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Is too much debt overwhelming you? If so, here are some suggestions to help you pay off those small debts.

Experts advise it would be better to pay off credit cards with high interest rates first. However, perhaps in your case, paying off those small debts will give you the incentive to put together a monthly budget and eventually pay off all you owe.

Make a list of the smaller debts you have and try to increase what you repay; that is, take what you can afford to put aside after all the household bills have been paid, and add it to the minimum amount due. The satisfaction of paying off a small debt will motivate you to move on to the larger debts you may have incurred.

After you have paid off the first bill on your list, start paying off the second debt utilizing the same method. For example, if you paid $50.00 minimum and added an additional $25.00 for the first debt; pay $75.00 a month for the second debt. This method is referred to as Debt Snowball and is mainly used to pay off high interest rate credit cards.
However, it also can be used in reverse and has been effective for those who have been steadfast in their desire to pay down all their debts, starting from the smallest to the largest debt.

One of the best ways to determine how much you can put aside from each paycheck is to establish a budget by listing the essentials first, including rent, mortgage, food, utilities, and pension contributions. How much you have left will determine the amount you can safely put towards the debts.

If the amount is small, don’t worry about it. The idea is to pay more than the minimum every month. For example, if you had a debt of $4000 at 18% interest, it would take approximately 291 months to pay it off with a minimum of $100.00 paid each month. Conversely, if you added $25.00 to that amount, the debt can be paid off in 44 months. Moreover, while the interest on the former would come to $5,615.32, the latter would only increase to $1,490.22 in interest paid.

You can see from the first example given that on a $4000 debt, the interest can be more than the principal amount owed.

The way to get out from under any kind of debt, large or small, is to make some sacrifices. Try to reduce the number of times you dine out, take lunch to work, utilize grocery coupons and buy in bulk, purchase store brands instead of name brand items, and buy clothing at consignment shops or thrift shops. If you work outside the home, try carpooling or take public transportation.

The bottom line is that debt can drag you down and stress you out. Cut up all credits cards except one, which should only be used in extreme emergencies. Pay with cash. If you can’t afford it, you can’t buy it.