How to Be Debt Free- Three Step Plan

Money paid in interest is money thrown away! Don’t give your hard-earned cash to make the financial institutions rich. Here is a simple plan shown to me by an accountant, when I was young. It worked. I paid off a 30 year note in 9.5 years once I set my mind to it.

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(1) Write down your debts, from the smallest to the largest, along with the monthly payments. (Do not include utility bills. Unlike “debts” utility bills can not be “paid off”.)

Example:

  •  Credit card     $40.00 per month
  •  Automobile  $200.00 per month
  •  House           $400.00 per month

(2) Determine how much extra you can pay each month, while continuing to pay each bill monthly, for the agreed amount. (This may mean taking your own canned pop instead of buying it at work. Or taking your lunch instead of going out every day, look for discounts, on everything.   15 minutes to clip coupons can save 10 percent ($10 on a $100 tab).That’s $40.00 per hour according to a Tulsa World news article!  

(3) Let’s assume you can come up with an extra $100.00 per month.*

Simply,  apply the extra $100.00 each month to the first bill (the credit card) along with your regular payment of $40.00. Be sure and specify that the extra $100.00 per month is “applied to the principal only”. Do this each month until the first debt is paid in full.

Once the first bill is paid off,  $140.00 that you were paying on the first debt is  “applied to  the principal” of the second bill. In other words, at this point you will be paying a total of $340.00 on the second debt (the automobile).

When the second bill has been paid in full, apply the $ 340.00 you have been paying toward the second debt, to the principle of the third debt. Your payment on the third bill (the house) would  go from $400.00 per month to $740.00 per month.

If you follow this plan faithfully on all your obligations, it will not be long before you are completely debt free.

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 Amortization calculator   shows impact of extra mortgage payments on an amortization table schedule.

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Some people were so impressed with what they had just done that once the bills were all paid they took the extra money they had each month  and socked it into a savings account for awhile, to save for the next purchase they wanted to make.

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*Here are some ways that might help you find some extra money:

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This entry was posted in Ask the Readers, Baby Boomers, Coupons, Finances, Great Deals, Great ideas!, Money Found, Senior Citizens, Students, Tulsa, USN. Bookmark the permalink.

2 Responses to How to Be Debt Free- Three Step Plan

  1. Pingback: “Senior Citizens” discounts, “Baby Boomer” Discounts and More | Tulsage.com

  2. Jan says:

    The debt avalanche approach: prioritizing their debts with the highest interest rates. Then put the majority of your monthly payments toward the credit card balance with the highest interest rate, and paying the minimum amounts on the others so you aren’t charged late fees: You’ll feel great watching your balances disappear one by one. And record-keeping will be easier.

    P.S. Transfer Your Debt to Low-Interest Cards. If you must use a credit card, take advantage of the deals now on the market. Some are offering very low interest rates or have introductory zero percent APRs that last for historically long periods of time—up to 18 months in some cases. If you’re making a big purchase or doing a balance transfer, plan to pay it off within that interest-free introductory period. Find cards and compare rates at CardHub.com or Credit Karma.

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