Debt Free Map

Hello everyone, I would like to share a great strategy to become debt free. By following  this steps you will start building a better spending habit and gain money management skills. This is critical when you need to come out of debt and the reason i say this is cause if you payoff all your debt and did not learned how to manage your money well you will be in the same position in no time again. First you  need to find the root problem and work your way from there. Ok lets get started and follow the steps below.

Ok it is very ovious that credit cards is the number one credit and debt killer so lets start by targetting those first, lets put them away somewhere  where you will not have immediate access to them. Many people i know are using this crazy by great idea. They place all credit cards in a zip bag and then place the zip bag in a bowl of water and freeze it. You are probably asking what in the world this would do for me, well you see if you need the cards you will need to defrost them and that will take along time, you cant have a pizza delivery guy waiting at the door for the ice to melt or you will not carry a bowl of  ice arround with you. Access to the card will be limmited. I know you are asking yourself why not get rid of them, well you can but at the beginning you might want to still be able to have a backup plan just incase things dont go your way fast enough.Lets say you start the plan but still need to organize yourself alittle more and you forgot to pay the light bill, The light company will come and shut your light off and you dont have the cash to pay the balance due and the extra security deposit most energy company charge when they shut you down, well since you have no light the ice in the fridge will melt and guess what, you have your backup money available, you get the idea. After you learn how to controll your spending habits and have the extra cash to back yourself up don’t do it.

Now the second step you should do is to lower your monthly bill so you can have a more flexible monthly payments. You do this by calling every single credit card company you have (hope you got them before you frozed them) and explain to them you are having financial problems and you would like to see if they can adjust your minimum monthly payment to a lower one untill you get financially stable again. Most credit cards company will help you out, They know that by lowering your monthly payment it will take you longer to pay earning them more money on interest. Don’t worry about this remember you are asking a reduction of your monthly payment to make it comfortable for you but no one said you cant pay more if you can. If you can pay more to eliminate this debt quick but if you cant just make the minimum monthly payment, its better this way cause if you are expected to pay more and you can’t, there goes your credit.

Ok lets move on to step 3, After you have contacted every credit card company and got your monthly payments reduced you will find the interest rate you are paying on every single one of your cards. Write them down in your notebook with the balance still owed and prioritized them by interest rate not by amount. Get the one with the highest interest rate and place it first on your list to pay off then work your way down to the second highest interest rate credit card and so on you get the point.

Moving to step 4, Its time to begin payments on all your credit cards but this is how you are going to do it. Grab the list you made and find out how much money it will take you to make a monthly payment to all cards together. Lets say you are going to pay a minimum of $30 per card and you have 4 credit cards thats a total of $120 a month you have to pay on credit cards. Now that you know you have to spend $120 a month plan to have at least $140 a month and let me tell you why. You will pay the first card on your list with the highest interest rate an extra $20 so that would be instead of sending $30 you will send $50. This extra twenty dollars you are sending is critical for the first card on your list, you dont want to make the minimum monthly payment unless you have no choice and if you do send the minimum try the following month DON’T stop sending the extra $20. Once you send the first payment go down the list and send the minimum payments on the rest of the credit cards.

We are almost done, Stay awake. Ok here is the tricky part. Lets say you are making payments on 4 credit cards and you finished paying off the first credit card with the highest interest rate, now what. Well you will move on to the second card on the list and use the same amount of money you paid for the first card and added to the second. so lets say you were paying $50 on your first credit card now you take those $50 and add it to the second credit card payment. That will make a payment of $30 minimum payment plus the $50 of what you were using for the first credit card that you won’t be sending to that card anymore equals $80. Hope you get the idea here, All we are doing is once we finish paying off one card since we don’t have to send the payment to that credit card anymore we use that money for the second in the list and so on untill we finish paying everything off.  Since we are paying off the credit cards base on interest rate not amount if you finish paying off a credit card that is down in the list because it had a lower interest rate and balance add that extra monthly payment to the first card on the list on top of what you already had, please don’t forget to do this because you are already sending an extra $20 to the card just add it on top of all that so you can come out of debt quicker.

Finally you are done paying everything off ,CONGRATS!.  but there is one more thing you need to do, YES its time. go to the fridge and get the bowl out, let the ice melt. Once the ice is melted grab the cards and cut them in thousands of pieces, have fun doing this cause this mean you are DEBT FREE.