"A Penny Saved Is A Penny Earned"

Friday, April 24, 2009

Debt Elimination Tips

Debt Elimination Calendar

Debt is the biggest hindrance to wealth. Debt is someone else's claim on your future. Debt is really not conducive to living a frugal lifestyle. So how do we get rid of it?

A debt elimination calendar is a plan to eliminate your debt in a systematic and progressive way. Some people call it snowballing your debt (as a snowball rolls down hill it gets bigger and bigger), where you pay the minimum payment on all debts and then as one debt is paid off, you then apply the payment of that debt to the next one and so forth, until all are paid off (a snowball gaining momentum).

Now there are some tricks to this method, some people say pay off the highest interest debt first, but the method that seems to work better is to pay the debt with the lowest amount of total debt. That way you gain traction or success sooner and we all know that success bread success. You want to achieve momentum for that snowball.

Next, if you have any extra funds after you set your budget or you get that tax return or gift money apply it to that first debt and just keep paying the minimum on the rest. Then when you have that first debt eliminated, take the first debt payment and apply it to the next debt in line, thereby increasing your payment or snowballing.

Now, lets take a look at how to set up a debt elimination calendar or snowballing:

credit Card/Med./Car/Student
Jan. $100/ $50/ $200/ $300

Feb. $100/ $50/ $200/ $300

Mar. $100/ $50/ $200/ $300

Apr. $ ---/ $150/ $200/ $300

May $ ---/ $150/ $200/ $300

Jun. $ ---/ $150/ $200/ $300

July $ ---/ $ ----/ $350/ $300

Aug. $ ---/ $ ----/ $350/ $300

Sep. $ ---/ $ ----/ $350/ $300

Oct. $ ---/ $ ----/ $ -----/ $650

Nov. $ ---/ $ ----/ $ -----/ $650

Dec. $ ---/ $ ----/ $ -----/ $650

NOTE: On a piece of paper write across the top each creditor equally space, starting in order with the lowest amount owed to the highest amount owed. Down the side list out the months. Draw vertical lines between each creditor creating vertical columns for each. Now, go down each column and list the monthly payment for each creditor, until the loan is repaid. Finally, after the first creditor is paid off, add the payment from the first column to the second column and then when that's paid off and both payments to the next and next and so forth... until all loans are paid off.

Less is more,


1 comment:

  1. Nice post. I just want to add something. If we really want to get rid of debt, we have to change our think first about spending then everything will be solved with time. We have to admit that being in debt is very easy but being out of it is so hard. That's why we need more time to eliminate our debt. So, put a limit on your spending habits and that's the best key helping you to eliminate your debt faster.