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.


(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”.)


  •  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.


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

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.


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

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.

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

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

  2. Jan says:

    Some say why not 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.
    ANSWER: A paper published in the Journal of Marketing Research found that people are driven to attain small goals. This means people are psychologically-driven to pay off small debts first even if others have higher interest rates. People run up huge bills on their credit cards and while paying double-digit rates to the credit companies, turn their focus to paying other bills.

    Dave Ramsey says to open all the unopened bills, throw away any duplicates and keep only the most recent statements and notices. The unknown in always scarier than the known, so facing the bills and cutting that stack in half right off the bat will help reduce a lot of your initial anxiety.
    Next, list all the debts you owe, from smallest to largest, making one column for the payoff balance, one column for the amount you need to get current on that debt, and on e column for the single payment amount when you get current. Total each column–the payoff balance, the amount to get current, and the single payment. (It won’t be as bad as you think.)
    Make a monthly budget, Prioritize your needs, starting with food, utilities, house payments and transportation. When it comes to your debts, pay as much as you can on the smallest one while making minimum payments on all the others. Doing it this way you will feel good about the progress you are making.

    P.S. Thinking of transferring Your Debt to Low-Interest Cards? Careful. There are fees and also they don’t approve everyone! 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 or Credit Karma.

  3. Billiam says:

    Say you have four debts. Add up the minimum payment due on each debt per month.
    Line up your debts according to size, putting the one with the shortest pay-off time at the top and the one with the longest term at the bottom.

    Pay off your lowest credit card balance first. As one debt is paid off, take the money you were paying toward the paid-off debt, and apply it to the regular payment of the next debt and then use the same process with the debt after that until the entire debt is paid in full.

    P.S check out this blog

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