Getting Out of Debt Using a Pyramid Method

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Getting out of debt using a pyramid method requires making a list of all bills owed, paying off the smallest bill or paying off the bill with the highest interest rate. Add 10 percent to each bill paid to save money for the next bill with advice from a licensed financial planner in this free video on personal finance.

Part of the Video Series: Debt & Debt Consolidation
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Video Transcript

Hi, my name is Bill Rae. I'm with HBW of Florida, and I've been in the finance field for well over 20 years and have helped many people out of their own financial situations. Today, we're going to talk about how to get out of debt using the pyramid method. This is a term that's starting to float around very frequently in today's economic environment. Understand that a pyramid method is simply listing all your creditors, what you owe, how much your monthly payment is, and in my opinion, also add the interest rate. Simply use a regular piece of paper and write it all down. Once you see it, you have to make a commitment as to how you're going to get out of debt. My suggestion is either start with the smallest bill that you owe or the highest interest rate. If you start with the smallest bill, you're going to feel a little good about yourself when you get that one paid off and that usually can be paid off quickly. But here's how the pyramid has to work. Once you pay that bill off, you must take that money that you've been paying that and apply it to the next one. If at all possible, when you start this plan, decide upon the first one you're going to attack, make the monthly payment required plus 10 percent. Remember, there's only two ways to get out of debt: cut your spending or increase your income. And do understand it took you a while to get into debt; it's going to take you a while to get out. But make no mistake about it: There's no magic pill out there. If you have a plan and you work it diligently, you must stop spending. It's the only way that's going to get you out of debt. My name is Bill Rae, I'm with HBW, and I'm helping you build true wealth.

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