Debt can destroy lives, families, marriages, relationships, business—even countries. So this year my mission is to help one million people pay down a billion dollars in debt and start a new life—free of debt! Care to join me on this journey?
I’ve just written my twelfth book, Debt Free For Life; The Finish Rich Plan for Financial Freedom. What follows is a condensed version of what I believe are the 11 most important decisions you can make in 2011 to get on track to crush your debt and buy back your freedom.
Ready? Let’s get going!
- Decide you want to get out of debt. It sounds obvious, but the truth is that all progress begins with making a real decision. If you have more debt than you want, you need to decide that enough is enough—it’s time to be debt-free once and for all. Are you ready to decide? Make a public pledge right now by registering at www.debtfreechallenge.com and be entered to win $10,000!
- Get some free help. Getting out of debt is much harder then getting in. You can help yourself by taking advantage of the FREE one-day download of Debt Free For Life on AOL Wallet Pop. The book is filled with powerful tips and techniques, and can be your guide to a debt-free life in 2011.
- DOLP your debt away. DOLP stands for “done on last payment.” Among other things, Debt Free For Life will teach you my DOLP method for getting rid of credit card debt. First you “stack your debt,” then you “rack your debt,” then you “hack your debt.” That is, you see how much you owe and who you owe it to, then you figure out the order in which you should pay it off, and then you start making the minimum payment on every card except the one you’ve designated your #1 priority debt. Once you’ve paid off that card, you focus on #2, and so on until every card is paid off. You can download my DOLP worksheet at www.finishrich.com/dolp.
- Use an online tool to pay down your debt—AUTOMATICALLY. In my opinion, one of the best online debt-reduction tools around today is Debt Wise, an offering of Equifax, the giant credit bureau. I love this tool so much, I’m endorsing it. What’s great about Debt Wise is that it has taken my DOLP system and made it automatic. As a result, in literally seconds you can see how much debt you have, what order to pay it off in, and how long it will be until you are debt free. You can get a free trial of Debt Wise at www.debtwise.com/bach. There are similar free tools available from other companies like Intuit, whose Mint site (www.mint.com) is also pretty great. But only Debt Wise automatically pulls your debt data from your credit file. With the others, you have to access all your various accounts manually.
- Get a better rate on your credit card debt. Some of you are paying as much as 29.99% in credit card interest—even though you’ve never had a single late payment. Don’t accept this. Go to websites like www.creditcard.com, www.lowcards.com, or www.bankrate.com to find out the rates your credit card company is offering new customers. Chances are you are paying up to 10% more than they are. Debt Free For Life contains a chapter about how you can use this information to renegotiate your card rates down or, failing that, get yourself a new card with a better rate.
- Do the “debt math” to learn how lenders keep you broke. If you make only minimum payments, it will take you more than 23 years to pay off a credit card balance of just $5,000. My suggestion is that you make at least DOUBLE the minimum payment on your #1 priority debt. In this way, your debt could be all paid off within three to five years—maybe sooner! Read your statements today–the new Credit Card Act—by law requires lenders to show the “debt math” of minimum payments.
- Raise your credit score. A low credit score will cause lenders to charge you a high interest rate—which makes getting out of debt even harder! For that reason, raising your credit score in 2011 is an important goal! Other than paying down debt, and paying your bills on time (every time), length of credit history, types of credit used and new credit—the fastest way to raise your credit score is to make sure there aren’t any mistakes on your credit record. By law, you are entitled to one free copy of your credit report every year from each of the three big credit bureaus (Equifax, Experian and TransUnion). Order yours at www.annualcreditreport.com, check it for errors, and if you find any, go to the credit bureau’s website and use their online tools to request a correction.
- Accelerate your mortgage payments. When I was a financial advisor, I noticed that all my clients who retired in their fifties had one thing in common: no mortgage. And they all did it the same way—if they couldn’t afford the payments on a 15-year mortgage, they paid a little extra every month on their 30-year loan (either by adding 10% to their regular payment, making one extra payment a year, or switching to a “bi-weekly” payment plan). Make 2011 the year you adopt this extra-pay plan; it will get rid of your mortgage as much as six years early—and save you thousands in interest.
- Avoid debt consolidation loans or debt settlement offers. Every week I receive letters from people who paid $500 to $1,000 up front to “professional” debt counselors who promised to get rid of their debts. In most cases, they got little or nothing for their trouble. If you need help, stay away from the “for profit” debt-settlement agencies and instead look for “non-profit” credit counseling services. You can get referrals through the National Foundation for Credit Counseling (www.nfcc.org) or the Association of Independent Consumer Credit Counseling Agencies (www.aiccca.org).
- If you don’t have cash—don’t buy it. My grandmother Rose used to say, “if you don’t have cash—don’t buy it”. If you want to get out of debt, you have to change how you spend money and the best place to start is to no borrow money to buy stuff you don’t absolutely have to have.
- Make getting out debt a family, friend or team project. One of the videos we’ll be hosting later on AOL Wallet Pop tells how a woman named Genevieve paid off more than $70,000 in debt by creating a support team to help her achieve her goal. Getting out of debt can be tough. Having friends and family cheer you on makes it easier and more fun. Go build a team for 2011 to get out of debt!
This blog appeared elsewhere on AOL Wallet Pop. Come back to the Equifax Personal Finance Blog for more debt and credit advice from David Bach in the coming weeks.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.