Pay Off Debt In 7 Steps And Still Maintain Your Lifestyle
Pay Off Debt In 7 Steps And Still Maintain Your Lifestyle
1) Create your Money List aka a quick budget. Before you can dig your way out of debt, you need to know where you currently stand financially. This process should take you no more than 30 minutes.A Money List in 3 steps:
a. List EVERYTHING you spend money on (i.e. bills, entertainment, grooming, the kids...everything)
b. Write down how much each thing on your list costs you monthly. Unsure? Overestimate.
c. Add up your monthly spending and subtract it from your monthly, take-home pay.
Step 2) List all of your debt from lowest to highest.FYI: You might need a box of tissues handy. Looking at your debt can be a bit depressing, but cheer-up chuck. You're only 5 steps away from getting your situation under control. Step 3) Figure out how much money you can squeeze from your Money List, for your pay off debt plan. Good news! There's no need to change your lifestyle, unless your budget is wildly out of control (but that's another post). There are ways to free-up cash, without making dramatic changes to the way you live.First, I suggest doing things like: reduce your cable (ask your provider to get rid of the channels you don't watch), cancel magazine subscriptions (ehm...the library), cancel a gym membership (come on, you're not using it), and call your service providers and ask for discounts (i.e.: car insurance, cell, utilities). This works! If they claim they can't help you, use the magic words, "Can you please transfer me to your Retention Department?". There'salways a deal to be made. Step 4) Pay only the minimum amount required on all of your debt, with the exception of the one debt you are trying to pay off. This should be the debt with the lowest amount owed. I suggest paying the lowest debt off first vs. the debt with the highest interest rate, because when you pay off debt quickly, having early success will trigger an emotional reaction from you (happy-dancing), and that will enable you to feel encouraged and will motivate you to continue with your pay off debt plan. Step 5) Pay the minimum and the money you squeezed from your Money List (step 3) for debt reduction, toward the first (lowest) debt on your list. Make sure to automate the payments. This will leave you with less work and tallying to do each month. Remember to reset your automation when you move on to the next debt on your list. Step 6) After paying off the first debt, apply ALL of the money you used each month to pay off debt #1 and put it towards the next debt on your list. This means that the minimum amount from the first debt, the minimum from the second and the extra money that you found in your Money List, will be applied toward the second debt on your list. Don't forget; automate this new payment; doing so will help you stick to your pay off debt plan. Haven't you heard? Automation is the new discipline. Step 7) Pay off debt #2, then transfer ALL of the money you were paying each month to the second debt and apply it towards the third debt, along with its minimum. This means the third debt will be getting: the first debt's minimum, the second debt's minimum, its own minimum, plus the extra money you found in your Money List. Once again...AUTOMATE this new payment and continue with the cycle until you're debt free! The AWESOME thing about this pay off debt plan is that, as you begin to pay off debt with higher balances, you'll have larger amounts of money to pay them. The reason is, you'll have "collected" all of the minimums from the previous lower debts, and will be using them along with the money found in your Money List to pay the higher debts off.
A little extra financial help: After using this pay off debt system, continue to make "payments" to yourself and finance your savings, retirement and investment goals. BOOM!SIDEBAR: Give your pay off debt plan a Turbo Boost!Use Unexpected Money (UM) to help pay off the main debt you're focused on. UM is any money received outside of your primary source of income, a.k.a. your J-O-B.Examples of "Unexpected Money" are: a raise, loan repayment (to you), a refund (from taxes or from returning unwanted items), rebates (do you fill out and mail in those forms? I do!), found money, gifted money (happy birthday!). If you purchase an item that is on sale but don't realize it until you get to the cashier, the money you save is "Unexpected Money". You already planned to spend the money on the item, so you won't miss it if you use it for your debt reduction instead. If you have generous friends who occasionally surprise and treat you by paying for your meal, the money you were going to pay is also Unexpected Money. Cha-ching! Are you starting to see the possibilities here?In a nutshell, "Unexpected Money" or UM, is any money that you did not expect to receive or save. It's money that does not normally contribute to your day-to-day living expenses. So, it's therefore not calculated into your Money List you now have. You do have a new Money List, right? (step 1)The best way to use UM is immediately. As soon as you encounter UM, go online and make an additional bill payment in the amount of the UM, to the lowest debt you're working on. There is no amount too small and it really adds up! Soooo, now that you've got your pay off debt plan in place, do you feel a little better?
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Author:Kim Guest Phone: 864-918-0066 Dated: May 1st 2014 Views: 1,990 About Kim: ...
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