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Snowball Your Debt
J.D. Roth at Get Rich Slowly (getrichslowly.org) dug himself out from under a mountain of debt and now has cash in the bank. He did it by bucking conventional wisdom, which is to pay off the biggest debt with the highest interest rate first. This does minimize the interest you pay over the long term but offers very little motivation to stick with the program, because it's easy to feel like you're not getting anywhere and give up. Instead, Roth did what's called a "debt snowball," paying the minimum on every bill except the one with the lowest balance, which he quickly knocked out in full. Then he did the same thing again, eliminating another balance, and so on. I jumped on the bandwagon, paying off a small retail credit card lickety-split, which made me think I was succeeding. I added that monthly sum to the minimum payment on my next-smallest debt. Each time I hit another zero balance, the amount I can throw at the next debt in line gets bigger. As my snowball keeps growing, even large debts are dwindling—much to my delight.
Compute the Real Cost
According to the Bargain Babe (bargainbabe.com), if you're a minimum-amount-due type of payer, you end up shelling out 68 percent more for an item when you buy it with a credit card. This means that those 50-percent-off shoes are no bargain if you can't pay with cash. Since I loathe paying retail, I find that mentally adding 70 percent to the purchase price of something about to go on plastic is surprisingly effective at holding the line on my spending.