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Secret to conquering debt — rice and beans

By Andres Gutierrez

“Should I pay off the debt with the highest interest rate in order to get out of debt faster?”

That’s a question I get all the time. And it’s a question that makes sense mathematically. But if we were using math, we wouldn’t be in this mess to begin with.

What I’ve learned is personal finance comes down to 20% head knowledge and 80% behavior. When you’re paying off debt, you need small victories to keep you focused. It’s like losing two pounds during the first week of your diet. If I’m having to eat all this rabbit food, I better see the needle on the scale move at little bit! Those small victories will fuel the flame and make you believe that you can do this!

The Plan
Before you even start thinking about getting out of debt, you need to have $1,000 saved as a small emergency fund. This will keep you from going deeper into debt, and it will protect you from being bullied around by life.

Now, make a list of all your debts, smallest to largest, without worrying about the interest rates. The key is to make minimum payments on all your debts except the smallest, putting every bit of extra money you can into that smallest debt. Focus and concentrate on one thing at a time.

Start Rolling
After you pay off your smallest debt, take all the money you were putting toward it and apply it to paying off the next debt on the list. When you pay that off, takeall of that money and apply it to the third debt, and so on.

Every time you pay off a debt, it’s like the snowball picking up speed and taking on more snow. You’re attacking the debt with more and more money and greater intensity. After you pay off that first debt, you’ll believe that you can do this! Pretty soon, you’ll be telling your spouse, “Honey, we’ve paid off everything but the house!”

The Secret
It comes down to this: You’ve got to attack the smallest debt with absolutely everything you have. We’re talking about selling something, hosting a yard sale, garage sale, porch sale, sidewalk sale, getting a part-time job, deciding to stop eating out every night, and getting down to just rice and beans. You’re going to use the power of focused intensity, and right now we’re focused on one debt and one debt only.

I’ve been in that hole, and I know what it’s like.

I remember how I felt when I finally caught the vision of getting out of debt and how quickly I wanted to get there. So, I understand how you feel. But I learned the secret to getting out of debt is focused intensity mixed with a lot of guts!

Get out there and show that debt who’s boss!

Andres Gutierrez is a financial expert, host of “The Andres Gutierrez Show” and creator of Paz Financiera. A successful entrepreneur and small-business owner, Andres Gutierrez knows what it’s like to start with nothing and build lasting wealth. In 2009, Andres joined Dave Ramsey’s team to bring the message of Financial Peace to the Hispanic community. For more information about Andrés Gutiérrez visit his website “Andres Gutierrez” and follow him on Twitter at @elshowdeandres and on Facebook.

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  • Debt Relief Dynamics
    July 12, 2012 at 8:32 am

    @ paying off your debt takes commitment and sacrifices.
    You need a plan that will show results.
    During your payoff plan don’t charge anything for any reason unless you have an emergency.
    Sacrifices will include cutting back on eating out, movies, vacations,luxuries such as a new car, electronics or expensive cell phones and cable options.
    An unexpected benefit will be your family can spend more time together and grow closer doing simple inexpensive things.
    The benefit far outweighs the sacrifice in the end results.
    If you are saving in a retirement program put the money you are saving towards your smallest bill and pay them off one at a time.

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