Over the years I've evaluated many debt elimination systems. The best one I've ever seen is also one of the simplest. So let me introduce you to...
The Best Iron-Clad, No-Holds-Barred, Fool-Proof, No-Fine-Print, Debt Elimination System Ever Developed - Bar None
Just follow the following 10 steps...
1. Go back one year and record all of your expenses. You need to go back that far to make sure you account for seasonal spending. Check bank statements, cancelled checks, credit card statements, anything your spending money on.
Carry a little notebook with you for a couple a weeks and record anything your spending cash on. For example, that cup of Starbucks coffee that you can't seem to do with out. You'll be amazed at how much is falling through the cracks on that kind of stuff. I realize that this part is a pain. But the payoff will be tremendous.
2. Divide your expenses by 12 to get your average monthly expenses.
3. List the balance owed for all of your debts, including your mortgage. If you can't find it from your records, call your creditors and lenders and ask them.
4. List the minimum monthly payment for all of your debts. What is the total of all your minimum monthly payments? Let's say, for example purposes, the total is $2,000 per month.
5. Divide the balance owed by the minimum monthly payment for each debt. This will give you the number of months it will take to pay off each debt assuming the minimum monthly payment.
6. Rank your debts by how many months it will take to pay off each one. The fewest number of months all the way down to the most number of months.
7. Prioritize your debts by the number of months it will take to pay off each one (again, assuming the minimum monthly payment). Your highest priority debt is the one that you can pay off in the fewest number of months. Your lowest priority debt is the one that will take you the most number of months. That will probably be your mortgage.
8. Okay, in step Number 4, you totaled your monthly payments on your existing debts. We are using as an example a total of $2,000. Take 10% of that total, or $200.
9. Re-direct $200 that you are already spending on something else to apply to getting out of debt. Don't tell me that you can't find the $200 because you can. I've worked with thousands of people in helping them improve their financial lives and I know you can do it. It may come from $20 here, $25 there, $30 from this other thing, but it's there. We all spend more than we think we do.
10. Apply the $200 to your highest priority debt. It will be the one that you can pay off in the fewest number of months. For example, if the minimum monthly payment on your highest priority debt is $200, you are now paying $400 per month toward paying off that debt.
Once that debt is paid off, you now have $400 a month to apply to the second highest priority debt. For example, let's say the minimum monthly payment for your second highest priority debt is $250. You are now paying $650 a month on that debt ($250 + $400).
When that debt is paid off you have $650 a month to apply to the next highest priority debt. You keep doing that until your completely out of debt including your mortgage.
The beauty of this system is that you'll be totally debt-free in just a few years and the only extra money that you committed to paying off your debts is the original $200 that you applied to your highest priority debt.
Also, you now have $2,200 a month ($2,000 minumum payments on all your debts plus the $200 extra commitment) that you now can apply to investments. And it's those investments that are going to make you financially free.
Visit www.money-management-wisdom.com>http://Money-Management-Wisdom.com for your common-sense guide to debt-free financial freedom.
Copyright 2005
About the Author
Larry Holmes is the owner of Money-Management-Wisdom.com and a Wall Street trained financial advisor with over 30 years of experience. He is also an accomplished public speaker who has presented well over 1,200 financial seminars and keynote addresses to audiences throughout the United States and the United Kingdom.