Get Out of Debt

The really get rich by saving, you will first need to get out of debt if you have any. So before you start putting any of your extra income into CD's or savings accounts, you must put all of it towards paying off any loans and bills.

The priority of payment is definitely on your credit card. Credit cards always have extremely high interest rates compared to any type of loan you may have. If you have multiple credit cards always pay off as much as you can on the credit card with the highest interest rate. Some may say that you should pay off the credit card with the lowest debt left on it so that when you are done you will have one less bill left. Don't do that (unless it has the highest interest rate). That is a debtors' mentality. It will give you a boost mentally when you see that your minimum owed on credit is less each month, but it is a false celebration. You are still losing more money in future interest on the card with the higher rate. If you are struggling to even pay the monthly payments as it is, you've got bigger problems and you better start looking at the other money saving tips I have written about.

So the plan remains:

1. Pay minimum payments on the debts with the lowest interest rates.

2. Pay as much as you can on the debt with the highest interest rate until it is paid off.

3. Repeat steps 1 and 2 with the remaining debts until all debts are paid off.

4. Start your saving.

If you are in a credit card mess, for goodness sakes, forget about minimum payments. Those are the devices for credit card companies to cash in. Minimum payments will stretch your debt and cost to ridiculous lengths. I don't care if those shoes were on sale, they will end up costing you 3 times that much by leaving the charge on your credit card and sneaking by on minimum payments! What you need to do is control yourself and always pay off your card in full. The best way to do that is to not impulse buy, track your spending , and live within your means. You could always try paying in cash too for a mental boost.

If you do have control of your credit card use, then by all means use them to your advantage and focus on paying off any loans you might have. Again follow the steps outlined above.

A school loan of $25,000, may have been essential to paying for college and I won't scold you for that. Minimum payments on your loan though can send that cost skyrocketing until you realize that you actually ended up paying $40,000+ for that loan. If you really try, you can easily knock off $10,000 from that total. Now who couldn't use an extra 10 G's down the road?

Minimum payments are a curse. They may look good in the short term and delay your problems, but in the long term they will really cost you. So before you can get rich, let's get out of debt.