Friday, February 15, 2008
Reasons to get out and what God says about it.
"the borrower is servant to the lender." Proverbs 22: 7
AND, heres how to get out, the most awsome book, Total Money Makeover. Here is his website with the same info as the book. This is the plan we are following and we now have a double retirement set up, our 33K car we bought Sept 2007 over halfway paid off, all our credit cards gone and nothing but a house payment and the remainder of the car to pay off.
Debt Snowball Plan
The principle is to stop everything except minimum payments and focus on one thing at a time. Otherwise, nothing gets accomplished because all your effort is diluted.
First accumulate $1,000 cash as an emergency fund. Then begin intensely getting rid of all debt (except the house) using my debt snowball plan. List your debts in order with the smallest payoff or balance first. Do not be concerned with interest rates or terms unless two debts have similar payoffs, then list the higher interest rate debt first. Paying the little debts off first gives you quick feedback, and you are more likely to stay with the plan.
Redo this each time you pay off a debt, so you can see how close you are getting to freedom. Keep the old papers to wallpaper the bathroom in your new debt-free house. The "New Payment" is found by adding all the payments on the debts listed above that item to the payment you are working on, so you have compounding payments which will get you out of debt very quickly.
"Payments Remaining" is the number of payments remaining when you get down the snowball to that item. "Cumulative Payments" is the total payments needed, including the snowball, to pay off that item. In other words, this is your running total for "Payments Remaining."
You attack the smallest debt first, still maintaining minimum payments on everything else. Do what is necessary to focus your attention. Keep stepping up to the next larger bill. After the credit debt is taken care of, you are ready for the next Baby Step in your Total Money Makeover.
I have been broke. I know how scared I felt, and I know how fast I wanted to get out of debt. I know how you feel, and I have learned that what really works is unbelievably fierce, focused intensity.