Five-Step strategy for getting out of debt

Most people get caught up in their life style or debt juggling. Many would think it would be great to get ride of their panic, pain and they don't think they can go much further. Remove yourself emotionally from your debt, make it a pure business venture.

As you move forward in this process will note what makes this different from the other debt elimination processes is that this approach allows you to live a normal life while you eliminate you bad debt.

Step 1.
List all your consumer debt. Use excel into 4 rows; 1 name of the creditor,2 the amount you owe, 3 minimum monthly payments and 4 the interest rate.

Step 2.
Take the number in column 2 which is the amount of the debt, and divide that number by the number in column 3 which is the minimum monthly payment required.

Step 3.
On a new list, take the debt with the lowest factoring number and put it at the top. This is the first priority payoff.

Step 4.
In addition to the minimum payments required, you are going to take $200 from your current spending and allocate this to your debt elimination plan.

Step 5.
Take the debt listed in the first spot of the priority payoff box and apply the $200 jump-start allocation to the minimum payment listed with this debt. While you pay the normal monthly payments on all other debts. When your finished paying off the debt in the number one spot you will take the amount you paid for those minimum monthly payments, plus the jump-start allocation, payment on the debt in the second slot. As you can see the payments build and build as you drop on down the list of debts and your capacity to pay off your debt accelerates incrementally. Though you will be uncomfortable with this process at first, when you witness the speed at which you make progress, debt elimination will become as addictive as accumulating the debt once was.

This formula is by Loral Langemeier in her book The Millionaire Maker

1 comment:

Justine Clark said...

I've seen many theories on debt elimination but, this makes sense. I almost had this down but, add previous payment to the next was the key-up from my former way of paying off debt.