“Americans collectively spent more than we earned after taxes for the past two years in a row,” says SmartMoney in their latest cover story, “Live Debt-Free”. Their point: we spend a lot of time thinking about how to save and how to invest, but not enough time working out a healthy debt strategy that doesn’t eat away at our happiness, not to mention our retirement savings. They offer four different strategies for reducing your debt to little or nothing, so that you can apply your income to more worthwhile activities than fighting off your liability monster.

“Change the monthly mind set”
No more “low monthly payments” for you. This means their answer to the windfall question is to apply it all to a high-interest credit card account, for example. The sooner you pay these sorts of loans off, the more you’ll save. If you pay 1/12th more each month on your home loan—the equivalent of one extra payment a year—you can shave 7 years off a 30 year mortgage.

“Fix it and forget it”
Get out of your ARM loan as soon as you can, and if you have good credit, look for the elusive fixed-rate credit card. SmartMoney suggests you check out CardRatings.com.

“Shuffle the cards”
Take advantage of zero-interest transfer offers from credit cards, not so you can run up the card with new charges, but so you can pay off your debt faster—which can lead to a better credit score, which makes you a more attractive customer to credit card companies, which means you can shop for better offers and lower rates.

“All under one roof”
Consolidate your loans into one payment at a lower rate, usually through a home equity loan if you can get one.

“Live Debt-Free” [SmartMoney]
(Photo: Getty)

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