Paying down your debt can take a great deal of stick-to-itiveness, especially if you have a lot of debt and not much income to throw at it.  When you do finally make the decision to pay off your debt once and for all you might wonder what the best plan of attack is.  Do you aggressively pay down one debt while only paying the minimum payments on other debt, or do you spread the extra payments out toward all your debt?

First and foremost, you should use whatever method you are most comfortable with.  The utmost mathematically sound method may not be the method you decide to use, but as long as you are comfortable with the method you choose and you are actually making some progress in paying down the debt, then you’re doing it right.

Here are some of the more popular methods for paying down debt:

1.  Pay your accounts down one at a time, concentrating on one account while paying the minimum payment on all the others.  Which account do you concentrate on first? Choose either the account with the highest interest rate or instead choose the account with the smallest balance so you experience small victories quicker, potentially motivating you further.

2.  Consolidate all your debt into one account, such as an equity line of credit, a personal loan, or a credit card with a very low introductory interest rate that will not expire until after your debt is paid off.  Once the debt is combined into one account, make large payments until it is paid off. 

3.  Aggressively attack all your debt at once, spreading the extra payments out to your various bills.  As accounts are paid off, put the extra money toward the other accounts.

You want to choose a method for paying down your debt that keeps you motivated while also allowing you to eliminate debt more quickly than if you didn’t have a plan in place. 

For many people, the hardest decision about paying down debt is actually deciding that it’s time to get serious.  It is all too easy to simply send in minimum payments and not dwell on the interest charges and fees you’re paying each month, so actually acknowledging that something needs to change is a huge step.  Pat yourself on the back for making a smart decision, and then get to work paying off your debt using whatever method works best for you. 

Whether or not you have debt you should still be putting some money away for savings.  How do you know where to put the money? With so many interesting terms floating around - annuities, mutual funds, bonds, FOREX, etc - you might feel a little like you don’t have the slightest idea what you should do with the money you do manage to squirrel away. 

The fact of the matter is that unless you have a great deal of money to put into the bank, you can relax knowing there is a relatively simple savings hierarchy you can follow:

First, build up an emergency fund.  An emergency fund isn’t designed for investing or saving for a down payment on a house.  It’s an interest-bearing account that has no risk involved where you can put some money in case you suddenly find yourself in need of cash beyond what you have in your checking account.  Most financial experts suggest you place at least six months worth of expenses in your savings account.  Money market accounts are ideal for an emergency fund.

The next step is to start putting money toward retirement.  Depending on how much time you have before you expect to stop working you may have many options available to you when it comes to retirement savings.  Once your emergency fund is in place you should aim to put at least 10% of your income toward retirement.  Choose whatever type of account you want for your retirement fund - IRA, mutual funds, etc - but make sure it’s under the umbrella of retirement savings for tax purposes.  Generally, the closer you are to retirement, the less risk you should accept for your retirement savings.

Invest for fun or profit.  Investing can be a hobby, or it can be a way to potentially make money.  The stock market should not be the only place you put your savings because there is just too much risk of losing your money and leaving you without any savings at all.  If you have an emergency fund in place, and you already have 10% of your income going to retirement, feel free to start playing the market as an additional way to save money.

If you are conservative with your money, try a CD or savings bond.  A certificate of deposit from a bank or credit union usually earns an impressive interest rate, but the money is inaccessible for a period of time unless you want to pay fees and forfeit interest.  Savings bonds are also long-term investments, but if you’re trying to save some money for years down the road or simply want to be patriotic, government-issued savings bonds are a reliable tool.

Save for big expenses.  Most banks and credit unions offer savings accounts that are for specific purposes.  Perhaps you want to save money for the holidays, or in a more long-term situation you need to save money for your child’s college education.  There is a savings account for almost every scenario.  Take a look at the savings options offered by your bank or credit union to find out the best way to stash some money away while also earning interest returns.

Whenever you’re dealing with any sort of financial transaction you need to be sure that you get the terms of the deal in writing.  If your loan officer guarantees you a certain interest rate, get it in writing.  If a collection agency accepts the terms of a balance settlement, get it in writing.  If you lend $500 to your brother and you both agree to a certain schedule for payments, get it in writing.

In other words, get everything in writing.

A verbal agreement may seem like a sufficient contract, but if you ever have to go to court because of breach of a verbal contract things can get tricky.  Unless you have everything in writing, signed by everyone involved, it becomes a “he-said, she-said” situation.  Yes, it may feel a little awkward to request the terms of every financial deal documented, but ultimately it’s the smart way of doing business.

It’s a sad fact, but it’s true: Sometimes loan officers and customer service representatives don’t tell the truth.  More often than not it’s just a matter of them simply making a mistake and not an attempt at being malicious.  For example, the representative you speak to at your bank might think that you qualify for a certain interest rate when in fact you qualify for a higher one, and unless someone contacts you to clear up the mistake you won’t realize the higher interest rate until you’re signing your loan documents.  By then you might be so wrapped up in the process that you don’t notice the higher interest rate at all.

A signed financial document is powerful.  It proves the terms of whatever agreement you have, and can also protect you if you have to go to court over an issue.  Suppose you pay off a loan, but never request documentation or don’t hold on to the documentation you receive.  A month down the road you get another statement requesting the regular monthly payment.  If you had the documentation you could easily fax it over to the lender and they would quickly realize their mistake, but without the paperwork it’s your word against the lender.

Always get it in writing, no matter what the financial agreement.  You’ll be immensely glad you did if you find yourself needing to prove the terms of the agreement.