Financial Literacy Debt Series: “Power Down” Your Debt Method

by Allacyn - Apr 12, 2011

Use a systematic method to eliminate debt, pay one item first then apply that amount to the next obligation and so on. You should have already  prioritized your debt so that you know what payment to focus on first. Now you will want to focus on that first item on your list and apply any extra amount of money to that payment. When this payment is gone you will move on to the next payment and instead of spending the money you have extra from the first payment, you will apply that extra amount to the payment.

For a simple example: Sara wants to “Power Down” her debt so that she can start saving more money for a down payment on a home. She has three credit cards and an auto loan that she would like to get paid off. The first payment she is going to focus on is a credit card with a small balance and a high interest rate. She owes $150 on this card and the minimum monthly payment she has been making is $15. She has started to bring her lunch to work instead of going out to eat and this is saving her $35 a month. So she would add that $35 to the $15 she was already paying, making a total payment of $50 she is applying to that debt. This payment will be gone in three months, and then she can take that $50 and apply it toward her next credit card that she owes $500, which she has been making $50 payments to. So now she is paying $100 toward this debt, and will pay it off in 5 months. Now as with the last example, she will apply the $100 payment to her next item of debt a credit card for $1000; she has been making payments of $100 so now she can make a payment of $200 to this debt and this debt will be paid off in 5 months. Now she has $200 extra to pay toward her car payment, which she is currently paying $250 to every month and owes $12,000 on. She is now making $450 dollar payments each month and will pay her car off in a little over 2 years. When she has accomplished paying off her bills and can save that $450 a month extra for a house payment.

The “Power Down” method helps you get out of debt faster and accomplish your long-term goals. Instead of just throwing your money around make a plan and stick to it and you will realize your goals. If you are interested in finding out more information about the “Power Down” method and the My Money Plan system, as well as our other Financial Literacy resources, visit

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