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10 Tips to Get Debt-Free

David Bach’s Top 10 Debt-Free Tips

New York Times bestselling author David Bach aims to help 1 million people pay down $1 billion of debt with his newest book, Debt Free For Life. Bach’s book uncovers the latest strategies for paying off debt, and it could not have come at a better time – during the current unstable economic recovery, when people are looking to escape their onerous debt loads.

Bach shares his top 10 debt-free tips with MainStreet, so if you’re drowning in an insurmountable level of debt, Bach is here to help you get rid of it.

Photo Credit: David Bach

Step on the Debt Scale

You have to recognize how much debt you have and become motivated to pay it off, says Bach.

“It sounds obvious, but the truth is that all progress begins with making a real decision. If you have more debt than you want, you need to decide that enough is enough—it’s time to be debt-free once and for all.”

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Automatically Track Your Debt


Bach is currently promoting a new website, Debt Wise, that gives users tools to get out of debt for a fee.

“Debt Wise automatically pulls your debt data from your credit file, and you can see whether you’re making progress or if your debt is growing,” says Bach.

Debt Wise also comes with four free credit scores per year, which allows you to see how your credit score is changing based on the amount of debt you have.

“In literally seconds you can see how much debt you have, what order to pay it off in, and how long it will be until you are debt free,” Bach adds.

Photo Credit: David Bach

DOLP Your Debt Away

Debt Free For Life teaches an efficient method toward becoming debt-free: DOLP. DOLP stands for “done on last payment.”

Bach notes, “First you 'stack your debt,' then you 'rack your debt,' then you 'hack your debt.' That is, you see how much you owe and who you owe it to, then you figure out the order in which you should pay it off, and then you start making the minimum payment on every card except the one you’ve designated your number one priority debt.”

To help you bring the DOLP method to fruition, David Bach has a free DOLP worksheet, which can be downloaded online.

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Negotiate a Lower Interest Rate

Toward the end of last year, the average credit card interest rate, according to the Federal Reserve, was 13.44%. To make matters worse, many consumers have significantly higher interest rates than the average. Regardless, Bach suggests renegotiating your credit card’s interest rate.

Remember, if you have credit card debt, the lower the interest rate, the more money you’ll save in interest payments.

Photo Credit: Andres Rueda

Do The “Debt Math”


Simply paying the minimum payment on your credit cards is not enough. According to Bach, “If you make only minimum payments, it will take you more than 23 years to pay off a credit card balance of just $5,000.”

Bach recommends doubling the minimum payment on your “number priority debt.”  In fact, as a result of the epic CARD Act of 2009, credit card issuers must disclose how much money in interest it will cost and how long it will take you to get out of debt if you only pay the minimum payment.

Bottom line: Pay more than the minimum payment wherever possible. You’ll be shocked at how fast you can become debt free.

Photo Credit: photosteve101

Your Goal: A High Credit Score


Your credit score plays an integral part in your financial life.  By paying down debt, you’ll dramatically increase your credit score.

Bach stresses the importance of a high credit score: “A low credit score will cause lenders to charge you a high interest rate—which makes getting out of debt even harder! For that reason, raising your credit score in 2011 is an important goal!”

Bach recommends checking your credit report, which is different than your credit score (the credit report lists all of your financial details that make up the credit score).  You can check your credit score for free by visiting AnnualCreditReport.com.

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Accelerate Mortgage Payments


In addition to credit card debt, you may have a larger and more intimidating amount of mortgage debt. To pay off your mortgage faster, Bach suggests three tips:

1.  Add 10% to your regular mortgage payment

2.  Make one extra payment a year

3.  Switch to a “bi-weekly” payment plan

Bach says these strategies “will get rid of your mortgage as much as six years early—and save you thousands in interest.”

Not bad, right?

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Avoid Debt Consolidation Loans

Bach suggests looking for “non-profit” credit counseling services, instead of the “for-profit” ones.

To find the proper agencies, visit the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.

Photo Credit: Andres Rueda

If You Don’t Have Cash, Don’t Buy It


It’s a simple rule you’ve probably heard before, but nonetheless, one of the most important tips of personal finance.

“If you want to get out of debt, you have to change how you spend money and the best place to start is to no borrow money to buy stuff you don’t absolutely have to have” says Bach.

Stick to a cash only diet and you won’t have to worry about getting into debt, damage to your credit score or those nasty credit card fees.

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It’s a Team Effort

Getting out of debt can be a daunting task.  But with support from family and friends, accomplishing this feat becomes much easier.

Bach says, “Go build a team to keep motivated!”

Scott Gamm is the founder of the personal finance website HelpSaveMyDollars.com. He has appeared on NBC’s TODAY, MSNBC, Fox Business Network, Fox News, ABC News and CBS.  Follow Scott on Facebook and Twitter.

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