November 19, 2023 • 24 mins
Having a plan to reduce debt makes the process much easier. What is the plan and where to find a plan.
Article Links:
https://www.thebalancemoney.com/debt-elimination-plan-2385990 By Courtney Johnston
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Unknown (00:04):
Hello, I'm your host, Mr. Chuck, I retired accountant
turned truck driver, I reduce mydebt in a relatively short
period of time, debt reductionto achieve financial freedom
takes commitment, confidencedetermination.
(00:24):
Plan for debt reduction, havinga plan to reduce debt makes the
process much easier. What is theplan? And where do you find a
plan, I do have a link in myshow notes to an article. But if
you go online and Googled debtreduction plan, debt management
(00:45):
plan debt elimination plans,mostly you're gonna find
articles that's gonna refer youto counseling companies, or
counselors that are looking foryour business, he might find an
article or two, that's going togive you some basic information,
(01:06):
like the article I have on mylink from the balance, basically
is tinia. What to do a basicwhat to do, find out how much
you owe, identify your debt.
I've already talked about that.
In the past, I talked about thelast couple episodes how to not
get into debt, and how to stayout of debt once you've achieved
(01:30):
your debt reduction plan.
But I have yet to tell you whata debt reduction plan is. Now,
I've done this in many episodesin the past. But if you only go
back three or four episodes Italked about, don't spend more
than you make except for twoexceptions. That's your housing
and your transportation. Ifyou're gonna buy a house that's
(01:52):
not running, but buying, ifyou're gonna run a house, don't
spend more than you make,because you couldn't afford it.
And your automobile, yourtransportation, you got to
finance those two things. If youdo that, and then pay for
everything and cash go onforward and save your money and
pay as you go, you will not havea debt reduction problem, you
(02:16):
won't have a debt problem, youwill be manage your money
efficiently enough that you willkeep yourself out of trouble.
But there's things that pop upthat are unplanned for that
maybe you have to charge on acredit card and you'll get
behind and then you'll getanother credit card, and you
might get behind again, it's anever ending saga, you get into
(02:39):
that debt cycle, it's very hardto break away from it. And the
debt cycle is going to keepsucking you in. And if you go
online, they're gonna say do aconsolidation loan, that's not
going to reduce your debt,you're just rearranging your
debt, yes to the better lowerrates of interest, etc. But if
you don't get rid of thosecredit cards, you keep using
(03:01):
them, you're gonna be back in aworse place. And within a year
or two, it might take longer,but it's gonna keep getting
worse as you go through yourlife. You never got out of that
debt cycle, and you're stillstruggling. And as the deeper
you go, the more of your incomeis going to be used to repay it,
(03:23):
the less money you haveavailable to do things you want
to do in a for your monthlyexpenses. And then you start
living paycheck to paycheck. Andthen you start struggling. And
then if something bad happens,it gets even worse. I present
all this gloom and doom becausethat's what happens and happened
(03:46):
to me. I had no intention ofgoing into debt on one credit
card much less two or three andthen a couple car loans and on
and on at once. I just had somebad luck. And I every time I was
getting close to paying one offor paying one down, then
something would happen. BecauseI never had a plan. I just was
(04:09):
willy nilly like most people do.
I've just went through life. Iwas going to work I was making
my money. Now I was trying touse the money. I had my checking
account at that time to pay asmuch of my debt as possible. But
I had no plan. You're nevergonna be successful unless you
have yourself a plan in youwrite it down and you stick to
(04:29):
it. And the number one thing yougot to do, quit using credit.
Quit using your credit cards,period. Now if you've been
listening and you're trying toget your
monthly bills that you pay onthe timely monthly manner and
(04:50):
you're working towards it, youknow in order to quit using
credit you have to watch yourspending and you can't be
spending on thingsthat you're not using that
you're paying for, you know,subscriptions, and you just
can't be wasting money he got,it's hard to make money. And
it's harder to keep your ownmoney, you got to be in the
(05:12):
mindset, you want to hold on asmuch of your money as possible,
and save as much as money aspossible. So you quit using
credit, because you're in debt,you're struggling to get out of
debt. So every time you use thatcredit card, that's one step
farther away from getting itpaid off. Maybe it's 10 steps
(05:36):
away, because it's just gettingworse and worse. So quit using
credit number to pay the minimumamount on all your debt period,
by how do you pay it down, ifyou just paying the minimum
amount? Well, you're gonna getto that. But you have to do
(05:57):
that. The reason is, you want tofree up as much money to pay
your normal monthly bills,timely every month on time. So
you can get that processstarted. If you're unable to do
that, if you're already doingthat, then you take the money
that you're not spending and putit into a savings account, and
(06:21):
we're going to call it anemergency fund. Why have an
emergency fund? Well, becauseyou never know when something
bad could happen, an unforeseenexpense could pop up at any
time. If you don't plan aheadfor it, what are you gonna do,
you're gonna use your credit.
(06:44):
And if you use your credit, youcan get farther in debt, and
you're not achieving your goalof reducing your debt, you need
to have an emergency fund andstart building one emergency
fund is nothing but a savingsaccount where you go to your
bank. To start with, if youdon't have a savings account, go
(07:07):
to the same bank where you haveyour checking account, open up a
savings account, the minimummight be $50 $10. I don't know,
I think the last time I did it,a minimum for a savings account
was $50. So I put in $50. Andthen you gradually build it up.
(07:28):
Because our goal here is have aminimum of $1,000 in your
emergency fund to get started.
So what have we done? One wequit using credit to, we're
making a minimum payment. Three,we started an emergency fund.
And our goal now is to build itup to a minimum of $1,000. That
(07:53):
minimum you're never gonna gobelow. And last, some unforeseen
expense comes along, your carbreaks down it charge child has
an accident, you have anaccident, you get sick,
something unforeseen, unplanned,comes along, that's when you use
(08:16):
an emergency fund, and may notpay for 100%. But if it pays for
75% or 90%, that much closer tostand out of debt, to reduce
your debt. We're working on thatgoal. Then when you do once you
have your $1,000 The minimum andyour savings account. While you
(08:41):
keep building up this process atthe beginning is going to be
difficult. It's gonna be itmight take you two months, three
months before you could quitusing all your credit cards and
charge and stuff and gettingpaying cash for all your stuff.
He might have to use your creditcards and charge a grocery bill
(09:02):
or a gas fill up your gas tank.
But you gradually gonna start toget away from that. And that
might be probably the hardestpart of this whole process. Just
to getting that started.
We already identified we had aproblem. We already identified
(09:23):
all what your debt is we gottheir debt in order. We know we
have a mortgage, a couple carpayments, three credit cards,
personal loan, payday loan, weall got that identifier and
we're working on it. Right now.
You're just making a minimumpayment on all that debt and
you're trying to build up anemergency fund. And then when
you get that $1,000 Each keepdoing the same thing. You build
(09:46):
it keep building your emergencyfund until you have 3500 to
$4,000 Somewhere in that range.
Once you achievethat this could take you six
months or nine months at thebeginning, but it's going to
speed up over time is slowlygoing to speed up. And then it's
(10:08):
going to start speeding upfaster and faster as we go. Once
you have anywhere over $3,500,in your emergency fund, the
reason we're building that up,is because of any time during
this process, that you'rebuilding up that emergency fund,
an unforeseen event happens, youjust have that much more in your
(10:31):
emergency fund to cover it, soyou're less likely on a half to
use credit. That's the reason Ihope you follow that pretty
precisely. Once you have let'ssay you have 3800 in there, it's
the middle of the month, allyour monthly bills are pretty
(10:53):
much paid for, you have enoughcash to pay for groceries for
two more trips to the grocerystore for the to the end of the
month, maybe put gas on all yourvehicles to the end of the
month, you're sitting prettygood. And you're fairly
confident you're doing well pickone of your debts, he shouldn't
be starting on your highinterest debt. First, what ever
(11:15):
the highest rate of interest,whichever debt, generally
speaking, it would be a creditcard. But if you have a payday
loan, it might be that if youhave a personal loan, it could
be that if you have one of thoseitems, high rate of interest
that has a smaller balance, thatyou be able to get close to
(11:36):
being paid off, or even paidoff, I'd be better do that one
first, then after you get thatfirst one paid off, if it's a
credit card, do not cancel thecard, you're gonna keep it
because it's going to help yourcredit score. And maybe in the
future, we might be able to usethat card, again, to our
(11:59):
advantage. So you get it paiddown, you got one less debt.
After that, you want to focus onthe highest rate of interest,
only what is I have that I'mpaying the most interest on. And
you see, cuz you're, now you gotyour savings account emergency
(12:24):
fund was at 3800, it's now downto
1000. So you applied 2800, youdid whatever you did, you're
gonna start building that backup again,
let's assume you paid somethingoff, so you got one less debt,
it's gonna come up a little bitfaster, because that's one less
(12:44):
minimum payment you're making,and might have been $55 a month,
or could have been $35 a month.
But that's that much more,that's gonna go into the savings
account.
So now we want to focus, startbuilding it again. Now maybe if
it took you nine months, thefirst time, it might be seven
(13:05):
months the second time. Soseveral months down the road.
Now this all could be faster, itall depends on your income, your
monthly expenses, how much debtyou got building up, and you
decided to go to the full 4000.
So you had 3000 to apply. So youdo that, it's some time later,
you pick your highest rate ofinterest, and you apply it,
(13:29):
maybe you paid off a third ofit, maybe you paid off half of
it, whatever, you paid it downby three grand. So that means
that interest that you're payingis gonna significantly drop on
that card or that loan, or thatcredit, whatever it is, and your
minimum payments gonna go down.
(13:52):
So you're just gonna make theminimum payment. So now you have
even a little bit more money,that's gonna build up that
savings account a little bitfaster. And you keep doing this
over over and over. You'rewatching your spending.
You're paying for everythingmonth to month. You're watching
your spending, you're paying foreverything month to month on a
(14:14):
timely basis. You're building upyour savings account, you're
looking for things to cancel anddo away with to get rid of so
you don't have that expense hereongoing checking your cell phone
service, your cable service,your internet service.
(14:35):
Trying to get the best dealspossible. You doing that all the
time. You're consistentlylooking for ways does not spend
money, ways to save money forthe reason of paying down this
debt. I'm not saying that you'regonna sacrifice maybe didn't cut
back. If you were somebody thatwent out to dinner five times a
(14:58):
week. Do it oneSo week, wherever you can say
money either means you're gonnabe able to build your emergency
fund faster, which means you'regonna be better be able to pay
off your debt sooner. Andhopefully, you're gonna be
building new habits, speciallyspending habits, you got to
(15:21):
watch got to think, ask yourselfbefore you buy anything that's
cost more than $100. That'ssomething you usually don't buy.
That's a tool,a new computer, a new phone,
smartphone, whatever it is, doyou really need it? Can you get
(15:42):
by without buying it for anotheryear? Or two years? Can you? Is
it worth your while? Do youreally want to spend them money?
These are things you always gotto be asking yourself, you got
to be looking for ways to reduceyour spending, thus increase
your savings, thus increasingthe rate of paying off your debt
(16:05):
at all effects each other, Icould just say, make more money,
and then pay off your debtfaster. Well, that's true. But
that's hard for a lot of peopleto do. If you can do that.
Basically, when I did, I changedjobs got a better job, and then
more money. And that reallyhelped a lot. I paid off it was
(16:27):
about $130,000. In three yearsand eight months, it was three
or four credit cards, two orthree car loans. My line of
credit on my home and my firstmortgage, I had some of that
somewhat under control, before Igot serious and start really
doing this plan. But it was thisplan that propelled me much
(16:53):
faster, and got everything undercontrol, gave me some focus,
quit using credit, make theminimum payment, get your
savings accounts build up to aminimum of $1,000. He builds it
up until you have three to 4000apply it to one debt only pay
(17:13):
off that debt repeat over andover. And as you pay him off, it
speeds up towards the end, I wasapplying three and $4,000 to my
mortgage, like every othermonth.
(17:34):
Like every month, towards theend, I was making my monthly
payment. Two weeks later, I wasputting an extra three grand on
it. And that really goes quick,especially when you didn't have
much left on the balance. Beback in one moment with my final
thoughts.
If you're interested andlearning about an online
(17:54):
software that helped myself getout of debt,
it does tracking, budgeting, andkeeps track of all your assets
and all your debt. And eventells you how much and when to
transfer money into your savingsaccount. And how much and when
to transfer money to your debtand which debts to pay off and
(18:18):
order. First. It's not cheap.
It's a one time payment. But itwill definitely be an investment
something and yourself and aninvestment in your personal
financial life. If you'reinterested, send me an email at
reduced that increasewealth@gmail.com. And I'll send
(18:39):
you the information about thisonline software that worked
great for me. Before you getthis gone, II got to be tracking
your spending in annual income.
And you need to have yourcontrol center or do a monthly
(19:01):
budget. I call it a controlcenter. And you update it every
pay cycle every week. If you'repaid weekly. Every time you get
paid, you got to make sure it'supdated. Because it's there to
help you identify a potentialupcoming problem. If you can
(19:22):
catch the problem before ithappens, you can minimize it. If
you're doing tracking, you needto update it on a regular basis.
If you go to the grocery storein a gas in the car and pay a
few bills every Saturday, thenyou update it every Saturday. If
(19:42):
you go out on Wednesday and dosome spending, update it have
your tracking software up todate at all times. That way you
know how much is in yourchecking account. How much you
have on your credit cardcourses.
If you're doing the debtreduction plan, you shouldn't be
using those credit cards. Butyou have an idea how much money
(20:06):
is available to pay for upcomingexpenses. It's looking ahead and
planning for the future. Andthis gonna help you get rid of
your debt. And this article fromthe balances debt elimination
tips, you get, I get almost tothe end of the article before it
(20:27):
says, make sure you have anemergency fund in place before
diverting all extra funds todebt repayment, that's at the
end of the article. And that wasstep three, quit using credit,
make the minimum payment, createemergency fund, step three. And
they're telling you make sureyou have an emergency fund in
(20:48):
place before diverting all extrafunds to the debt repayment. At
the end of the article, it's anextra tip, and it should be part
of your plan. As you pay offaccounts start to pay towards
other debt. Well, that's kind ofsome common sense. If you pay it
one off how you're gonna notstart paying towards the other
(21:09):
member, you quit using credit.
So once you get paid off, itshould stay at zero,
it shouldn't have any morepayments applied to it.
Keep an eye on your credit scoreas you begin paying down debt.
While yes, you want to knowwatching your credit score
increase can be an excellentmotivation. Yes, if you pay off
(21:30):
some credit cards and you don'tclose them or cancel on your
credit rating will come up alittle bit. As the less debt you
have, your income to debt ratiois gonna be improved, thus your
credit score is gonna improve ifyour income changes during your
debt repayment plan. Be sure toreevaluate your budget. That's
(21:52):
common sense to me. So what areyou going to do if your income
goes up?
Most likely your rent ormortgage payment and change your
car payment probably neverchange or what you eat that
changing, your utilities are notgoing to change because you have
more income, put it in youremergency fund, and you're gonna
(22:13):
increase the emergency fundfaster, then you're gonna pay
off your debt quicker. Afteryour debts paid off, continue to
utilize your budget to help keepyourself out of debt. If you
don't stop doing once your debtspaid off, let's say that you're
just at first saying I want topay off my credit cards. Well,
(22:33):
that's fine. That's your firstgoal. Once you get that done,
would you have other debt? Well,I like to get my cars paid off,
or at least pay down. So when Itrade a man, I won't have to
refinance the unpaid part intomy new loan.
Because a lot of people do that.
And that that's a no, no, youdon't ever want to do that.
(22:56):
Okay, once you get that goaldone, well, maybe I need to pay
down my mortgage, I have thislow rate of interest, it's
relatively cheap money. And I'mpaying 3% on a 30 year loan that
is pretty good.
Well, this ply a little extra,so I don't have to pay this for
(23:18):
30 years. So maybe if I retire alittle bit early, I'll be able
to pay it off maybe a year ortwo sooner, whatever it may be,
I just want to pay off my lineof credit. Okay, do that. Maybe
I just want to give a littlemore equity build up my home. So
if I would sell the house andmove out have more money to put
(23:40):
down on my next place? Yes, whenthose things are good. Whether
or not you pay it off, it's upto you depending on your your
rate of interest, how long youhave left on the loan, what your
income situation may be. It allvaries by individual. I can't
(24:01):
tell you what to do. Keep thehigh interest rate, credit,
under control and out of yourlife. And you'd be much happier
you did so
Hello, I'm your host, Mr. Chuck, I retired accountant
turned truck driver, I reduce mydebt in a relatively short
period of time, debt reductionto achieve financial freedom
takes commitment, confidencedetermination.
(00:24):
Plan for debt reduction, havinga plan to reduce debt makes the
process much easier. What is theplan? And where do you find a
plan, I do have a link in myshow notes to an article. But if
you go online and Googled debtreduction plan, debt management
(00:45):
plan debt elimination plans,mostly you're gonna find
articles that's gonna refer youto counseling companies, or
counselors that are looking foryour business, he might find an
article or two, that's going togive you some basic information,
(01:06):
like the article I have on mylink from the balance, basically
is tinia. What to do a basicwhat to do, find out how much
you owe, identify your debt.
I've already talked about that.
In the past, I talked about thelast couple episodes how to not
get into debt, and how to stayout of debt once you've achieved
(01:30):
your debt reduction plan.
But I have yet to tell you whata debt reduction plan is. Now,
I've done this in many episodesin the past. But if you only go
back three or four episodes Italked about, don't spend more
than you make except for twoexceptions. That's your housing
and your transportation. Ifyou're gonna buy a house that's
(01:52):
not running, but buying, ifyou're gonna run a house, don't
spend more than you make,because you couldn't afford it.
And your automobile, yourtransportation, you got to
finance those two things. If youdo that, and then pay for
everything and cash go onforward and save your money and
pay as you go, you will not havea debt reduction problem, you
(02:16):
won't have a debt problem, youwill be manage your money
efficiently enough that you willkeep yourself out of trouble.
But there's things that pop upthat are unplanned for that
maybe you have to charge on acredit card and you'll get
behind and then you'll getanother credit card, and you
might get behind again, it's anever ending saga, you get into
(02:39):
that debt cycle, it's very hardto break away from it. And the
debt cycle is going to keepsucking you in. And if you go
online, they're gonna say do aconsolidation loan, that's not
going to reduce your debt,you're just rearranging your
debt, yes to the better lowerrates of interest, etc. But if
you don't get rid of thosecredit cards, you keep using
(03:01):
them, you're gonna be back in aworse place. And within a year
or two, it might take longer,but it's gonna keep getting
worse as you go through yourlife. You never got out of that
debt cycle, and you're stillstruggling. And as the deeper
you go, the more of your incomeis going to be used to repay it,
(03:23):
the less money you haveavailable to do things you want
to do in a for your monthlyexpenses. And then you start
living paycheck to paycheck. Andthen you start struggling. And
then if something bad happens,it gets even worse. I present
all this gloom and doom becausethat's what happens and happened
(03:46):
to me. I had no intention ofgoing into debt on one credit
card much less two or three andthen a couple car loans and on
and on at once. I just had somebad luck. And I every time I was
getting close to paying one offor paying one down, then
something would happen. BecauseI never had a plan. I just was
(04:09):
willy nilly like most people do.
I've just went through life. Iwas going to work I was making
my money. Now I was trying touse the money. I had my checking
account at that time to pay asmuch of my debt as possible. But
I had no plan. You're nevergonna be successful unless you
have yourself a plan in youwrite it down and you stick to
(04:29):
it. And the number one thing yougot to do, quit using credit.
Quit using your credit cards,period. Now if you've been
listening and you're trying toget your
monthly bills that you pay onthe timely monthly manner and
(04:50):
you're working towards it, youknow in order to quit using
credit you have to watch yourspending and you can't be
spending on thingsthat you're not using that
you're paying for, you know,subscriptions, and you just
can't be wasting money he got,it's hard to make money. And
it's harder to keep your ownmoney, you got to be in the
(05:12):
mindset, you want to hold on asmuch of your money as possible,
and save as much as money aspossible. So you quit using
credit, because you're in debt,you're struggling to get out of
debt. So every time you use thatcredit card, that's one step
farther away from getting itpaid off. Maybe it's 10 steps
(05:36):
away, because it's just gettingworse and worse. So quit using
credit number to pay the minimumamount on all your debt period,
by how do you pay it down, ifyou just paying the minimum
amount? Well, you're gonna getto that. But you have to do
(05:57):
that. The reason is, you want tofree up as much money to pay
your normal monthly bills,timely every month on time. So
you can get that processstarted. If you're unable to do
that, if you're already doingthat, then you take the money
that you're not spending and putit into a savings account, and
(06:21):
we're going to call it anemergency fund. Why have an
emergency fund? Well, becauseyou never know when something
bad could happen, an unforeseenexpense could pop up at any
time. If you don't plan aheadfor it, what are you gonna do,
you're gonna use your credit.
(06:44):
And if you use your credit, youcan get farther in debt, and
you're not achieving your goalof reducing your debt, you need
to have an emergency fund andstart building one emergency
fund is nothing but a savingsaccount where you go to your
bank. To start with, if youdon't have a savings account, go
(07:07):
to the same bank where you haveyour checking account, open up a
savings account, the minimummight be $50 $10. I don't know,
I think the last time I did it,a minimum for a savings account
was $50. So I put in $50. Andthen you gradually build it up.
(07:28):
Because our goal here is have aminimum of $1,000 in your
emergency fund to get started.
So what have we done? One wequit using credit to, we're
making a minimum payment. Three,we started an emergency fund.
And our goal now is to build itup to a minimum of $1,000. That
(07:53):
minimum you're never gonna gobelow. And last, some unforeseen
expense comes along, your carbreaks down it charge child has
an accident, you have anaccident, you get sick,
something unforeseen, unplanned,comes along, that's when you use
(08:16):
an emergency fund, and may notpay for 100%. But if it pays for
75% or 90%, that much closer tostand out of debt, to reduce
your debt. We're working on thatgoal. Then when you do once you
have your $1,000 The minimum andyour savings account. While you
(08:41):
keep building up this process atthe beginning is going to be
difficult. It's gonna be itmight take you two months, three
months before you could quitusing all your credit cards and
charge and stuff and gettingpaying cash for all your stuff.
He might have to use your creditcards and charge a grocery bill
(09:02):
or a gas fill up your gas tank.
But you gradually gonna start toget away from that. And that
might be probably the hardestpart of this whole process. Just
to getting that started.
We already identified we had aproblem. We already identified
(09:23):
all what your debt is we gottheir debt in order. We know we
have a mortgage, a couple carpayments, three credit cards,
personal loan, payday loan, weall got that identifier and
we're working on it. Right now.
You're just making a minimumpayment on all that debt and
you're trying to build up anemergency fund. And then when
you get that $1,000 Each keepdoing the same thing. You build
(09:46):
it keep building your emergencyfund until you have 3500 to
$4,000 Somewhere in that range.
Once you achievethat this could take you six
months or nine months at thebeginning, but it's going to
speed up over time is slowlygoing to speed up. And then it's
(10:08):
going to start speeding upfaster and faster as we go. Once
you have anywhere over $3,500,in your emergency fund, the
reason we're building that up,is because of any time during
this process, that you'rebuilding up that emergency fund,
an unforeseen event happens, youjust have that much more in your
(10:31):
emergency fund to cover it, soyou're less likely on a half to
use credit. That's the reason Ihope you follow that pretty
precisely. Once you have let'ssay you have 3800 in there, it's
the middle of the month, allyour monthly bills are pretty
(10:53):
much paid for, you have enoughcash to pay for groceries for
two more trips to the grocerystore for the to the end of the
month, maybe put gas on all yourvehicles to the end of the
month, you're sitting prettygood. And you're fairly
confident you're doing well pickone of your debts, he shouldn't
be starting on your highinterest debt. First, what ever
(11:15):
the highest rate of interest,whichever debt, generally
speaking, it would be a creditcard. But if you have a payday
loan, it might be that if youhave a personal loan, it could
be that if you have one of thoseitems, high rate of interest
that has a smaller balance, thatyou be able to get close to
(11:36):
being paid off, or even paidoff, I'd be better do that one
first, then after you get thatfirst one paid off, if it's a
credit card, do not cancel thecard, you're gonna keep it
because it's going to help yourcredit score. And maybe in the
future, we might be able to usethat card, again, to our
(11:59):
advantage. So you get it paiddown, you got one less debt.
After that, you want to focus onthe highest rate of interest,
only what is I have that I'mpaying the most interest on. And
you see, cuz you're, now you gotyour savings account emergency
(12:24):
fund was at 3800, it's now downto
1000. So you applied 2800, youdid whatever you did, you're
gonna start building that backup again,
let's assume you paid somethingoff, so you got one less debt,
it's gonna come up a little bitfaster, because that's one less
(12:44):
minimum payment you're making,and might have been $55 a month,
or could have been $35 a month.
But that's that much more,that's gonna go into the savings
account.
So now we want to focus, startbuilding it again. Now maybe if
it took you nine months, thefirst time, it might be seven
(13:05):
months the second time. Soseveral months down the road.
Now this all could be faster, itall depends on your income, your
monthly expenses, how much debtyou got building up, and you
decided to go to the full 4000.
So you had 3000 to apply. So youdo that, it's some time later,
you pick your highest rate ofinterest, and you apply it,
(13:29):
maybe you paid off a third ofit, maybe you paid off half of
it, whatever, you paid it downby three grand. So that means
that interest that you're payingis gonna significantly drop on
that card or that loan, or thatcredit, whatever it is, and your
minimum payments gonna go down.
(13:52):
So you're just gonna make theminimum payment. So now you have
even a little bit more money,that's gonna build up that
savings account a little bitfaster. And you keep doing this
over over and over. You'rewatching your spending.
You're paying for everythingmonth to month. You're watching
your spending, you're paying foreverything month to month on a
(14:14):
timely basis. You're building upyour savings account, you're
looking for things to cancel anddo away with to get rid of so
you don't have that expense hereongoing checking your cell phone
service, your cable service,your internet service.
(14:35):
Trying to get the best dealspossible. You doing that all the
time. You're consistentlylooking for ways does not spend
money, ways to save money forthe reason of paying down this
debt. I'm not saying that you'regonna sacrifice maybe didn't cut
back. If you were somebody thatwent out to dinner five times a
(14:58):
week. Do it oneSo week, wherever you can say
money either means you're gonnabe able to build your emergency
fund faster, which means you'regonna be better be able to pay
off your debt sooner. Andhopefully, you're gonna be
building new habits, speciallyspending habits, you got to
(15:21):
watch got to think, ask yourselfbefore you buy anything that's
cost more than $100. That'ssomething you usually don't buy.
That's a tool,a new computer, a new phone,
smartphone, whatever it is, doyou really need it? Can you get
(15:42):
by without buying it for anotheryear? Or two years? Can you? Is
it worth your while? Do youreally want to spend them money?
These are things you always gotto be asking yourself, you got
to be looking for ways to reduceyour spending, thus increase
your savings, thus increasingthe rate of paying off your debt
(16:05):
at all effects each other, Icould just say, make more money,
and then pay off your debtfaster. Well, that's true. But
that's hard for a lot of peopleto do. If you can do that.
Basically, when I did, I changedjobs got a better job, and then
more money. And that reallyhelped a lot. I paid off it was
(16:27):
about $130,000. In three yearsand eight months, it was three
or four credit cards, two orthree car loans. My line of
credit on my home and my firstmortgage, I had some of that
somewhat under control, before Igot serious and start really
doing this plan. But it was thisplan that propelled me much
(16:53):
faster, and got everything undercontrol, gave me some focus,
quit using credit, make theminimum payment, get your
savings accounts build up to aminimum of $1,000. He builds it
up until you have three to 4000apply it to one debt only pay
(17:13):
off that debt repeat over andover. And as you pay him off, it
speeds up towards the end, I wasapplying three and $4,000 to my
mortgage, like every othermonth.
(17:34):
Like every month, towards theend, I was making my monthly
payment. Two weeks later, I wasputting an extra three grand on
it. And that really goes quick,especially when you didn't have
much left on the balance. Beback in one moment with my final
thoughts.
If you're interested andlearning about an online
(17:54):
software that helped myself getout of debt,
it does tracking, budgeting, andkeeps track of all your assets
and all your debt. And eventells you how much and when to
transfer money into your savingsaccount. And how much and when
to transfer money to your debtand which debts to pay off and
(18:18):
order. First. It's not cheap.
It's a one time payment. But itwill definitely be an investment
something and yourself and aninvestment in your personal
financial life. If you'reinterested, send me an email at
reduced that increasewealth@gmail.com. And I'll send
(18:39):
you the information about thisonline software that worked
great for me. Before you getthis gone, II got to be tracking
your spending in annual income.
And you need to have yourcontrol center or do a monthly
(19:01):
budget. I call it a controlcenter. And you update it every
pay cycle every week. If you'repaid weekly. Every time you get
paid, you got to make sure it'supdated. Because it's there to
help you identify a potentialupcoming problem. If you can
(19:22):
catch the problem before ithappens, you can minimize it. If
you're doing tracking, you needto update it on a regular basis.
If you go to the grocery storein a gas in the car and pay a
few bills every Saturday, thenyou update it every Saturday. If
(19:42):
you go out on Wednesday and dosome spending, update it have
your tracking software up todate at all times. That way you
know how much is in yourchecking account. How much you
have on your credit cardcourses.
If you're doing the debtreduction plan, you shouldn't be
using those credit cards. Butyou have an idea how much money
(20:06):
is available to pay for upcomingexpenses. It's looking ahead and
planning for the future. Andthis gonna help you get rid of
your debt. And this article fromthe balances debt elimination
tips, you get, I get almost tothe end of the article before it
(20:27):
says, make sure you have anemergency fund in place before
diverting all extra funds todebt repayment, that's at the
end of the article. And that wasstep three, quit using credit,
make the minimum payment, createemergency fund, step three. And
they're telling you make sureyou have an emergency fund in
(20:48):
place before diverting all extrafunds to the debt repayment. At
the end of the article, it's anextra tip, and it should be part
of your plan. As you pay offaccounts start to pay towards
other debt. Well, that's kind ofsome common sense. If you pay it
one off how you're gonna notstart paying towards the other
(21:09):
member, you quit using credit.
So once you get paid off, itshould stay at zero,
it shouldn't have any morepayments applied to it.
Keep an eye on your credit scoreas you begin paying down debt.
While yes, you want to knowwatching your credit score
increase can be an excellentmotivation. Yes, if you pay off
(21:30):
some credit cards and you don'tclose them or cancel on your
credit rating will come up alittle bit. As the less debt you
have, your income to debt ratiois gonna be improved, thus your
credit score is gonna improve ifyour income changes during your
debt repayment plan. Be sure toreevaluate your budget. That's
(21:52):
common sense to me. So what areyou going to do if your income
goes up?
Most likely your rent ormortgage payment and change your
car payment probably neverchange or what you eat that
changing, your utilities are notgoing to change because you have
more income, put it in youremergency fund, and you're gonna
(22:13):
increase the emergency fundfaster, then you're gonna pay
off your debt quicker. Afteryour debts paid off, continue to
utilize your budget to help keepyourself out of debt. If you
don't stop doing once your debtspaid off, let's say that you're
just at first saying I want topay off my credit cards. Well,
(22:33):
that's fine. That's your firstgoal. Once you get that done,
would you have other debt? Well,I like to get my cars paid off,
or at least pay down. So when Itrade a man, I won't have to
refinance the unpaid part intomy new loan.
Because a lot of people do that.
And that that's a no, no, youdon't ever want to do that.
(22:56):
Okay, once you get that goaldone, well, maybe I need to pay
down my mortgage, I have thislow rate of interest, it's
relatively cheap money. And I'mpaying 3% on a 30 year loan that
is pretty good.
Well, this ply a little extra,so I don't have to pay this for
(23:18):
30 years. So maybe if I retire alittle bit early, I'll be able
to pay it off maybe a year ortwo sooner, whatever it may be,
I just want to pay off my lineof credit. Okay, do that. Maybe
I just want to give a littlemore equity build up my home. So
if I would sell the house andmove out have more money to put
(23:40):
down on my next place? Yes, whenthose things are good. Whether
or not you pay it off, it's upto you depending on your your
rate of interest, how long youhave left on the loan, what your
income situation may be. It allvaries by individual. I can't
(24:01):
tell you what to do. Keep thehigh interest rate, credit,
under control and out of yourlife. And you'd be much happier
you did so
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