Start Saving and Make Your Money Work For You! Step 3

Step 3: Pay Off All Credit-Card Debts

That’s right: It's time to make those credit card companies a little angry. Tackling your credit-card bills is step three.

Why didn't we pay them down earlier?

Have you ever tried to dig a hole in the sand with the tide coming in around you?

For one thing, you can’t accumulate even more debt if you’re faced with an unexpected expense. And it’s crucial to get started on retirement savings.

If you don’t have any credit card balances, and keep credit cards paid off then you can go ahead to step four.

But if you do have credit card balances then you need to begin by making a list of all your card bills. Start by paying off the credit card with the highest rate first. This will eliminate the balance that costs you the most on a monthly basis.

Then move to the card with the second-highest rate, and so on. (Do this regardless of which card has the lowest balance or the highest annual fee.)

If you can, transfer a balance from a high-rate card to a low-rate card. To find one with a no- or low-balance transfer fee, go to CreditCards.com or check with your local bank, which may be offering an introductory promotion.

This does not mean stop paying your other cards down. Missing a payment can mean your credit score will suffer. Your credit score can mean the difference between getting to the end goal and getting tot he poor house.

If you have equity in your house, consider refinancing your mortgage and consolidating your debt load, which allows you to deduct the amount of interest you’ve paid on your taxes and can free up operating capitol on lower interest rate mortgages. Be sure to proceed with extreme caution - if you combine your credit-card debt load into your mortgage and then fail to make your payments, you risk having your home go into foreclosure.

Confident that you have a firm grasp on step 3?

Let's move on to step 4: Boost Your Retirement Savings