6 Steps to a Realistic Debt Repayment Plan

Not sure how long paying off debt should take? Here are a few things to consider

by: Lynnette Khalfani-Cox | from: AARP | January 3, 2012

A Consumer Reports poll points out that 53 percent of consumers used a credit card to pay for all or some of their holiday gift purchases. Also, about 14.1 million adults were still carrying debt in late 2011 from the prior year's holiday season.

See also: Credit Card Payoff Calculator

If you're still struggling to pay off holiday debt or have other debts you've been carrying for some time, don't despair.

These six tips can help establish a realistic repayment plan that will get rid of your holiday and other debt sooner rather than later.

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1. Tally Up Your Current Debts

Guesstimating and kidding yourself about your credit card bills won't make them go away.

Instead, pull out each and every one of your most recent credit card account statements and create a list so you can tally up your debts. If you've not yet received your latest billing statement from a certain creditor, call the company and ask for your most recent balance.

2. Set Specific, Very Specific Goals

Don't make a generic promise or a haphazard New Year's resolution to "pay off the credit cards" this year. Be very specific about how much you are going to pay off and when that will occur.

Assume you have $1,200 in credit card debt. Four months is a reasonable amount of time to pay that off. Commit to paying off that $1,200 worth of bills by May 1. Pay the $300 a month (plus possible interest) that's necessary to become debt-free. Being very specific about your objectives can help you realize your goals that much faster – and might help you recover from holiday debt sooner than you think.

3. Hold Off on Additional Credit Card Spending

Give yourself a chance to get your budget back on track by stopping the debt cycle in its tracks. Eliminate credit card spending for at least two or three months so you can shift your focus to cash-based spending. Stabilizing your spending so that you're not accumulating more debt will make it much easier to stick with a debt payoff plan that actually works.

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