Make it Automatic: Six Tips to Help Put Your Finances on Autopilot

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Getting out of debt — and staying debt free — requires commitment, discipline and hard work. There are no shortcuts. But there is a way to make the job easier. It’s something that I have been writing, teaching and talking about for years now. If you want to success, you must make your plan automatic.

If you follow the steps I cover in this article, you will truly have a foolproof, no brainer, “set it and forget it” financial plan that, I promise you, will work. This plan is based on the one I laid out in my New York Times bestseller The Automatic Millionaire and I have a full chapter covering the details of these steps in my new, bestseller Debt Free For Life. The whole process should take no longer than an hour to get organized.

Read and follow these steps. It’s easy and, yes, you really can do it.

Are you ready? Then let’s go make it automatic!

1. Pay Yourself First Automatically

In my books, TV and radio appearances, and seminars I’ve always emphasized the importance of paying yourself first. This starts with having at least 5% of what you earn deducted from your paycheck and deposited directly into a 401(k), IRA, or similar qualified retirement account before the government takes its bite of withholding tax. Ideally, this deduction should total 12.5% of your income (the equivalent of one hour’s work each day).

Whatever amount you decide, just be sure to make the process automatic. If you’re not eligible for a 401(k) or similar program you’ll have to create your own “pay yourself first” program with the use of an IRA. Just tell the bank or brokerage where you have your IRA that you want to set up a systematic investment plan — where money will automatically be transferred on a regular basis into your IRA from some other source such as a payroll deduction or you use a free online bill-paying service that allows you to schedule regular automatic payments of specified amounts to anyone you want. Most banks and brokerage firms will handle all the arrangements for you, contacting your employer’s payroll department on your behalf and dealing with all the paperwork.

And yes, you should do this first step even if you are in debt. After more, than two decades of experience teaching people about money, I have come to believe with all my heart that it’s a big mistake to put off saving money until your are debt free.

2. Deposit your Paycheck Automatically

If your employer uses a computerized payroll system, you should be able to arrange with your company’s personnel or human resources department to have your pay automatically transferred directly into your bank account. This is known as direct deposit. It gets your pay into your account without delay — and saves you the trouble of going to your bank and physically depositing your check.

3. Fund your Emergency Account Automatically

I’ve also long advocated the importance of maintaining and emergency cash cushion of at least three months’ worth of expenses in an FDIC-insured bank account (not your regular checking account, but a separate one specially for this purpose). Until this emergency account is fully funded, you should have at least another 5% of your paycheck directly deposited into it. If your employer doesn’t offer payroll deduction, arrange to have your bank automatically transfer the money from your checking account the day after your paycheck clears.

4. Pay your Credit Card Bills Automatically

Call all your credit card companies and arrange to have all your bills come due on the same day of the month — ideally, 10 days after your paycheck is normally deposited. (Virtually, every credit card company will work with you to change your due date if you ask them.) Then use your bank’s online bill paying service to automatically make the minimum payment for each of your cards, five days before the bill is due. (If your bank doesn’t offer free online bill-paying, think about switching to one that does.) If you want to pay more than the minimum on any of your cards — and if you follow my DOLP plan, you will — you can write a check for the extra amount. Making your minimum payments automatic ensures that you will never miss a payment deadline and get hit with late fees or penalty interest rates.

5. Fund Your “Extra Payments” Automatically

In addition to making all your minimum payments automatically, you should also automate your “extra payments.” Based on your DOLP plan or “debt stacking tool,” you know now which debt should be your Number One priority. If you add just an extra $10 a day to the minimum payment or your Number One debt, that’s $300 a month that should be automatically added toward your debt each month. Arrange to have this amount (or whatever amount you’ve decided on) transferred automatically from your checking account to the appropriate loan account until it’s paid off. Once you’ve automated this debt down to nothing, you should automate your Number Two debt. And so one — until all your debts are paid off completely. The same goes for your mortgage. If you add something extra to your mortgage payment, make that automatic too.

6. Pay off your Monthly Bills Automatically

There are two kinds of monthly bills: regular ones that are always the same amount (like mortgage, rent, or car payments) and those where the balance due varies (like phone bills, electric bills, or cable and Internet charges). You can automate payment of the bills that are a fixed cost by using your bank’s online bill-paying service to have them automatically debited from your checking account each month. And you can automate payment of the variable ones by arranging to have them charged to one of your credit cards. As long as you keep your checking account adequately funded and you have sufficient credit available on your card accounts, this will protect you from ever missing a payment due date. My entire financial life is automated this way. As a result, all my bills are always paid on time, whether I am in town or not, and I never get hit with late fees or penalties.

You now have the information to make your financial life automatic — Congratulations! It’s now time to put this information to work, and in doing so you will be taking a major step toward getting your finances under control and becoming Debt Free For Life!

If this is the first article of mine that you have read — you should know that you just caught the tail end of my 10 Weeks to A Debt Free Life Series! You can also visit for more information to help guide you to financial freedom, and make sure to join me on Facebook, where you can ask questions, read articles, and share your thoughts with like-minded individuals.

Five Ways to Find Money (Sometimes Lots!) in Less Than an Hour

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State treasurers and other government agencies are currently holding more than $32 billion in unclaimed assets from 117 million accounts that their owners have either forgotten about or never knew they had.

As the sentence above says, billions of dollars in unclaimed assets are sitting in government coffers — and some of it may be yours! In my New York Times Bestseller, Debt Free For Life, I cover in detail seven different ways for you to find unclaimed money that rightfully belongs to you. In this article I am going to cover five of these steps to help you begin your search to find your money.

1. Check the Federal Government’s Savings Bond Database

According to the United States Treasury, more than $17 billion worth of Series E Savings Bonds have never been redeemed. These bonds were sold between 1941 and 1980, marketed by the government as a safe and patriotic way to invest. Maybe you got one as a gift. (I know I did — the dreaded “Grandma got you a savings bond” gift.) Apparently, a lot of recipients simply forgot about them.

Just visit the Treasury Department’s savings bonds website and navigate to a special page called TREASURY HUNT. To get to the Treasury Hunt page, click on the tab for “Individuals,” then on the tab for “Tools” — or just go to Google and search for the term “Treasury Hunt.” Once you’ve reached the Treasury Hunt page, you’ll find a big blue button two-thirds of the way down marked “Start Search.” Click on it, type in your Social Security number, and you’ll instantly be informed whether or not they are holding bonds in your name. The whole search should only take you a few minutes.

2. Check the Banks

It’s equally fun to find money the banks may be holding for you. Remember that savings account you opened up with your parents as a kid? Did you ever cash it out? What about the bank account you first opened up when you got married, or that college savings account your grandmother opened for your kids?

My first stop would be the National Association of Unclaimed Property Administrators (NAUPA) website, which provides links to the individual databases of all 50 states listing unclaimed assets.

I’d also visit, a one-stop-shop for finding unclaimed property that is operated by a private company for NAUPA. What distinguishes both these websites is the huge amount of data they can access — and the fact that both of them are FREE.

There are also unclaimed-asset sites that will charge you to do a search. A typical example is But please go to the correct site, Take the FREE approach first. The other sites charge up to $18 per search.

3. Check with the FDIC

The Federal Deposit Insurance Corporation, or FDIC, moves in to protect our savings when a bank is in danger of failing. In the process, it becomes responsible for all insured deposits and for liquidating any of the bank’s remaining assets. Many of these assets are unclaimed. If you can prove that an account belonging to you is among them, the FDIC will be more than happy to give you your money. So, if you think you might have once had an account at a bank that was taken over by the FDIC, go online and visit the FDIC website.

At the top of the home page, click the tab labeled “Consumer Protection,” and then the tab labeled “Banking & Your Money.” This will take you to a page where you will see a list of links under the heading “Learn More.” Click on the one that says, “Search for Unclaimed Funds.” (The direct link is here.) Toward the bottom of the “Unclaimed Funds” page, you will find a search function you can use to see if there is an unclaimed account belonging to you in the FDIC’s database.

The only information you need to input is your name and the name of either the failed bank OR the city/state it was in. Once you’ve done that, it will instantly tell you whether the database contains anything under your name.

4. Check With the IRS

Of all my recommendations, this is the one most likely to actually put money in your pocket. When we think of the IRS, most of us worry that we owe them money. But not everyone does. In fact, many of us are owed money, maybe you!

The place to go to find out is the IRS website. I absolutely LOVE this website. It is truly a treasure trove of FREE information that can help you get refunds you never collected, get tax credits you never realized you were eligible for — in short, get what you are owed.

You go online to the IRS website and you click on the link labeled “Where’s My Refund?” You then input some basic information about yourself (Social Security number, filing status, and the amount of refund you’re due) and the site will tell you the status of your refund. If you don’t have access to the Internet, you can phone the IRS toll-free at (800) 829-1040 and ask them if they’re holding a tax refund for you. Since 2004, taxpayers have used the “Where’s My Refund?” tool more than 24 million times. If you think there’s even a remote chance that you never got a refund you were supposed to get, you should join this crowd.

Now here’s the big catch. The IRS has a rule that you have to claim your refund within three years from the time your return was due or they get to keep the money. By the time this book goes on sale, it will likely be too late for anyone to claim a refund for 2006. But if you have a refund coming to you for 2007 or later, you still have a chance to get your money.

5. Check for Unused Gift Cards and Gift Certificates

How many times have you received a gift card and never bothered to use it or used only part of it — or just flat out lost it? I know I do that all the time. And so do a lot of people. Indeed, according to the Wall Street Journal and research by Tower-Group, each year Americans spend about $65 billion in gift cards but don’t redeem $6.8 billion.

Here’s the good news. Depending on where you live, state law may require that unused gift cards and gift certificates with expiration dates or services fees must be turned over as unclaimed property. In most cases, if you are given a gift card or certificate with a specific date, the unused balance is presumed abandoned five years from date of purchase. If the gift card is rechargeable, depending on the state, it may be considered abandoned five years from the date of the last owner-initiated transaction.

Google your state treasurer’s office — once you’ve arrived at their website, navigate to their unclaimed assets department and see if they have an area where you can search for abandoned gift cards.

So, now that you know how you can find the money that’s rightfully yours — it’s time to put this information to work. If you think this all sounds too good to be true, it’s not. I have received so many success stories since the release of Debt Free For Life about people finding their money. Just this past week my business manager found unclaimed bonds that were worth $2,000!

I want you to know, my favorite part of my day is reading the success stories that my readers send to me. If you wind up finding some money you never knew you had, please let me know. Head over to my Facebook page and post what happened or send us a video clip. You can also visit and tell me how you found the money. Remember, if you have unclaimed money out there, chances are, it’s not going to come and find you, so get started!

How to Pay Off Your Home Faster in Five Steps

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For homeowners, the key to becoming debt free for life is paying off your mortgage as quickly as possible. Of course you can’t even think about doing that unless you have the right kind of mortgage — which is to say, a 15- or 30-year fixed mortgage with payments you can afford to make. If you don’t have that kind of mortgage, I’m going to tell you how you can get one. But for the moment, let’s assume you either have that kind of mortgage or are shopping for a mortgage and can choose. How do you make the right choice so you can pay it off as quickly as possible?

Step 1: If You’re Loan Shopping, Choose a 15-Year Mortgage.

If you can manage the higher monthly payments, signing up for a 15-year fixed mortgage is the way to go. Not only will you be free of your mortgage debt sooner, but you will also save A LOT of money in the process.

Let’s say you have a $300,000 mortgage with a 6% interest rate. Paying it off in 30 years will cost you $647,515, and $347,515 will be interest.

But if you have a 15-year fixed mortgage for the same amount, you would only pay $155,683 in interest — a savings of roughly $192,000! Of course, your payments would be $733 higher with the shorter term ($2,532 a month vs. $1,799), but that will pay off for you big-time in the long run.

Step 2: Pay Off Your 30-year Mortgage Early.

I know that, especially these days, most people simply can’t afford to make the higher monthly payments that go along with having a 15-year fixed mortgage. But that doesn’t mean there’s nothing you can do to speed up the day when you will own your home debt free.

The problem with a 30-year mortgage is that it’s designed to make you spend 30 years paying it off. If we stick with our $300,000, 30-year fixed mortgage example, that means you’re paying the bank nearly $348,000 in interest! But what if you were to take that same mortgage and make the payments on a biweekly-instead of a monthly schedule? This simple change can cut the total payment time by six years and save you $72,000 in interest payments.

It’s not a trick. Here’s how it works. All you do is take your 30-year mortgage and instead of making the monthly payment the way you normally do, split it down the middle and pay half every two weeks. In the beginning, paying every two weeks probably won’t feel any different from paying once a month. But as you should know, it’s not really the same thing.

A month, after all, is a little longer than four weeks. Therefore, over the course of a year you gradually get further and further ahead in your payments, until by the end of the year you have paid the equivalent of not 12 but 13 monthly payments. Best of all, because it is so gradual, you will hardly feel the pinch.

The impact of that extra month’s payment is awesome. Depending on your interest rate, you will end up paying off a 30-year mortgage somewhere between five and seven years early, and a 15-year mortgage three years early. You will be debt free years ahead of schedule, saving you tens of thousands of dollars in interest payments over the life of your loan.

If you’d like to figure out how much you could save on your own mortgage, visit First, click on the Free Stuff tab then select See All Calculators under the calculator section, then click the Get a biweekly mortgage payment plan” calculator under the mortgage section. You can then plug in your own numbers and quickly see how much you could save by switching to a biweekly payment plan.

Step 3: Set Up An Automatic Biweekly Payment Plan with your Lender.

These days most mortgage lenders offer programs designed to totally automate the process I’ve just described. To enroll, all you need to do is phone your lender or go to its website. Many banks also offer this service for free to customers who do all their banking with them. Those that don’t usually refer you to an outside company that runs the program for them. These companies generally charge a set-up fee of between $200 and $400. In addition, there’s a transfer charge of $2.50 to $6.95 that’s assessed every time your money is moved from your checking account to your mortgage account.

A lot of companies now provide these services. To be sure you’re dealing with a reputable firm, you should probably use one that is referred to you by your bank.

Step 4: Do the Same Thing Yourself for Free.

Why spend hundreds of dollars when you could just as easily use your bank’s online automatic bill-paying service to schedule biweekly mortgage payments for yourself? Unfortunately, it’s not that simple. The problem is that if you split your monthly mortgage payment in half and send it in to your mortgage lender every two weeks yourself, the lender will simply send it back to you because they won’t know what to do with it. Or worse, they’ll stick the money in an escrow account and just let it sit there.

What you can do is add 10% to your regular mortgage check each month and have the money applied toward the principal. The effect will be the same. That’s my suggestion. Add an extra 10% per month — and make the payment automatic. Make a point of asking your bank to make sure that this extra payment is credited toward your principal — and then check your monthly statements to make sure they did it correctly.

Step 5: Get the Right Kind of Mortgage.

My early pay-off plan won’t work unless you have the right kind of mortgage — a 15- or 30-year fixed mortgage with payments you can afford. So, if you plan to be in your home more than five years and you have anything but a 15- or 30-year fixed mortgage — say, one of those adjustable-rate deals that have gotten so many people in trouble — then you should refinance NOW. Rates are at historic lows as I write this — but this won’t last forever.

First, go to a website like, or and see what mortgage lenders are offering. Then call your current lender and ask if they can match the best deal you found online.

Lending standards are much tighter than they used to be, but if you can meet the requirements, most banks will be happy to refinance your mortgage. The three basic criteria are:

  • Your debt-to-income ratio, or DTI. Mortgage lenders want your DTI to be less than 38%. That is, your monthly mortgage payments shouldn’t total more than 38% of your monthly income.
  • Your loan-to-value ratio or LTV. Most lenders want it to be less than 80% — meaning the total amount you owe on your house should be no more than 80% of what the house is worth. (For example, if your house is worth $200,000, they will not refinance a mortgage of more than $160,000.)
  • Your credit score. You’ll generally need a FICO score of at least 620 to even be considered for a loan and at least 740 to get the best interest rates.

Refinancing only makes sense if the savings you enjoy from lower interest payments more than cover the cost of closing the new mortgage. If you’re going to be in your home for more than another three years, you’ll generally come out ahead as long as your new interest rate is at least one full percentage point lower than what you are currently paying. Have your bank run a “break-even analysis” for you, they can tell you,

Yup, the cost of refinancing will be paid off in 28 months [or whatever]. You need to know this before you pull the trigger.

It’s time to go back to the basics of homeownership: buy less house than you can afford and pay off your home as fast as possible. A debt-free home is really a nice home to live in and it’s absolutely worth striving for! For more tips on paying off your mortgage faster, visit me online at

Nine Steps to Paying Off Your Student Loans

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Over the last two years, I have received more questions about student loans than I got in the previous two decades combined. The reason is brutally simple: Not only is college more expensive than ever, but because of the recession, it’s also the hardest time in decades for college graduates to find decent employment — and thus earn the money they need to be able to pay off their loans. This financial double-whammy is crushing a generation of young people under a mountain of debt.

According to the most recent U.S. Department of Education statistics, two out of every three students who graduated from college in 2008 financed their education at least partly with student loans, with the typical borrower starting out their working life owing around $23,000. In 2009, the total amount of federal student loans outstanding topped $605 billion.

The private student loan market is a largely unregulated “wild west” market, but experts figure it accounted for another $300 billion or so — bringing the grand total to around $1 trillion.

And with this in mind, let’s look at how you should borrow money for school — and ultimately pay off those loans so you can get on with finishing rich!

1. Get the Facts and Understand the Problem.

In the past I have argued that student loans are not only a good investment but also that they are a more intelligent form of debt than, say, a bank loan you might take out to buy a car. But in recent years, I have begun to see some problems with student loans.

To begin with, people who borrow money for college often don’t really understand what a serious commitment they are making. It’s generally easier to get a student loan than it is to borrow money to buy a home or a car or get a credit card — and yet student loans are the most difficult loans to get out of if you get into financial trouble.

Another problem is that an increasing number of people are being forced to take out private student loans, which generally have variable interest rates (meaning they can get more expensive) and are virtually impossible to refinance.

And perhaps most troubling of all, the value of a higher education simply isn’t as much of a “sure thing” as it used to be. When you borrow money for school, you’re betting that you will be able to afford to pay back the loan after you graduate. But these days, with unemployment high, many college students wind up graduating into a world of no income — and lots of debt.

2. Know What Kind of Loans You Have.

There are two types of student loans — government and private. Before you can start evaluating the repayment options, you need to determine which kind you have. If you’re not sure, check the paperwork: If there’s any reference to a Stafford Loan, Perkins Loan, Federal Direct Loan Program, or the Federal Family Education Loan Program, congratulations! You have a government loan, which means you are eligible for a number of different repayment options. This is not the case with private loans. With them, you’re basically stuck with the repayment terms that you agreed to when you took the loan out.

3. Understand Your Repayment Options.

If you have government loans, you are eligible for two standard repayment plans. The 10-Year Plan is the default option. You make fixed payments each month for 10 years, and at the end of the decade, your loan is paid off and you own your diploma debt free. You can also opt for a 20-Year Plan, which will stretch out your repayment period. This will lower your monthly payments-but it also will increase the amount of interest you’ll pay over the life of the loan. Since your goal should be to become debt free for life, the 10-year plan is generally your best option.

Let’s plug in some real numbers to see if this makes sense. Imagine two students who both paid for college with $25,000 federal Stafford loans:

  • Student A chooses the standard 10-year repayment plan. As a result, he’ll have to make monthly payments of $287.70 for 10 years, at the end of which he’ll be debt free. In all, he will have paid a total of $34,524.14, of which $9,524.14 will have been interest.
  • Student B chooses the extended 20-year plan. Her monthly payments will be only $190.83. But after 20 years, she will have paid a total of $45,801.70, of which $20,801.70 will have been interest.

In other words, opting for the 20-year repayment plan increases the total amount you will end up paying by roughly a third — in this case, more than $10,000. This is not a good way to get rich!

4. Consolidate Your Loans.

Most students who borrow take out multiple loans from multiple sources. Once you graduate, it can become something of a nightmare to keep track of all these loans. This is why most students choose to consolidate their federal loans. (Private student loans are in their own separate universe and cannot be consolidated with federal loans.) Consolidation not only combines all your obligations into one monthly payment, it also cuts down on the paperwork. What’s more, there is never a fee for consolidating federal loans and you can choose to extend your repayment term.

While students with federal loans can consolidate with any lender, it is always a good idea to consolidate into the federal direct loan program. That’s because there are some loan forgiveness programs that are open only to people with federal student loans.

5. Learn the Difference Between Deferment and Forbearance, and Investigate Loan-Forgiveness Programs.

The official government website for federal student aid, Student Aid on the Web , defines a deferment as “a temporary suspension of loan payments for specific situations such as re-enrollment in school, unemployment, or economic hardship.” If you have subsidized federal loans, this can be a very good deal, since interest will not accrue during a deferment. However, if your loans are unsubsidized, interest will accrue.

If you don’t qualify for deferment but are experiencing financial difficulty, you can apply for forbearance, which will temporarily postpone or reduce your payments. The catch here is that interest will continue to accrue even if your loans are subsidized. Most private student lenders also offer forbearance and deferment options, but there are no uniform policies governing private student loans and you are completely at the lender’s mercy. Check with your lender to find out your options.

If you qualify for a loan forgiveness program, whatever balance remains on your loan will be wiped out without penalty. One of the best-known loan-forgiveness programs is for federal employees. If you work for the federal government for 10 years and make 120 on-time monthly payments, any remaining balances you owe on federal student loans will be forgiven. Many states offer their own programs that help public employees pay off their student loans, but a word of warning: These programs can quickly evaporate in times of financial crisis. You can learn more about loan-forgiveness programs on the FinAid website.

6. Ditch Your Loans ASAP (Especially Your Private Ones).

The fastest way to get rid of student loans is to live beneath your means and pay them off as quickly as you can. If you’ve got private loans and you want to have any chance of finishing rich, it is imperative that you move paying them off to the top of your list of financial priorities.

This is why: the adjustable rates on private loans make them ticking time bombs. If you have both private and federal loans, I believe you should make paying off the private loans your first priority — even if the interest on your federal loans is higher. If you have a mix of private and federal loans, use IBR (income-based repayment) or an extended payment plan to keep your federal loan payments as low as possible and throw all the money you can at your private loans. They’re that dangerous.

7. Don’t Forget to Deduct Your Interest Costs When You File Your Taxes.

Don’t overlook the income-tax deduction on student loan interest. This deduction is calculated as an adjustment to income, so unlike the home mortgage interest deduction, you do not need to itemize your deductions in order to qualify for it. Assuming you’re in a 25% tax bracket, this deduction could save you as much as $625 per year.

8. Think Before You Borrow.

If possible, keep your borrowing to the absolute minimum and never, ever take out any private student loans. Don’t sentence yourself to a lifetime of indentured servitude in pursuit of a sweatshirt with a nice name on it. This may sound harsh, but student loans should cover only a small portion of your college costs. There are plenty of other, better ways to pay for college — savings plans, scholarships, and part-time employment. Remember, people have been working their way through college for as long as they’ve been giving out degrees.

9. Do your Homework and Shop Around For the Best Loan.

There are a mind-numbing variety of programs, each with a mind-numbing set of rules and conditions. The difference between the wrong loan and the right one can be the difference between a miserable life and a great one. Here are some tips on where to go for information and help:

Federal Loans

The best information will come from the school you are looking to attend. Reach out to the student-aid department for information about the various programs and how to apply.

Private Loans

There isn’t a better resource for information and advice on private loans than FinAid. This website contains everything you need to know about borrowing money for private student loans. But as I mention above, tread carefully before loading yourself up with private loans.


FastWeb bills itself as “the leading scholarship search provider for every student, whether you’re in high school or a mother of two returning to school,” and with 34 million users, the boast is probably justified.

Before you start your studies, do your homework: get a student loan education and explore all your options before you borrow. And to find more student loan tools, info and to read real success stories from people who found student loan freedom, go to

Six Ways to Lower Your Credit Card Interest Rates

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My friend Alice had been a loyal, responsible user of her credit card since 1998. While she normally paid off her monthly bill in full, she had recently lost her job and as a result she was currently carrying a balance of about $10,000. Her interest rate had always been rather low — about 9% — but she checked her statement to see what her current rate was, and to her shock, she discovered that her credit card was charging her 29%!

“It must be a mistake,” she thought. So she called the phone number on her credit card. Was her rate really 29% or had she misread it? The customer-service representative who took her call explained that the credit card company had raised everyone’s rates to 29%, regardless of their payment record or credit history.

When she got off the phone, Alice did the math. Here’s what it looked like:

$10,000 (interest rate 9%)
Total cost to pay off with 2.5% minimum payment: $14,192
$10,000 (interest rate 29%)
Total cost to pay off with 2.5% minimum payment: $85,547

At 29% interest, there’s a $71,355 difference!

Not surprisingly, Alice was really mad. I told Alice to bring her statement to me and we would call the credit card company together to see what we could do to negotiate her rate down. I am going to share with you the six things Alice and I did, so you can do exactly the same thing for yourself and save thousands by lowering the interest rate on your credit cards. Keep in mind that Alice did not achieve instant success. However, she did ultimately make progress, and so can you — let’s get started!

1. Find Out How Much Interest You are Paying.

Go get your latest credit card statements. Your Annualized Percentage Rate (APR) should be listed at the very top or the very bottom of the statement. If you can’t find it or, like Alice, you aren’t sure you’re reading it correctly — call your credit card company and simply ask them what your APR is.

2. Shop For a Lower Rate.

Do an online search of your credit cards (using each card’s exact name) and compare the interest rate you are currently paying to the rate each of your card companies is offering to new customers. In Alice’s case, we were able to find out in less than five seconds that her card was offering new customers who qualified, an APR of just 13%, plus 30,000 frequent-flyer miles once you charged $750. That’s adding insult to injury. This is the type of information you want to know before you get on the phone to ask your credit card company for a lower rate.

3. Compare your Rate to National Averages.

You can get the latest credit card rates, along with national averages, at websites like,,,, and The following chart from shows the different rates that credit card companies currently offer different types of borrowers:

Jan 2010 Jul 2009 Jan 2009
Super Prime (for the most creditworthy 10.59% 9.69% 8.99%
Prime (for average borrowers) 15.44% 14.99% 13.77%
Sub-Prime (for below-average borrowers) 26.01% 22.99% 21.67%
Punitive (for borrowers with missed payments, are behind on payments, have exceeded their credit limits, or have poor credit scores) 29.99% 29.12% 29.99%
Promotional (for new customers) 5.77% 3.33% 2.66%
Note: Average Rates based on FICO Credit Scores.
Super-Prime = 760–850; Prime = 660–759; Sub-Prime = 500–659.

4. Figure Out the Rate You Should be Paying Based on Your Credit Score.

Before you start calling your credit card companies, determine what category your credit score should qualify you for. If you don’t already know your credit score, go to and get your free trial of Debt Wise which comes with a FREE Equifax Credit Score. If you have signed up for your free trial of Debt Wise already, you can get your credit score by logging into your account and clicking on the “credit score” link in the middle of your Debt Wise homepage.

If you have a “super prime” credit score, your credit card company shouldn’t be charging you the regular “prime” rate. If it is, ask it why when you call the company. Remember, unless you make the effort to get your interest rates down by asking for a better deal, your rates are going to stay high, and it’s going to be harder for you to get out of debt.

Ready? Great! Let’s pick up the phone and start what I call the “Credit Card Rate Negotiation Game.”

5. Call Your Credit Card Company.

When you call the credit card company, your job is to USE YOUR KNOWLEDGE. You have become smarter about your debt and know what kind of rates are being offered, so there’s no reason for you to be afraid to ask for a better deal. However, assume that the first person you speak to is going to say, “Sorry, I can’t help you.” This is what the first tier of customer-service representatives are generally trained to say. If this happens, simply respond by saying, “Well, then let me speak to someone who can help me. Please connect me with your supervisor.”

When you make this request, the customer-service rep may say, “I’m sorry — no one is available right now.” Don’t accept this. Instead, tell them you want their name and ID number, so you have a record of whom you spoke with. Then insist they put a supervisor on the line immediately. Since I first began taking this approach, I have never been unable to get a supervisor on the phone.

Once you’ve got him or her on the line, explain your situation. Start by going over your current rate, tell them your credit score, and ask why your rate is higher than it should be. Compare your rate to what competitors are offering and ask if they would be willing to work with you to give you a better deal.

Credit card companies lower rates all the time, every day of the year, every hour of the day! I worked with one couple that had 12 credit cards, and we were able to ultimately get all but one of them to lower their rates to below 5%. In some cases it took multiple calls, but the effort paid off in the end.

Ultimately, Alice wound up taking advantage of an offer she got in the mail — for a card that was offering new customers 0% interest for six months! She applied and transferred her balance from her old card to her new card. True, she had to pay a transfer fee of $300, but for six months there wouldn’t be any additional charges on her debt. Because she read the fine print on her transfer agreement (something you should always do), she knew that if she were just one day late on even one payment, the rate on her new card would be increased retroactively to 25%. So she made a point not to be late — ever!

6. Ask About Forbearance or Debt Management Plans.

When all else fails, there is one last resort that can ultimately get your rates lowered. The credit card companies know that millions of their customers are in financial distress. It may be because you lost a job, had an illness in your family, or are simply earning less than you used to earn (what they call being “underemployed”).

What the credit card companies will often do in such cases is review your situation, and based on what they find, they may decide to work with you to restructure your debt. This restructuring can include lowering your interest rates to zero for a period of time (usually six months to a year), lowering your minimum payments, suspending over-the-limit penalties or annual fees — or all of the above.

There are two basic types of hardship plans for people with credit card problems: Forbearance Plans and Debt Management Plans (or DMPs). I have coached people who had credit cards with interest rates as high as 29% who were able to get their rates cut to zero as a result of signing up for one of these plans.

One downside of enrolling in these programs is that your credit card company may report this to the credit bureaus — and if it does, this could lower your credit score. But not all the card companies do this. To find out whether yours does or not, make sure you read the fine print before you sign the contract. The truth is that even if enrolling in a forbearance program affects your credit score in the short term, it’s better than falling behind on your payments or not being able to reduce your debt because you’re paying so much in interest.

The reality is your credit card company is not going to lower your rate if you don’t ask. So, when you do call them, make sure that you have all your information prepared and organized if you want the best results. The same goes for entering a Forbearance Plan or DMP to lower your interest rates — you need to make sure that you do your homework so you can be in control of your finances and make the right decision for yourself. For more resources and information on credit cards and managing your money, check

Eight Ways That Non-Profit Credit Counseling Can Help You – Fast!

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Not everyone has the knowledge and discipline to get out of debt by themselves. Many people — maybe you’re one of them — need someone to take them by the hand and walk them out of debt. There is nothing wrong with this.

My recommendation, if you decide you need some outside help, is that you consider working with a non-profit credit-counseling agency. According to the two major non-profit credit-counseling trade associations — the National Foundation for Credit Counseling (NFCC) and the Association of Independent Consumer Credit Counseling Agencies (AICCCA) — some eight million people came to member agencies for help in 2009. So if you need help, trust me, there’s no reason to be embarrassed. You’ve got plenty of company.

Let’s take a look at eight ways that a great non-profit credit counselor can help you:

1. They Will Offer You a Free Counseling Session.

Before they ask you to sign up for anything, most good nonprofit credit-counseling agencies will spend at least 60 to 90 minutes with you reviewing your entire debt situation and overall financial position FOR FREE. (Some reputable firms do charge an up-front consultation fee, but it’s very small-usually less than $100.) A common first question is, What brings you to us today? They may then ask you about your short and long-term goals. The idea of this is to encourage you to think beyond the immediate problem of getting out of debt and start looking forward to a brighter future.

2. They Will Help you Look Closely at Your Financial Reality.

First, they will look at what you earn and your expenses. Then they will look closely at your debt, how much you owe, what kind of interest rates you are paying, and how much you are wasting in late fees and over-the-limit penalties. Based on all this, they can figure out if you might be able to get yourself out of debt simply by changing your financial habits, or if you need to enroll in a Debt Management Plan (DMP).

3. They will Create a Spending Plan or Budget for You.

There’s no point in trying to pay down your debt if you don’t create a spending plan that allows you to live within your means. Creating this plan or budget is a critical part of what a good non-profit counselor will do for you. They will study where your money is going and make recommendations about where you can and should cut back in order to get your finances under control.

4. They Will Work With You on Secured Debt as Well as Credit Card Debt.

A good counselor will review both your secured debt (where you put up collateral, such as a mortgage) and your unsecured debt (where you don’t, such as most credit card debt). The goal will first be to make sure you can buy groceries, keep the lights on, and pay your rent or mortgage. Then they will look at the best way to deal with your credit card debt and other unsecured obligations.

5. They Will Recommend a DMP — But Only if it Makes Sense for You.

A Debt Management Plan is a payment plan where your credit counselor negotiates with your creditors to work out an arrangement designed to make it possible for you to get out of debt within three to five years. Millions of cash-strapped credit card customers have enrolled in such plans in the last few years. In most cases, a DMP will:

  • Create a three- to five-year plan to get your debt paid off.
  • Lower the interest rate on your debt — usually to below 10% and sometimes much lower.
  • Get your credit card company to stop charging you over-the-limit fees, annual membership fees, and late payment penalties.
  • Freeze your credit card accounts until your balances are paid off. Some credit card companies will actually close your account and make you apply for a new card once your debt is paid off.

It is important to note that a reputable non-profit won’t recommend a DMP to just anyone. According to the National Foundation for Credit Counseling, about one out of every four people is able to sustain a DMP. A DMP can’t really help you if you still can’t afford to make your payments even after your interest rates are lowered and your penalty fees are waived.

6. They Will Level With You About Your Need to File For Bankruptcy.

According to the NFCC, about 10% of all credit-counseling clients probably should consider bankruptcy. A good credit-counseling agency will let you know right away if you are in that 10%. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, you’re not allowed to file for bankruptcy without first working with an approved credit-counseling agency, and a good agency will provide you with legally required pre-filing counseling. What a good counseling agency won’t do is push you to use a particular bankruptcy lawyer. (I talk about finding a good bankruptcy attorney in Chapter 14 of Debt Free for Life).

7. They Will Provide You with References and Testimonials.

Most reputable non-profit credit counselors take great pride in the success stories of their customers — and they should be willing to provide you with references from people they have helped. If you’re considering a credit-counseling agency that wasn’t recommended to you by someone you know, ask them for the names of three former clients whose situations were similar to yours and who might be willing to talk about their experiences.

8. They Will Happily Explain Their Fees Up Front.

Any honest, accredited non-profit credit-counseling agency will be happy to explain exactly how much they charge and put it in writing. Many won’t charge you anything for the first appointment. In most cases, you will have to pay a monthly fee if you enter a DMP, but this, too, should be nominal — usually $50 a month or less. If you can’t afford to pay, most non-profit consumer counseling organizations will still work with you. Both the NFCC and AICCCA membership guidelines say that consumers cannot be denied service based on inability to pay.

The road to financial freedom can be long and arduous so if you feel that you need some outside guidance to get your finances on track you will need to find the right agency to help you.

To find a reputable credit-counseling agency, contact the NFCC (800-388-2227) or the AICCCA (866-703-8787). If you feel like you may not necessarily need the assistance of a non-profit credit counselor but still want some help to keep you on track while getting out of debt, visit my website for financial info and resources. Also be sure to check out for a do-it-yourself online debt reduction tool I’ve created with Equifax to help you automate your way out of debt.

A 12-Step Action Plan to Improve Your Credit Score

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Your credit score impacts your ability to get out of debt and stay out of debt. The worse your credit score, the higher the interest rate you will be charged on money you borrow. The better your score, the less your debt will cost you and the quicker you’ll be able to pay it off.

So it’s not only important to know your credit scores from all three major credit rating bureaus — Equifax, TransUnion and Experian — but to know how to raise your score. The simple truth is that raising your credit score isn’t that hard if you know what to do.

Over the years I’ve coached literally thousands of people on how to fix their credit scores, and based off of that experience I have developed a 12-step action plan to raise your score quickly and keep it there. Regardless of where you start from, if you follow this plan and utilize the online tools I discuss — in six months your score will be higher than you ever thought possible.

Step 1: Get Your Credit Report and Check it For Errors

Under the Fair Credit Reporting Act, the Big Three credit bureaus are required to provide every consumer who asks with a free copy of their credit report once a year. You can get yours by going to This step is important because it is extremely likely there are errors.

A study by the National Association of State Public Interest Research Groups found that one in four credit reports contain a mistake serious enough to keep you from getting a loan, credit card or in some cases a job.

Once you get your report, go through it with a fine-tooth comb. If you find any errors (for example, late payments that were actually paid on time or credit limits that are lower than they should be), get them corrected as quickly as possible. You can do this by sending the credit agency a certified letter that explains what information was inaccurate, including copies of documents (such as bank records) that verify your claim, along with a copy of your credit report with the disputed issue highlighted.

Under the Fair Credit Reporting Act, the credit-reporting agencies are required to correct inaccurate or incomplete information in your report within 30 days. Go to the “Free Stuff” tab at to access sample correction letters. Also, go to and sign up right now and take advantage of the free Debt Wise 30 day trial. By signing up, you will be entitled to a free Equifax Credit Score, so you can see where you stand.

Step 2: Automate Your Bill Paying.

This may be the most important tip. Missing payments or being late on payments can quickly ruin your credit score. For this reason, I strongly recommend that you use your bank’s online bill-paying service to automatically transfer a pre-set amount every month from your checking account to cover at least the minimum payments on all your credit accounts. I have practically every bill of mine automated in this way. You can also use your credit card company online bill payment system to notify you through email when you are close to going over your credit limit, which can help you avoid more damage to your score.

Step 3: If You Have Missed Payments, Get Current.

It’s never too late to clean up your act. Get yourself current as quickly as you can and stay current. Your score will begin to improve within a few months, and the longer you keep it up, the more noticeable the increase will be. The negative weight that FICO gives to bad behavior like delinquencies lessens over time, so as long as you stay on the straight and narrow, those black marks will eventually disappear from your record for good.

Step 4: Keep Your Balance Well Below Your Credit Limit.

Of all the factors you can control — and improve quickly — how much you owe is probably the most powerful. Since the credit crunch, credit card companies have been cutting customers’ credit limits without warning.This can be devastating to your credit score. Say you’ve got a $1,000 balance on a card with a $2,000 limit-and then the card company slashes your limit to $1,000. Suddenly, you’ve gone from 50% credit utilization to being maxed out, which can shave 45 points from your credit score. The credit bureaus recommend that you keep your usage below 33% of your available credit.

Step 5: Beware the Credit Card Transfer Game.

For years, people have saved money by transferring high-interest credit card balances to low-interest cards.This can still be helpful, but be aware that using one credit line to pay off another sets off credit score alarm bells — even if all you’re doing is consolidating your accounts. All other things being equal, your credit score will be higher if you have a bunch of small balances on a number of different cards rather than a big balance on just one or two.

Step 6: If You Rack up High Balances, Pay Your Card Bill Early.

The “Amounts Owed” part of your credit score is based on the balance due listed on your most recent credit card statements. So even if you pay your bills in full each month, running up high balances can still hurt your score. Avoid this problem by paying down all or part of your bill before the end of your statement period, thus reducing the balance that will be reported to FICO and the credit bureaus.

Step 7: Hang On To Your Old Accounts

Part of your credit score is based on how long you have had credit accounts. Closing old accounts shortens your credit history and reduces your total credit — neither of which is good for your credit score. Keep the older accounts open even if you aren’t using them.

Step 8: Use Your Old Cards.

The credit card industry has gotten much stricter about closing inactive accounts. This can hurt your credit score, since it reduces the average age of your credit accounts. To prevent this from happening, you should pull out your old cards and start putting at least one charge on them every month.

Step 9: Demonstrate That You Can Be Responsible.

The best way to raise your credit score is to demonstrate that you can handle credit responsibly — which means not borrowing too much and paying back what you borrow on time. Don’t open new accounts just to increase your available credit or create a better variety of credit. You should open new credit accounts only if and when you need them.

Step 10: Shop For Loans Quickly.

When you apply for a loan, the lender will “run your credit” — that is, send out an inquiry to one of the credit-rating agencies to find out how credit-worthy you are. Too many such inquiries can hurt your FICO score, since it could indicate that you’re trying to borrow money from different sources. Of course, you can also generate a lot of different inquiries by shopping for the best mortgage or auto loan. The FICO scoring system is designed to allow for this by considering the length of time over which a series of inquiries is made. So, try to do all of your loan shopping within 30 days.

Step 11: Know the Difference Between a “Soft Inquiry” and a “Hard Inquiry.”

The credit bureaus all recognize the difference between you checking your own score (a “soft inquiry”) and lenders checking your score (a “hard inquiry”). While too many hard inquiries can lower your score, soft inquiries don’t count at all. Feel free to check your score as often as you want.

Step 12: Buy a 3-and-1 Report And a Credit-Monitoring Package and Identity Theft Service.

Your credit score and credit report are so important that it makes sense to pay for a 3-and-1 Report (which provides you with your credit scores from the three bureaus) as well as an identity theft monitoring service. In most cases, these services will cost you between $14.95 and $19.95 a month — I personally pay for these services myself because I think it’s worth the investment.

Congratulations! You now know more than 95% of all Americans about what may well be the most important influence over your financial life — your credit record and score. Make lifelong monitoring of your credit part of a debt-free lifestyle! For more resources and tools go to

The Debt-Free Mindset: Seven Questions to Help You Get Out of Debt

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You’re probably ready to begin getting out of debt. But I’ve learned that if you want your motivation to stick, you need to be really clear about why you want to be out of debt. I’m going to ask you seven simple questions about your debt. Don’t get nervous. There are no RIGHT answers — only honest answers. By answering these questions, you can see whether or not you’re really ready to make this journey.

By the way, if you are married or in a committed long-term relationship where you share finances, discuss these questions with your partner. Working on your money together significantly improves the chances of succeeding financially and of staying together happily as a couple.

1. Why Do You Want To Be Debt Free For Life?

You could write, “I’m carrying $10,000 in credit card debt, and it stresses me out, and I’m worried every month when the bills come. I’m paying 19% in annual interest, and I feel stupid wasting this money — so the faster I pay it down, the better. I know when I pay it off I will feel GREAT.” That’s a simple answer, but you get the idea. Then again, you might read that question and come up with a deeply personal, more spiritual reason.

2. Why Are You in Debt?

My goal with this question is not to have you beat yourself up, but rather to have you face the truth about how you got where you are today. Did something tragic happen, like a medical problem? Did you lose a job? Did you buy a bigger house than you could afford? Did you live beyond your means? What happened? Answer the question from your heart as honestly as you can.

3. How Much Debt Do You Have?

If you completed the DOLP worksheets from last week, you should have a clear idea of your total debt. Go ahead and just write it down now: “I estimate that my total debt (house, cars, student loans, credit cards-you name it) as of [today's date] is $________.

4. What Percentage of Your Income Goes to Pay Interest Charges on Your Debt?

This may be the most eye-opening question. If you’ve completed the DOLP worksheets, you can use that information. If you haven’t, then pull out the most recent statement for every loan you have — mortgage, car loan, student loan, and credit card. You’re going to use this information to figure out exactly how much of your monthly payment goes to interest charges.

For example, say your mortgage payment is $2,000 a month. Chances are that less than $150 of that goes toward paying down the principal. The rest is going to interest. Look at this for each loan; call your lenders for the facts if you have to. Once you add up all the interest you are paying, you may find that more than half your take-home pay is going right into the lender’s pockets — without helping you make one inch of financial progress.

Now it’s time to figure out the percentage of your pay that goes to interest:

  • My total interest payments each month are:
  • My take-home pay each month is:
  • (Divide your total interest payments by your take-home pay.)
  • The percentage of my take-home pay that goes to pay interest charges is: ____ %

5. Who Can Help You Get Out Of Debt?

If you follow the plan I lay out and use the tools I provide, you should be able to get yourself out of debt. But maybe you’re not the do-it-yourself type. Maybe you feel you’ll need a professional credit counselor to help guide you through the process. If that’s true for you, then great — write it down. And even if doing it yourself is not a problem for you, if you have a family, you are going to need their support to get out of debt. It’s hard to get out of debt if the people around you are spending you back into it. So if you have a spouse and/or kids, you may want to add them to your answer here. Also, you should definitely add me to your list — because I am committed to helping you. I can start by offering you a free trial to my new revolutionary debt reduction tool called Debt Wise. Learn more about this tool and get your FREE trial by clicking HERE.

6. What’s The Worst Thing That Could Happen if You Don’t Get Out of Debt?

It’s important to face your fear about debt. What is your life likely to look like in the future if you don’t deal with your debt? Facing your fear about your debt is not being pessimistic — it’s being honest. The more honest you are right now, the better. So tell yourself the truth. Write down your worst-case scenario. It will motivate you to act decisively to start dealing with your debt.

7. When Will You Start to Get Out of Debt?

Below you will find the “Debt Free For Life Pledge,” which I’ve created to mark your new commitment to leading a debt-free life. By signing it, you are making a promise not to me but to yourself and your loved ones — a promise that you are truly headed toward a new life of financial freedom. Signing this pledge you will be automatically entered to win $10,000 to put toward paying down your debt! Here is how you join the movement — you can just copy and paste the pledge below and sign it (without entering to win the prize). If you want to join the challenge community and the chance to win $10,000 go to and take the Debt Free Pledge online or go to directly to the challenge site by clicking HERE

As of today over 11,000 people have made the pledge and started the challenge towards a debt free life — now it’s your turn. Let’s start a movement together!


I __________________________ [insert your name] commit to being out of debt by __________ [insert date]. I believe that paying down my debt and being DEBT FREE FOR LIFE is critically important, and I am ready to work to make it happen.
I will start my journey to being out of debt on __________ (insert date).
Signed __________________________

Congratulations on taking the time to read my questions and answer them. I’m proud of you. Now let’s continue working on getting out of debt!

Five Steps to Get Out of Debt in Record Time: The DOLP Method

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Today, I’m going to share with you a system to help you get out of debt called DOLP, which stands for “done on last payment.” The DOLP system is the cornerstone of your Debt Free For Life plan. I’ve talked about it for over a decade, and I’ve taught it to millions of people. It’s simple and it works. Are you ready? Let’s get started with a real-life example of someone who has used the system to great success.

First, get all the statements from every credit card account you have. Now get some folders and create a file for each different credit card account and label it appropriately (e.g., “Capital One Visa”). From now on, you will put all of your statements and payment receipts for this particular account in this particular folder. For each folder, write the amount you currently owe. Every time you make a payment, you’ll write the new (lower) debt amount and the date.

Now, make a list of each credit card account and its current outstanding balance, starting with the smallest debt and working down to the largest. In this way you will figure out exactly how much you owe and who you owe it to:

  • Name of Creditor
  • Account Number
  • Outstanding Balance
  • Monthly Minimum Payment
  • Interest Rate
  • Figure Out Your Other Debts

    Next, gather up all the statements for your mortgage and related debts, such as second mortgages and home-equity loans. As you did before, create a file for each debt, label it (e.g., “Wells Fargo home mortgage”), and on the front of the folder write the total amount you currently owe. Do the same for any car loans, student loans or other personal loans. Now add up all of this other debt and record it as follows:

  • I owe $______ on my primary mortgage.
  • I owe $______ on second mortgages/home equity loans, etc.
  • I owe $______ on second property/vacation homes or rental properties.
  • I owe $______ on student loans.
  • I owe $______ on car loans/boat loans.
  • I owe $______ on other installment debt.
  • The total amount of additional debt I carry is $______.
  • The Grand Total I owe as of ______ [today's date] is $______.
  • The purpose of the DOLP plan is to build “debt-reduction momentum.” Here’s how you do it.

    Step One: Fill Out the DOLP Worksheet

    You’ll find an interactive version of the DOLP Worksheet here. In the first column, write in the name of the loan account. In the next column, write the balance you owe, followed by the minimum payment due. The fourth column is for the payment due date. For the moment, hold off on filling this one in.

    The last two columns are for the loan’s DOLP Number and its DOLP Ranking. These are the heart of the DOLP system, and figuring them out (which we’ll do next) is super easy.

    Step Two: Calculate the DOLP Number For Each Account

    To figure out each account’s DOLP Number, divide the outstanding balance by the minimum monthly payment. For example, if you owe $500 on Visa and your minimum payment is $50, take the $500 and divide it by $50, which would give your Visa account a DOLP Number of 10. The 10 represents how many monthly minimum payments (not counting interest) it would take to pay off your debt.

    After you’ve finished with your credit card accounts, do the same for your other debts. With most closed-end loans, such as mortgages and car loans, the remaining number of payments is listed on your statements. If it’s not, leave the space for the DOLP Number blank. We’ll come back to it later.

    Step Three: Assign Each Account a DOLP Ranking

    This is easy. The account with the lowest DOLP Number is ranked #1, the account with the second lowest is ranked #2, and so on.

    Step Four: Calendar Your Due Dates

    Now fill in the “payment due date” column in the worksheet for all of your loans. Add these due dates to whatever calendar system you use. Set your calendar alerts to remind you of all your payment due dates at least five days ahead of time. This should prevent you from making any late payments, which can cost you an absolute fortune.

    Step Five: Fast-Pay Your Debt — The DOLP Way

    Each month, make the minimum payment on every credit card account … except the one with the lowest DOLP Ranking. For that card, you make as big a payment as you can manage-ideally, at least double the minimum.

    Once a card has been paid off, bury it and start attacking the account with the next lowest DOLP Ranking.

    DOLPing is simply a matter of prioritizing your debts and then fast-paying the right card down. It takes time, effort, and commitment. But with your new-found knowledge, plan, and willingness to take action, you’ll make steady progress.

    David Bach is the New York Times bestselling author of Debt Free For Life. To ask David questions, visit his website at or

    Click here to follow more of my Debt Free for Life program on

    10 Steps to Get Out of Debt in 2011

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    Debt can destroy lives, families, marriages, relationships, business — even countries. So this year my mission is to help one million people pay down a billion dollars in debt and start a new, debt-free life. Care to join me on this journey?

    I’ve just written my twelfth book, Debt Free For Life; The Finish Rich Plan for Financial Freedom. What follows is a condensed version of what I believe are the 10 most important decisions you can make in 2011 to crush your debt and buy back your freedom.

    Getting out of debt is much harder then getting in. You can help yourself by taking advantage of the free one-day download of Debt Free For Life on WalletPop, available for today only! The book is filled with powerful tips and techniques, and can be your guide to a debt-free life in 2011. Click here to download your copy.

    I’ll be your guide for a 10-week counseling session on WalletPop, starting today.

    Ready? Let’s get going!

    10 Steps to Get Out of Debt in 2011

    1. Decide You Want to Get Out of Debt. 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, and that it’s time to be debt-free once and for all. Are you ready to decide? Make a public pledge right now by registering at and be entered to win $10,000, which would go a long way toward putting a dent in your debt this year.

    2. DOLP Your Debt Away. DOLP stands for “done on last payment.” Among other things, Debt Free For Life will teach you my DOLP method for getting rid of credit card debt. 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. Once you’ve paid off that card, you focus on number two, and so on until every card is paid off. You can download my DOLP worksheet here.

    3. Go Online and Go Automatic. In my opinion, one of the best online debt-reduction tools around today is Debt Wise, an offering of Equifax, the giant credit bureau. I love this tool so much, I’m endorsing it. What’s great about Debt Wise is that it has taken my DOLP system and made it automatic. As a result, 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. You can get a free trial of Debt Wise by clicking here. There are similar free tools available from other companies like Intuit’s Mint site, which also has a lot to recommend it. But only Debt Wise automatically pulls your debt data from your credit file. With the others, you have to access all your various accounts manually.

    4. Get a Better Rate. Some of you are paying as much as 29.99% in credit card interest — even though you’ve never had a single late payment. Don’t accept this. Go to websites like,, or to find out the rates your credit card company is offering new customers. Chances are you are paying up to 10% more than they are. Debt Free For Life contains a chapter about how you can use this information to renegotiate your card rates down or, failing that, get yourself a new card with a better rate.

    5. Do the “Debt Math.” 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. My suggestion is that you make at least DOUBLE the minimum payment on your number one priority debt. In this way, your debt could be all paid off within three to five years — maybe sooner. Read your statements today — the new Credit Card Act by law requires lenders to show the “debt math” of minimum payments.

    6. Raise Your 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. Other than paying down debt, and paying your bills on time (every time), length of credit history, types of credit used and new credit — the fastest way to raise your credit score is to make sure there aren’t any mistakes on your credit record. By law, you are entitled to one free copy of your credit report every year from each of the “Big Three” credit bureaus (Equifax, Experian and TransUnion). Make sure to check your report for errors, and if you find any, go to the credit bureau’s website and use their online tools to request a correction.

    7. Accelerate Your Mortgage Payments. When I was a financial adviser, I noticed that all my clients who retired in their 50s had one thing in common: no mortgage. And they all did it the same way: They paid a little extra every month. If they couldn’t afford the payments on a 15-year mortgage, they paid extra on their 30-year loan (either by adding 10% to their regular payment, making one extra payment a year, or switching to a “bi-weekly” payment plan). Make 2011 the year you adopt this extra-pay plan; it will get rid of your mortgage by as much as six years early, and save you thousands in interest.

    8. Avoid debt consolidation loans or debt settlement offers. Every week I receive letters from people who paid $500 to $1,000 up front to “professional” debt counselors who promised to get rid of their debts. In most cases, they got little or nothing for their trouble. If you need help, stay away from the “for profit” debt-settlement agencies and instead look for “non-profit” credit counseling services. You can get referrals through the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. Check out WalletPop’s recent series on the many dangers of debt consolidation companies as well.

    9. If You Don’t Have the Cash, Don’t Buy It. That’s what my grandmother Rose used to say, and it’s advice that still holds up. If you want to get out of debt, you have to change how you spend money and the best place to start is to not borrow money to buy stuff you don’t absolutely have to have.

    10. Make it a Family Affair. Go team! Make getting out of debt a family, friend or team project. One of the videos we’ll be hosting in coming weeks here on WalletPop tells how a woman named Genevieve paid off more than $70,000 in debt by creating a support team to help her achieve her goal. Getting out of debt can be tough. Having friends and family cheer you on makes it easier and more fun. Go build a team for 2011 to get out of debt!