Best Ways to Pay Off Debts

Video Transcript

"Hi, my name is Bill Rae. I'm with Alumni Financial Services out of Seminole, Florida. I've been in the business and the finance world for over 30 years. Today's topic is fairly interesting. What's the best way to pay off debt? Well, as always, when I sit down to talk to somebody about debt reduction or their financial plans, I've got to start with asking you, "Do you have a budget?" If you don't, get one. A budget is nothing more than how much do you take home, subtracting everything you spend. You can start a budget with a simple yellow pad. Simply record what you take home -- not your gross -- and then record every expenditure you have over a 30 or 60 day period of time. Know where you're spending your money. Now, you can begin to look at how to pay your debt off. If we're talking about debts such as credit card debt and on-time payment debts, the very first thing I tell people is, "Let's call the people that you owe money to and see if we can't renegotiate or restructure either the rate and/or the terms, and in most cases, all at once, to a more favorable position for you." Don't be surprised that if you're upfront with the people you owe money to, that especially in today's environment, they're more than willing to work with you. Their fear is you may not pay the bill entirely. Be very careful to get hooked up with any company that tells you they can eliminate all your debt and you can walk away from any obligation without suffering any penalties or legal hassles. Maybe that's possible, but is it right and is it ethical? Only you can answer that. But I can tell you this: There's no one I have ever talked to that isn't willing to work with you to lower an interest rate or restructure a payment in order to get you down and out of debt. Once you've taken all those steps, the fastest way I know and the best way I know to get out of debt is to pick either your lowest bill or your highest interest bill. It depends upon your ego. If you want to feel good, pick the lowest bill you have. Put 10 percent more on that bill than you've been doing now, and once that's done, put a check mark next to it. Give yourself a gold star. Now, take every bit of that, including that 10 percent you're adding and go to the next one in line. If you line them up on a pad, put who you owe, how much you owe, how much interest you have to pay, and then just begin to systematically pay them off. You know, I don't know anybody in any situation that can't be completely debt free in anywhere from five to seven years if they systematically go at it. It took you a while to get there, so give yourself a break and work your way back out. That's the best way I know how to reduce debt and do it ethically and honestly. My name is Bill Rae, I'm with Alumni Financial Services, and as always, we're here to help you build true wealth."