Debt Help: How Much Debt Do I Owe?

If you want to take a step in the right direction for getting out of debt, one of the first things you need to do is to understand what debt you have and how much debt you owe.  If you are seeking debt help, this list of debts is necessary in order to truly understand your financial situation.

The Debt Mind Sweep

A mind sweep is where you sit down and just write down everything that comes to mind.  I highly recommend that everyone does a debt mind sweep by listing every debt you owe.

At first don't worry what the dollar amount is or what order the debts should be listed.  For this task the goal is to just make sure that you create a comprehensive list of every debt you owe.  To help you think of all of your debts, think about whether you have any of these debts,

• home mortgage
• second mortgage
• home equity line of credit
• student loan debt
• car debt
• credit card debt
• debt to stores for items purchased
• Non-current monthly bills
• Doctor bills

Once you have the list of every debt you owe, write down how much you owe to each lender.  It is important that you know how much you owe to each lender.  This will give you a holistic look at what you owe and to whom.

Organize Your Debt

Now that you have your list of debts, organize them so that you can better understand what kind of debt you owe and how much to whom.

List Debts Smallest To Largest

There are many ways to organize your debt, but I start by listing the debts smallest to largest.  This allows you to see a path to paying the debt off using the debt snowball method of repayment.

List Debts in Order of Priority

Another way to list the debt is by repayment priority.  If you are not current on any bills, you should list these first because you need to get current on these debts.  Other debts that are a priority are necessities like housing debt, car debt and utility bills like heating oil or electricity.  You need to make sure that you are paying your bills for things that are needed for survival.

List Debts by Highest Interest Rates to Lowest Interest Rates

While I believe that it often is best for people to pay down their debt by paying off their smallest debts first using the snowball method, I also think you need to understand the interest rates on each of your debts.  These interest rates reflect the cost for borrowing the money.

If any of these interest rates are extremely high, you might consider paying these debts first.  But, for most people, the payment of high interest debts first rarely gets them debt free faster than paying the lowest amount of debt first.  Therefore, while mathematically it makes sense to pay the high interest loans first, the debt snowball method is often easier to stick to.

Knowing what you owe and to whom is critical to start getting out of debt.  Therefore, if you haven't done this already, create a list today of all of your debts.  It is a great kick start to becoming debt free.

Related posts:

1. How To Start Becoming Debt Free
2. Dave Ramsey’s Total Money Makeover Baby Steps
3. Debt Settlement Company Guide
4. Get Out of Debt 2010
5. Top 5 Checking Accounts

Tagged as: Debt Help, Debt Snowball, Reduce Debt