Step #5: Pay
off other debt
Now you've gotten your debt somewhat under control, you've paid off your credit cards, you have some emergency savings, and you are even investing in your retirement. Time to go crazy and spend some money, right? Wrong!
Now is the perfect opportunity for you to get more cash and pay off other debts. For example, if you have a car loan with a high interest rate, or you purchased furniture or appliances on a high interest rate, pay these off. You even need to be very careful of these many "interest free" deals that are being run during sales. If you miss a payment or don't get the last payment in on time, they can sometimes go all the way back to the very first payment and charge you some outrageous interest rate for the entire life of the loan. So take a look at the rest of your debt. Take that extra money you have from getting your credit cards paid off and start paying off the rest of your loans. You can either save up and pay off the entire loan at once or pay a little extra every month. Start with the highest interest loans and work your way through them. Depending on the size of your remaining debt, this could take months or years, but the end result will be that you are completely out of debt. This is something well worth working and striving for.
During this time, do your best to not take on any new debt. If you have to stop paying extra for a month on the loan you are trying to pay off because an unexpected expense came up, that's okay. Keep focused on not taking on new debt and pay off the existing debt when you can.
When you finish this step you will have come a long way. There is hard work involved, but it will all be worth it. Now you can start with the fun stuff. Investing and getting your money to work for you rather than the other way around.
Suggestion: if you only did three months step 2, this might also be a good time get your emergency savings up to 6 months.
Please Note: you should always consult your professional financial advisor or planner. The advice on this page is just opinion and we recommend you consult a professional before making any financial decisions.
to Step #6: Invest
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#1: Renegotiate debt, consolidate debt, and settle
Pay off your credit card
3) Get some emergency savings
4) Start investing in 401k plan or IRA
5) Pay off other debt
6) Invest conservatively
Financial Mistakes to Avoid
Holding Loser Investments and Stocks
Not saving for Retirement
Interest Only Home Mortgages
Cash Value Life Insurance