make another payment on the debt at the top of your list.

As each debt is repaid, cross it off your list, but keep paying the total monthly amount. This will accelerate your debt repayment and save you hundreds in interest charges. simplejoe.com