What debt to pay off first

You've charged it up...now it's pay-down time.

If you're up to your eyeballs in credit card and other debt, paying the minimums and little else, it's time to get serious.

The best way to get rid of debt, experts agree, is to attack the balance with the highest annual percentage rate first. When that one is paid off, move onto the debt with the next-highest interest rate.

Be sure to tackle that high-interest debt first.  Always pay more than the minimum balance, try to double your payment, if possible.  When you have completed those payments, move on to the next highest interest card.

Try to prioritize by interest rates rather than the balance.

The amount you owe doesn't really matter when you're paying an enormous amount of interest.  Try to tackle the highest interest rate ones first. Use all your resources to gather all the funds available and get the debt out of your life.

An alternative plan... littlest first

What about knocking off some low-balance bills first and eliminating a bill or two from that thick monthly pile? Experts respond: Go ahead, especially if it will give you the boost you need to stick with a pay-down plan.

It makes better financial sense to pay down the highest interest rate first. But people often get discouraged.  It's a lot more gratifying for some people to pay off the smaller balances within a couple months. It may make you feel as if you are making more progress!

Once those smaller balances are gone go back to Plan A: Take the money that had been set aside to pay those bills and apply it to the balance with the highest interest rate.

Remember, getting out of debt is your goal, so make the commitment and stick to it. 

Stick to your plan...

The key to an effective pay-down plan is sticking with it. Don't let up on the monthly payments as the credit card's minimum payments inch down and as bills get paid off.

Once you establish a payment plan with a credit card bill, stick with the payments until it's gone and then roll it into another credit card and keep going.  Unfortunately, many people quit before they get started.

The problem is that people make mental promises to themselves that they can't keep.  Don't commit to paying $100 a month if you can not afford to.  If you can't make your goal, it will discourage you.  Instead make a smaller commitment and apply any additional monies as a bonus to resolving your debt quicker. 

Think before you act

To avoid falling into that trap, take a hard look at your finances and determine how much you can realistically afford to pay each month. Rhode suggests that people track their spending every day for a month to get a firm handle on where their money is actually going.

You may find that you save 20 percent just writing down where their money goes because you are more aware of your spending. 

After tracking their spending, people can better decide how much they can afford to pay toward credit card debt. Experts point out that just $50 more a month can make a big difference.

If logging expenses for a month doesn't turn up additional money try these tips for saving $50 a month. 

• Brown bag 10 lunches per month.
• Have movies and popcorn at home instead of going out.
• Use coupons for groceries and buy store brands.
• Make pizza at home instead of ordering out.
• Buy in bulk and freeze dinner entrees.
• Give handmade cards and gifts.
• Shop at consignment, thrift and discount stores.

Pay more than the minimum

Once you start paying more than the minimum, the debts start to disappear. Paying just the $60 minimum payment on a $3,000 credit card balance would take eight years to pay off and cost a person a whopping $2,780 in interest. By paying an additional $50 a month, the debt would be paid off in three years and they would be spared $1,800 in interest charges.

It is also important to keep in mind that debt is not always bad.

Having a certain amount of credit balance is not negative.  Establishing credit is necessary to help you reach some of your goals.

But most experts recommend that debt payments including car payments and credit cards eat up no more than 10 to 15 percent of income. More could spell trouble.

If you can only afford the minimum payments each month, you're on the edge. If you have to hope and pray that your deposit gets to the bank to cover your checks... and especially if you're using the cash advance on a credit card to pay other cards or for routine living expenses you are spending money you don't have.