Do Your Own Debt Consolidaton And Save! Know Exactly When You Will Be Out Of Debt, And Sooner Than You Think. No: New Loans, Credit Checks, Monthly Fees, Discussing Your Situation With...
(75) Michael Killian http://learncreditmanagement.com/
You can eliminate all debt in the fastest possible time by starting an avalanche.I recognize that starting or getting caught in an avalanche probably would not be your idea of an enjoyable time. But what if I told you that the principles of an avalanche are very similar to the principles used to eliminate all debt in the fastest possible time-frame.
Consider the following: By applying specific strategies beginning with the development of a "Magic Bullet", the average consumer can eliminate all debt including a mortgage in about 7.5 years with the money currently earned. By so doing, they can save over $100,000 in interest. They can then build over $1,000,000 in savings in the same time it would normally take to pay off their mortgage by investing in a safe mutual fund, the same money formerly spent paying debt. (RAM Research, Chicago Title & Trust, National Association of Realtors, and U.S. Census Bureau.)
I realize this is contrary to the popular belief. It is also absolute heresy to the credit world because it is not in your creditors best interest [no pun intended] for you to know it can be done. However, I am constantly running client debt against software proving it can be done.
So What Is This "Magic Bullet"?
The "Magic Bullet" is the key to getting your financial snowball going. It is the primer to start the debt elimination process.
The Magic Bullet is that portion of your income which you will temporarily set aside to pay extra on your bills in a very specific sequence. The example of the 7 year payoff above is based upon a 10% (gross) Magic Bullet. The amount can obviously be more to make the payoff occur faster. It can also be less, but the payoff of course will be slower.
I can already hear you saying, "I knew there was a catch. Where am I going to come up with 10% of my income?" I hear this so often and you would be amazed at the money we waste without even being aware of it. Therefore, this site also offers numerous debt reduction tips, links and strategies and is being augmented routinely. (For example See Community Blog/News for Frugal Blog, Frugal Feedback, and to sign up for the Frugal Newsletter. There is also Article Index for more money saving articles.) But in this article I simply want to insure you have the basic plan to develop the Magic Bullet.
Here are the basics:
1. Go to your last six to seven months of check registers. List each item which has any hope of reduction (not bills because they will soon be paid off, taxes because they are a fact of life, etc.). If there is a question, list it.
2. Categorize each entry (groceries, entertainment, lunches, savings, etc.)
3.Develop ideas for how to save on each entry aiming for a total of 10% of gross. (More on this in other articles but as an example--- stop monthly savings = $50; use grocery coupons = $60). Remember, this is temporary until you get your snowball big enough that you can cut back.
Payoff Sequence
The bill payoff sequence is a bit more complex but not difficult. Here is the formula.
1. Divide the total payoff amount by the monthly payment. Assign a numeric sequence starting with 1 for the lowest division answer, 2 for the next lowest, etc.
2. Each month make the normal monthly payment to each debt except debt one to which you also apply the Magic Bullet. Repeat until debt one is paid.
3. Pay the minimum monthly on all bills except debt two. With debt two, apply the minimum monthly + Magic Bullet + former debt one payment. Continue until debt two is paid. Start on debt three with the Magic Bullet + former debt one + former debt two, etc.
4. The great part of this system is that after a few months you realize maybe you don't need what you have been wasting your money on and therefore you can now permanently eliminate some temporary Magic Bullet items for the rest of your life.
Most Asked Question
The most common question I receive is, "Shouldn't I pay off the highest interest first." The answer is no, not if you are trying to eliminate all debt. The objective of this plan is to pay off a couple of the smaller debts first and use this money as leverage to pay the rest. If you are paying only selective debts and not ALL debts, I might agree about paying the highest interest first.
Employing the method described in this article allows the fastest possible method of eliminating ALL debt with the money currently earned. If on the other hand you are simply trying to pay off a few debts, then paying the highest interest first does make sense.
It's your call. The question is simply how badly do you want to get out of debt?
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Heavenly Father,
Hallowed be your name, your kingdom come
Your will be done on this Earth as it is in the Heaven
Give us today our Daily bread
Forgive us our debt and sins
As we have forgotten our debtors and sinners
Lead us not into temptation
But deliver us from the evil one
For you are the glory and the power and the kingdom
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