Debt-Free Forever by Gail Vaz-Oxlade (the beginning after the end read novel .TXT) 📕

you want a dead-on amount for your budget, you can find an online calculator that can do the math for you. For now, work through this so that you understand what’s going on.

Add up your Monthly Payments. That’s a crapload of money, isn’t it? But that’s what you’re going to have to come up with if you want to be consumer debt-free in three years or less. It may take you a minute or seven to wrap your head around your new debt repayment number.

If you were not yet convinced of how important it is to get your interest rates down as low as possible, looking at a big, fat repayment amount may be just the motivation you need to get busy reducing your interest costs. If you have tried your best and couldn’t get your lenders to move, couldn’t consolidate, or couldn’t do a balance transfer, you’ll just have to suck it up and work with what you have. Six months of steady payments against your debt should go a long way to shining up your credit score, at which point you can call and negotiate, do a balance transfer, or get a consolidation loan to reduce your costs.

If you’ve already got your rates down as low as they will go, you’ll have to find a way to make the plan work. That may mean cutting back even further on your expenses or getting another job or two to come up with the extra money you need for debt repayment. If you’re serious about being debt-free, you’ll do whatever it takes!

SNOWBALLING YOUR PAYMENTS

And now we come to the best strategy for taking those payments and making them really work for you if you haven’t consolidated or refinanced your home. You know how much you must put toward debt repayment to get out of the hole. But how you apply those payments makes all the difference in the world. The strategy is called Snowballing, and it involves putting your money where it’ll do the most good. Here’s how it works:

1.Having figured out how much your monthly debt repayment amount must be—in our example, it’s a whopping $1,068.95—put that amount into your budget.

2.You use as much as you need to make the minimum payments on all but your most expensive debt. In our example, it would take $846 a month to make the minimum payments on all the debt. It is very important that you keep up with all your minimum payments to protect your credit history from becoming bruised. Even one late payment could reduce your credit score and result in higher interest rates. So make sure you make all your minimum payments on time every month.

3.Take all the rest ($1,068.95 – $846.00 = $222.95) and apply it against the debt with the highest interest rate. In the case of our $700 department store card, the payment of $250.95 (the minimum payment of $28 + the $222.95 we are snowballing) means it will take less than three months to get the balance paid off.

4. Once the balance on your most expensive debt is paid off, start all over, applying the amount above the minimum payments to the next most expensive debt. The total debt repayment amount does not decrease until all the debt is gone, so don’t pat yourself on the back and go shopping. You’ve still got a long way to go.

GAIL’S TIPS

I know some people like to start with their smallest debt because they find it very “motivational” to get their small debts paid off. It’s that instant gratification thing that got most people into debt in the first place. Hunkering down to become debt-free forever isn’t just about “feeling good,” it’s about becoming debt-free as fast as possible. Paying off your most expensive debt first is the most efficient way to become debt-free. And when you’re debt-free, you’ll feel great!

Now you’re going to snowball the amount you were paying on the first debt you’ve just vanquished and put it into the payment against the next debt dragon you must face. On our sample list it’s the $1,200 owed on the department store credit card. Add the amount for the minimum payment for that debt ($48) to the amount you were using to repay the previous debt ($250.95), and you’ll have the amount ($48.00 + $250.95 = $298.95) that you’ll be using to pay off the $1,200 department store credit card balance. It’ll take about four months to slay the second debt dragon ($1,200.00 ÷ $298.95 = 4.0 months). As each debt is paid off, you continue to snowball the amount from the debt just paid off by adding it to the minimum payment on the next most expensive debt on your list.

Do I actually have to say that you should not be using your credit for anything at all at this point. NOTHING! There is no good reason to spend on credit if you’re trying to get to debt-free. If you’re still using your credit, you’re not really serious about this. If you are serious, you’ve chopped up your cards so you can’t use them, and you’re living within your means.

DON’T PROCRASTINATE!

If you have to wait until your next pay period to get started, or until you know you have some extra money, or until [insert your pathetic excuse here], you’re procrastinating. How’s that working for ya? Any closer to being debt-free?

If you want to be debt-free you must start TODAY. “But I don’t have the money,” you say. Well, then, either you’ll have to find a way to make more money or use the money you do have in a smarter way. Go over your budget with a paring knife and trim out all the non-essentials that are sucking away your money.

Right now. I mean it. Grab your budget and start trimming your expenses.

How much did you come up with?

Do it again.

Now how much do you have?

Do it again.

And again.

You want your budget to be so tight it squeaks.