In her Washington Post/Bloomberg column, Michelle Singletary says that people who are resolved to reduce their debt in 2012 should use the “Debt Dash” plan. The plan involves ruthlessly attacking debt by paying off credit cards with the lowest balance first.
There are a number of ways to pay down your debt. One way in particular I call the “Debt Dash Plan,” which I wrote about in my recent book, “The Power to Prosper.” It’s a way of paying off debts similar to running a 100-meter dash, a quick race. You start by attacking — and I mean ruthlessly — the debt with the lowest balance to get rid of it as soon as possible.
I’ve found in working with individuals and couples that when they can knock off a bill quickly, it motivates them to press on and aggressively tackle their remaining debts.
On the Debt Dash, you list your debts and then take any extra money you have — say, from reducing expenses or from a second job — and apply it to the debt with the lowest balance while making the minimum payments on the others. When you’ve paid off the first debt, apply the full payment amount from the first debt to the one with the next lowest balance, adding any extra money you can, until that one is paid off. You continue paying the debts this way until they are all gone.
Read Michelle Singletary’s entire column at the Washington Post/Bloomberg.