Congratulations and Welcome to Atlas!
You have taken your first step towards financial independence. This is a journey that only few make as it is difficult, and requires effort and sacrifice. However, imagine going to work each day without any fear of being laid off? After all, your job is your pleasure, not your occupation. You are independent from your paychecks!
Debt can be toxic to your financial health. It is a hole that will dig itself deeper if you don't properly manage it. Later, we can learn how debt can be leveraged. \ But for now, our first step here is to identify and prioritize your debt. We will want to make a list of all of your debt accounts, the % interest, and the balance outstanding. It should look something like this:
Here it is step by step:
Make a list of everything. Do you pay interest on it? Add it to the list.
Note: If you are paying the "Statement Balance" of your credit card every month, you will not pay interest on it, so do not add it to the list.
Now that you have your list of debts, its time to prioritize them. Most people simply pay off what they are told they should. They apply no strategy or thought to how much to pay, and to which account. Most people don't realize that the creditors WANT you to stay in debt. But you are not most people....right?
So, let's develop a strategy. It isn't that complicated, it just requires thought. Here at Atlas, we generally suggest a 5% rule. That is, any loans with an interest rate of over 5% need to be paid down before you can level up. They need to get paid down ASAP. While that $400,000 mortgage may look scary, and while that American Express card may look easier to pay off than the Visa...we really need to tackle the Visa first.
Pay down your debts, highest interest rate first.
Finally, we have identified and prioritized our debts. Now let's figure out how to pay them down. First, we obviously need to make the minimum payment for all accounts each month. Hopefully you have left over money after that, (if not, we really need to talk about budgeting...). If you have an account with a rate of over 10%, I hate to tell you this, but you are now on austerity. No going out to eat, no movie tickets, nothing but work and home-cooked, large-batch, cheap meals until that is paid down.
In the above fictional example, this person is on austerity until the two credit cards are paid off. Then,