Financial Independence Debt Solutions – Part 2

January 12th, 2008 | Stacey | Debt Management, Financial Freedom, Financial Independence

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To achieve financial independence, the right debt solutions are a necessary part of the program. You can never reach your money goals while you continue to pay off high interest debts that keep you from using your money to earn more money.

Our last blog entry discussed the value of paying your credit cards and saving a little bit every day at the same time. By the time you pay off those credit cards, you will also be sitting on a couple of thousand dollars for emergencies so you can feel reassured you won’t need to use credit again in the face of a crisis.

When you decide to pay off those credit cards, many credit experts advise you to pay off your lowest balances first. This helps you to see quick results for your efforts to fuel your desire to continue to pay of that debt. However, if you have too many credit cards carrying balances this approach may actually hurt your credit score. According a spokesperson from Fair Isaac, the company that calculates your FICO score, “If you have five retail cards that have balances of less than $100, I would knock it all off within a month.” When the card is paid, don’t close it because that may hurt your score for eliminating your available credit. Use your paid off cards once every six months or so to keep them active and keep your credit scores soaring. Of course you should pay them off right after you use them to further enhance your credit rating and minimize your debt.

The next entry in our series about financial independence debt solutions will discuss more practical strategies to break free of debts and become financially independent now.