With differing accounts, interest rates and debt hitting you at once, your financial situation can very well seem overwhelming. But if you follow this program you will find that there is an effective and safe way to manage your money.

The only thing this simple calculation needs the interest rates for each debt account. This is assuming that all debt accounts have the same tax liability, but if not, you can find your interest rate after taxes for this calculation.

Your first step is to order your debts; highest interest rate to lowest. You\’ll be likely to find credit cards at the top of the list. Retail credit cards offered by stores typically have the highest interest rates, so you may find this type of credit card on the top. Be sure that the rates did not fluctuate from the promotional rates that you originally signed up for. Card issuers can change your interest rates at any time. They are supposed to give warning, but you may not receive this warning.

Your home equity loans and your mortgage might be the next debts on the list. It\’s crucial that you include every debt for which you make a monthly payment in your calculations. Student loans might be the last on the list.

Next, pay only the minimum to all debts every month. You should pay the minimum monthly payment for all of the debts, except for the one account up at the top of the list.The next thing you want to do is send all extra cash that is available to the debt with the highest interest. All unused income after paying expenses should be dedicated towards the debt account with the highest interest rate.

Repeat these steps every month. You will protect your finances by making sure every creditor receives the minimum payment, but you will hone in on your debt that has the highest interest. Once a debt account has been eliminated, remove it from the list and re-order if interest rates have changed.

Mallory Megan works for a debt collection agency.

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