Thursday, February 7, 2008

The Debt Monkey

Do commercials drive you nuts?
There is one right now where a woman signs papers
at a financial institution and instantly gets a
monkey on her back.
This monkey represents the
pressure and discomfort of living with debt.

Our family has experienced
the debt monkey.
We are on a course to remove him
permanantly from our backs.

The trick is always to accomplish
this while at the same time not losing
the value of saving over the long term.

Many times I have heard people say,
I will get that emergency fund started
as soon as my debts are paid off.
Then I will begin saving for my future.

This makes me sad!

You see,
in procrastinating on saving these dear people
are losing out on years of growth on their own money.
Money put to work in a growth account will actually
double several times if you are getting a
good return and have enough time.
The money will make money all by itself.

This cannot happen if every extra penny
you have is going toward paying down debt.

However, paying down debt is

So, here is one strategy that
you could employ.

Take all of your debt accounts
and review them. They might be car payments,
credit cards, home improvement loans,
furniture or flooring loans.
Include your mortgage.
Become familiar with the payments,
interest rate you are paying and any
other unique or important details.
It is amazing how many people don't really
know what they pay each month or
how their debt accounts are set up.
Do the research.
It will help you.

If it makes sense to move something
to a lower interest rate.
Do that now.

Your next step is simple.
Set an amount that you are going to
pay on debt each month.
Add up all of the
minimum payments that are required.
If you can afford an extra amount
decide what that will be.
Be realistic!

Maybe you are already paying
extra on one or more of your debt bills.
Great...but strategize with me here for a minute.

Which one of your bills is going to be paid off first?

Take any extra money and put it onto that bill only!

You are making minimum payments on all other accounts.

When bill number one is paid off
you will take the amount that you were paying to that bill
and add it to the minimum payment of bill number two
in line to get paid off.

You are looking at the quickest payoffs not
interest rate at this point.

And so will be amazed at how
much faster you knock off the debt.

You are always paying the same amount each
month no matter what your minimum payment says.
You'll always be paying extra on one bill.
This amount will grow as the car gets
paid off or that credit card is done.

Note: This works best if you only
put things on the credit cards that you can
actually pay for at the end of the month.
A good trick here is to write it out of your checkbook
every time you charge as if you had written the check already.

At the same time you should continue
to put money aside for your future.
If you can, maximize your IRA's and
make sure you are getting the most matching
from any available employer plan.

At the end of the next 15-20 years
wouldn't it feel great to not just be debt free
but to also have that nest egg that
can be earning money on itself?

So often, we lose mega bucks by
not having a plan or by procrastinating
until that next thing happens.

I am guilty of this, as well.
It just doesn't have to be this way.

Hope I don't sound too preachy.
I just want all of my friends to know
there is a way to save and reduce debt
at the same time.

It doesn't hurt too much...

Blessings on this day!


Anonymous said...

Dave Ramsey comes to mind. :o)

We celebrated Christmas w/o adding to debt. Cash only.

We're saving up (and selling things) to pay off more debt and to add to our vacation fund.

Groceries and spending $ are on a cash basis. When it's's gone.

Excellent points you're making...keep it up as they're great reminders for me personally!

Alicia said...

Thanks for the all points Becky, you dont sound preachy so dont worry about it! I am happy to say that my husband and I are debt FREE! I know having lots of debt can add to marraige stress also. My husband was smart and paid for his schooling out of his wasnt easy but he did it without loans thus brining no loans into our marriage! We are also ones who only spend what we have and dont do the credit card thing of not being able to pay it back. We nearly save a whole paycheck every month just for savings. I think we are doing pretty well! I love your tips!