This Is the No. 1 Question Ramit Sethi Asks People Who Are in Debt

Are you in debt? Can you answer this important question?

Certain types of consumer debts, such as credit cards and other high-interest loans, can have a major adverse impact on your finances. When you owe money, your hard-earned income will go to paying interest rather than covering your living costs or helping you get ahead. That's why it's important to make informed choices about how you handle your loans.

Although it can be difficult to do that, finance expert Ramit Sethi has one key question that he asks people who are in debt -- and if you know the answer to it, that's a very good sign you're on your way to climbing out of the hole. 

Here's what Ramit Sethi asks people who owe money

In an interview with Business Insider, Sethi detailed the one question he asks those who owe. The finance blogger and author of I Will Teach You to be Rich, also explained why he believes it's so important to ask this question. 

"Whenever you're in debt, I always ask people: What is your debt payoff date? You should know the month and year it will be paid off," Sethi said. "That means you have a plan. That means it's all automatic."

As Sethi's statement makes clear, creating a debt payoff plan is crucial because it means you have taken control of the situation. You may be making extra payments with the goal of becoming debt-free by a certain target date or you might have consolidated and refinanced your debt into a personal loan with a fixed payoff time. 

Whatever your approach, if you are working on progressing in becoming debt-free, chances are good you'll know when your efforts will pay off. As long as you continue with the plan you've created, you'll end up without bills to creditors so you can do more with your money. 

"A plan turns debt from a 'hot' emotional topic to a 'cool' math problem," Sethi said. "Most of all, a plan gives you control."

How to make your debt payoff plan?

So, what happens if you owe money and you don't know the answer to this crucial question that Sethi asks? 

If that's your situation, you need to make a plan to allow you to become free of your high-interest consumer debt. In order to do that:

• Add up all that you owe. Make a list of your debt balances and the interest rates on the account. 
• Decide which debts you want to have paid off early. You don't need to pay a mortgage off early because the interest rate is very low and you could earn a better return by investing your money than by saving on interest.
• Choose a payoff strategy. You could refinance and consolidate by getting a low-interest personal loan and using that to repay all your debt. Or you could do the debt snowball method and start paying extra to loans with the lowest balances first and then keep moving up from there. The debt avalanche is another approach, which involves paying extra to your highest-interest loans first. 
• Start working on your payoff plan and keep track of your progress.

If you do these steps, you'll easily be able to answer Sethi's question about when you will become debt-free. As he said, you will take control by making a payoff plan, and you will be able to reclaim the income currently going to your creditors ASAP.