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Financial Advice from Jean Chatzky

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Fiscal cliffs, changing tax laws, a shaky economy... Now more than ever it’s time to take control of our own personal finances.

To help us out Momtrends recently learned some tips from Jean Chatzky, bestselling author and finance expert on how to reduce and pay down debt. In April, Jean will be offering even more tips in JEAN CHATZKY'S MONEY SCHOOL, a series of online personal finance courses at Through this course, you can find downloadable preparatory materials, worksheets, notes and the tools as you work towards your personal finance goals.

How to Reduce and Pay Down Debt from Jean Chatzky:

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1. Start an avalanche. There are two basic schools of thought when it comes to paying down debt: The Avalanche method, which dictates paying your balances down in order of interest rate, highest first. Essentially, you're paying the minimums across the board, but throwing extra money to the debt with the highest rate. Once you dig out there, you move on to the next highest, until you're out of debt completely. The other method, called Snowball, involves paying off debts by balance -- lowest balance first. It can be motivating, because you're able to wipe out balances quickly at the start, but it will ultimately take you longer to get out of debt completely, and you'll end up paying more -- sometimes considerably more -- in interest.

2. Refinance. Are you paying too much in interest? That can keep you in debt longer, and of course cost you money. Go over every debt -- mortgage, auto loan, credit cards -- carefully and see if there is an opportunity for an interest rate break. If your mortgage rate is 4.5 percent or above, you could likely benefit from refinancing right now. Likewise, auto loan rates are at bottom, and the auto refinance process is quick, easy and -- most importantly -- cheap. Dropping three person could free up $250 a year. Finally, call your credit card companies and ask if they will lower your interest rate. If you're a good customer, and you've slowly been chiseling out, they may abide. If they say no, consider a balance transfer to a card with a lower or zero percent introductory rate.

3. Free up extra money. Paying off debt is a huge return on your investment, equal to the amount of your interest rate. That means it's worth it to make cuts elsewhere, so you can find money to put toward your debt. You may think you've already tried and failed this point, but it's worth revisiting again. Have you tracked your spending to pinpoint unnecessary leaks in your budget? Have you called your cable company, cell phone provider, or internet service and asked for a better deal? Often they'll knock $10 or more off a month just because you asked. If they say no, consider downsizing your service -- you may not notice a slightly slower internet speed, or dropping HBO when your favorite shows are off season.

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