When the topic of debt elimination comes up in discussions with clients, quite often I am asked what is the best way to lower their current interest rate on their credit cards and student loans. In addition, I get funny looks when I describe the Debt Snowball method of paying off your smallest loans first, regardless of the interest rates. Usually that is followed up by the question, “Why not pay off the loan with the higher interest rate first?” While I think it is ok to try to find ways to lower your interest rate, the interest rate is only about 10% of your problem and therefore you should only spend about 10% of your time on lowering the interest rate.
The real problem is the actual DEBT that you owe! Instead of spending all your time trying to find 0% interest rate credit cards to transfer your balance to, put 90% of your time and focus into paying the stupid thing off. Find creative ways to sacrifice items in your budget or work a little extra to earn more money to apply to the debt. When you pay the balance off, your interest rate will then be 0% forever and you can start using the monthly payments to live the way you have always wanted to, DEBT FREE!
We always say that personal finance is really 80% behavior and only 20% head knowledge. Paying off your debt is more about changing your habits and not finding ways to lower your monthly payments. I guarantee that if you put as much time into creating a written cash flow plan, getting on the same page with your spouse, and paying off your debt using the debt snowball approach as you put into finding ways to consolidate your loans at a lower interest rate, you will change your financial future.