Being an Intelligence Officer can be a challenging profession or hobby. One of the checks performed on professional analysts or officers before they are hired is a credit check, because individuals in debt might be more likely to share classified information with a third party in order to deal with their financial problems.
Getting out of debt gives an individual flexibility to make decisions that are necessary for their operations, and is good practice for everyone.
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Understanding Debt
Some people classify debt as “good debt” or “bad debt.” For instance, mortgages, low interest auto loans and student loans are usually classified as “good debt” because getting a degree, a car or a house helps you build equity or increase your earning power.
An average student loan interest rate is 6.8%, a mortgage might be around 5%, and an auto loan might be between 2 and 10%. Credit cards and other high interest debt, which can be 15-22% are considered types of “bad debt.” They simply hold you back from your goals.
Reducing Expenses vs Increasing Income
There are two ways to start finding money to pay down your debt. The first is reducing your expenses. For example, eating out less or cutting non-essential services (e.g. expensive cell phone plans or cable TV) can help you find additional money for your debt.
Increasing income is harder to do but can often give you much more money. Changing jobs or learning new skills (such as a new language) can help you find a new job with a higher income, that leaves you with extra money each month.
Once you’ve found some extra money to put at your debt, you have two approaches: the debt snowball and the debt avalanche.
Debt Snowball
The debt snowball was first popularized by personal finance writer Dave Ramsey. In a snowball, you list all your debts from lowest balance to highest balance.
For instance, you might have a credit card with a $1000 balance and a 20% interest rate, a second card with a $2500 balance at 18%, an $8,000 auto loan at 6% and a $30,000 student loan at 6.8%.
| Type | Balance | Interest Rate | Minimum Payment |
| Credit Card 1 | $1000 | 20% | $20 |
| Credit Card 2 | $2500 | 18% | $50 |
| Auto Loan | $8000 | 6% | $155 |
| Student Loan | $30,000 | 6.8% | $92 |
As you can see, minimum payments total $317 per month. Let’s say you have $400 per month to put towards your debt. You make the minimum payments on each of the 4 loans, putting the extra $83 towards that first credit card. That means you’re paying $103 per month on that card.
You’ll make 10 payments of $103 and then a final payment of $70.10.
After that last payment, your minimum payments will only be $297 – but you still have that same $400 per month to put towards your debt, which means that your second credit can now get a $153 payment. In this way, you’ll pay off that next loan even faster than the first one. This is the snowball effect.
Eventually you find yourself with no debt at all!
Debt Avalanche
The debt avalanche is very similar to the debt snowball but focuses on sorting them by the highest interest rate. Although this increases the length of time you might pay your debts, it decreases the amount of cash you’ll pay overall.
The major disadvantage of the debt avalanche is that you don’t get the psychological effect of having fewer loans to pay off – which can be make it easier to “fall off the wagon.”
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