|
Author: Ian McAllister Article source: http://loans.kozarchuk.com/. Used with author's permission.
To consolidate debt is a great idea with a trap built into it. The technique described here helps everyone in debt, but if you have an ongoing credit card debt you desperately need this article.
-------------------
* Part I Don't get into debt. Ways to avoid it.
* Part II The big advantages of student loan consolidation
* Part III This article
--------
The Trap
--------
When you consolidate your debt, will you celebrate your freedom from credit card debt by going out and buying more on your credit card? Do you really want to live your life in debt, or would you prefer to take charge of your finances?
It's too easy to consolidate debt. If it hurts to get rid of your credit card debt you'll find it easier to resist getting into debt again.
Are you getting married? If your partner likes to live in debt, and you want to become a millionaire, who is going to give way? Most divorces are caused by money arguments. Discuss it before you marry.
You should consolidate debt if you have no ongoing credit card debt. The trouble when you consolidate debt is that the whole thing loses immediacy when you have thirty years to repay.
--------
List your debts
--------
Make a table showing all your debts, the amount still owing and how much you pay per month. Call the last column "Damage" and calculate it by multiplying your repayments by a hundred and dividing by the amount that you owe. The larger the damage, the more harm it is doing to your finances.
Imagine you had a fictitious list like this
Mortgage , $100000 , $500 , 0.5
College loan , $50000 , $333 , 0.66
Personal loan , $10000 , $100 , 1
Car loan , $10000 , $360 , 3.6
Visa Card , $4000 , $250 , 6.25
Master Card , $2000 , $200 , 10
You should realise if you consolidate debt then nearly all your monthly payments will be interest, so your debt won't shrink much. When you pay an extra $100 your debt shrinks by that amount, and you won't keep paying interest on it either.
--------
List your surplus
--------
Using the methods in part 1 to earn and economise. Work out your surplus each month after all your expenses. Suppose you can spare an extra $456 each month. If there are two of you working, try to use all of one income to get out of debt, because you won't always have both incomes.
See which damage figure is highest. That is the haemorrhage you must stanch first. In this example it is your Master Card.
Add your $456 to your monthly payment (mostly interest) of $200. You will shrink your debt by more than $456 because of paying less interest. You'll have smashed that debt in about three months.
Now your self-discipline comes into play. Don't go out on an expensive celebration! After 3 months you'll be starting to build the financial discipline to make you a millionaire.
You've been paying $656 per month that is now surplus, so you add it to your visa account. That makes your repayments $906 each month. You'll get rid of your Visa debt in a little over four months.
Now you can pay princely sum of $906 + $ 360 = $1266 per month on your car loan winning free in less than eight months... quite a lot less because of shrinking interest payments.
To cut a long story short, when you start to concentrate on your mortgage you'll have $1266 + $100 + $333 = $1699 to add to your mortgage repayment of $500 per month.
When you start making repayments of $2.2K /month your twenty year mortgage will suddenly shrink to less than four years. You'll have everything paid off before your first child is ten years old.
--------
Is it worth the effort?
--------
You may think that the big benefit is freedom from debt. The biggest benefit is the mindset that you've developed as you escaped from debt. You are now in charge of your finances... not letting the loan parasites continue to leech you of all your money.
But it gets better. An Australian kid used the above method to get out of hundreds of thousands of dollars of debt, then became a millionaire while still in his twenties. He no longer needs to work, but he has a hobby of showing people how to become millionaires.
There's just one problem. He isn't interested in helping people who can't save up $20 thousand to invest, because he says they aren't trying very hard. Now if you take your $2.2 thousand, and start saving for $20K that will take you less than ten months.
He says that mindset is everything. Now you have the right mindset and have saved up $20K... Get more information before you start building your millions. Get more information before you start building your millions. See parts i and ii about debt consolidation.
Better than student loans
Consolidate debt.
Unemployment Blues: Staying Afloat
Five strategies are outlined to allow the long-term unemployed to stay afloat while searching for work.
Casino Food 101
Over the years, the various gambling games and the gambling joints or the casinos have undergone a change, making the experience riskier, adventurous and uniqu...
Brain Diet : Right Diet prevents Memory Loss
These days, when people have become so conscious about what they eat and how it affects their body, they don't realize that eating same food helps their brain t...
Your Dating Comfort Zone And How To Bust Out Of It
Is your love life in the dating doldrums? Get the wind back in your sails by expanding your dating comfort zone.
Pitfalls To Avoid In Being A Successful MLM Distributor
You don't need me to tell you that network marketing is hard work, but here are a few pitfalls to avoid on your path to success. Read on...
Profiting From Writting Your Own Ebook
As you might have heard, the Internet is all about information. Millions of people logon to the Internet each day searching for information. They're searching f...
Nine Advance Networking Skills for Seasoned Networkers
Networking requires finesse, being organized, efficient, and
on your toes. It also requires follow-up. Marketing
Master, Catherine Franz, shares nine techniqu...
Why Should Your Business Go O.N.L.I.N.E.
What's so great about putting your business online? Discover some of the precious benefits the Internet offers personal service providers like fitness, yoga & P...
So How Far Have We Come? Here are some of the 2001 Anti Terrorist Projects
How much safer are we now? It is a fair question to ask since we have spent and over spent to protect our people. We have deficit spent and that is also an issu...
High Search Engine Rankings - A Long Term Strategy
Search Engine Optimization is becoming more and more less predictable. The search engines are making changes to how they rank websites. A successful website tha...
Who Else Wants Their Share of Residual Income Without Having To Go MLM?
I know many people, when they hear the word "residual", they have a bad taste in their mouth, mostly because they have tried and failed big time in MLM, where t...
Client Service as a Competitive Advantage
As someone who has been heavily involved facilitating strategic planning processes with organizations during the last 15+ years, I often find it somewhat amusin...
The Real Estate Market In Spain: Making Profits Out Of Sand
Real estate in Spain continues to be an excellent Investment, with steadily rising prices and continued development in many areas of the mainland and the island...
Kick-Starting Body Copy
Several correspondents to our newsletter, AdBriefing, say that they are having trouble writing body copy for ads. Their problem seems to be the age-old one of h...
Lima, City with the Stretched out Wings [In English and Spanish]
A lovely poem of a lovely city, Lima, Peru
How To Stop Having Problems
If you are like me you have probably lost a lot of sleep
over the many problems that arise in your life. Sometimes,
the problem seems too huge. I become immob...
3 Pervasive Phishing Scams
Have you been phished? If so, you are not alone. The pervasiveness of these types of frauds warrants a strong reminder to email users, which is nearly everyone ...
Developing a POWERFUL 30-Second Elevator Speech That Could Double Your Business
When someone asks you what you do, or when you've been given an opportunity to introduce yourself at a meeting, most people respond by telling people about thei...
Closing the Sale - It Doesnt Have To Be Uncomfortable
The reason people find it difficult is that they hate the word "no" or "I don't want to do it" or even - "I'll think about it." We take it as rejection and most...
The Problem With Technology At The Point Of Sale In Financial Services
Using point of sale presentations in a sales environment can be a costly and useless exercise without following a few simple rules...
Lighting Up a Seniors Life - Baby Boomer Alert!
Lighting for seniors requires attention to some specific details. When planning a lighting design for aging baby boomers we want to provide both adequate light ...
Diabetic Complications - Can Benfotiamine Help Prevent Them?
Diabetic complications contribute too many life threatening diseases globally. The root cause of diabetic complications is elevated glucose levels which contri...
21 Search Engine Terms Every Web Marketer Should Know Part 1
1. Search Engine - Is a database of web sites that is ranked according to the computerized criteria that the programmers decide upon called an algorithm. Variou...
Dog Health: About Worms and Their Side Effects
Your dog's health is a very important part of overall care, and when you have a dog: Worms are a common problem. Puppies tend to get worms more often than grown...
|
Print this page