You probably didn't get into debt overnight, and short of winning the lottery or receiving a large inheritance, chances are you aren't going to get out of debt overnight, either! With discipline and consistency, over time you can pay off your debt and be on the road to an improved and more manageable financial situation.



Assess the Situation

While you may have gone blindly down the path to excessive debt, you don't want to attempt to get out of debt in the same manner. Developing a plan of attack will prove more productive and successful than simply saying you want to pay off your debt. It's important to be extremely self disciplined and determined in your quest for a debt free existence.

Start by gathering your most recent statements from each of your creditors. Make a list of each account on a piece of paper, starting with your lowest balance and ending with the account you owe the most on (like a pyramid, you start with the smallest and build to the largest).

Your list should include the creditor's name, the total amount owed, and the minimum monthly payment. On another sheet of paper, make a list of monthly living expenses that must be paid- rent or mortgage, insurance, gasoline for your car or commuting expenses, utilities, etc.

Make another list of all your monthly income, so that you know how much money you have to work with and make your payments.

Develop Your Plan of Attack

Once you have your list of creditors, your “pyramid” basically tells you how you will begin making payments. First, add up all of the minimum payment amounts of your accounts, except for the first one on the list. Add it to the total amount of monthly expenses you pay to get a total of minimum expenses going out each month. Once you have this number, subtract it from your total monthly income to see how much money you have left each month. This is the amount you'll send to the first creditor on your pyramid list monthly until that account is paid off.

When the first account has been paid off, you'll then apply the money you had been paying to that creditor to the next account on your list- and include the minimum amount you've already been sending to that account, also. Each time you pay off an account on your list, the next one will be paid off much faster.

Example list of creditors:

AccountBalanceMonthly Minimum Payment

Credit card 1:$475$21

Credit card 2:$895$56

Credit card 3:$1970$75

Personal loan$3000$150

Car Loan$13,500$375

Example of total monthly living expenses: $1200

Example of total monthly income: $2100

In this example, the total amount of minimum monthly payments (excluding the first account on the list) is $656. When combined with the monthly living expenses, $1856 of the $2100 monthly income is spoken for, leaving $244.

The first month, you would send credit card 1 the full $244 and send each of your other accounts only the monthly minimum payments. Month two you would call credit card 1 for a pay off balance, and send the $231 remaining, (plus whatever finance charges remain) to completely pay off the account. During month 3, you suddenly have an additional $244 to send with your $56 payment to credit card 2, making your payments to credit card 2 about $300 each month- so it would only take 2 or 3 months to pay that one off!

Once your second account is paid off, you take the $300 you have freed up from card 1 and 2 being paid off, add it to the payment for credit card 3, and send $375 to card 3 until that account has also been paid off.

You continue paying more and more on each of your accounts until each have been paid off- and this pyramid method of paying off your debt is probably the fastest self debt reduction method for getting your accounts paid off.

Important Considerations

In order for this self debt reduction method to work, you must have self discipline and stop charging on your credit cards while you are working to pay them off. You don't want to add additional monthly debt while you're striving to pay off the existing debt. And, once you've got your debt under control- don't run out and charge purchases all over again!