You need a good debt-repayment plan

If you're in debt, you have to get out by whatever means works for you. So put together a plan -- then stick with it. Commit to do whatever is necessary to complete the plan.

Above all, remember: a plan is only as good as your ability to stick with it. Just like diets, all of them work in theory. The true test, however is which diet will you stick with? No matter how effective the plan is on a daily basis, if the regimen is outlandish and impractical, you will not stick with it no matter how good it looks on paper.

When evaluating a get-out-of-debt plan, you should look for the following characteristics:

1. It is specific
2. It is easy to prepare
3. It is simple to understand
4. It is visually pleasing and suitable for refrigerator posting
5. Its results can be measured
6. It has a specific finish date

When it comes to this kind of effort, the simpler the better. But don't sacrifice quality on the altar of simplicity.

The Rapid Debt-Repayment Plan

I have developed a plan that fits the above criteria. It's a simple plan and effective because it works. I call it the Rapid-Debt Repayment Plan.

The Four RDRP Rules

This plan is simple because there are only four rules. If you adhere closely to all four rules, you will get out of debt in record time.

Rule #1: No more new debt. Unless you are willing to stop adding to your unsecured debts, you're really out of luck when it comes to debt-proofing your life. Furthermore, if you don't stop adding to the problem, you'll be like the homeowner with the kitchen fire -- except instead of putting out the blaze that's ready to destroy the entire structure, you'll be pouring gasoline on it. It might be manageable for a while, but you'll be on your way to a full-on raging inferno. The rule is simple: add no new revolving unsecured debt.

Rule #2: Pay the same amount every month disregarding the declining minimum amount due as stated on the monthly statement until that debt is paid. If you are following Rule #1 religiously, you will soon notice something peculiar about your minimum monthly payment: it will start to shrink. Credit card companies in particular are not that interested in your paying off your debt. They'd like to keep you in the position of paying them a tidy sum of interest every month for the rest of your life. That is why your minimum monthly payment may be a percentage of the remaining balance, generally 2 to 3 percent.

#2 requires that you pay no less than the amount of your minimum monthly payment required for the first month of your repayment plan. In the Greens' case, their current MasterCard payment is $115, which is about 3 percent of the current principal balance of $3,897. Next month the required payment might drop to $113 or $110. Nonetheless, they will ignore the change and commit to paying no less than $115 every month to MasterCard until that debt is paid in full.

Rule #3: Line up your debts according to size, putting the one with the shortest pay-off time at the top and the one with the longest term at the bottom.

Rule #4: As one debt is paid, take that payment and redirect it to the regular payment of the next debt in line. This rule requires that until completely debt free, you pay the same total amount toward your debt (in this case $640) until all debts are paid. For example, when Optima is paid in full, the Greens do not absorb the $50 they have been sending monthly to Optima into their regular household funds. They redirect it to the next debt in line.

The Question

If you haven't already asked the following question, you probably will at some point: Wouldn't it be better to line up my debts according to interest rate, with the highest interest rate debt in the first position rather than the debt with the smallest balance?

Theoretically, perhaps that would be the way to go. And you are going to hear many financial experts who advise that method. But I have worked these plans every which way possible, and still believe that the potential difference in interest is miniscule enough compared to the benefits of using a plan that has a high probability of taking me across the finish line -- or to the starting line, if you know what I mean. The RDRP is a plan that works because it is something you can live with. It is both economically and emotionally sound.