Wealth-Coaching

Debt Elimination is often a cause to celebrate.

Take last year, a good friend of mine threw a party.

Now lots of friends of mine throw parties, but this one was special. Ron wanted to celebrate the fact that after three years of indebtedness that had approached $40,000, he was now free and clear.

He had an interesting approach to Debt Elimination. The way he described it to me- before the libations kicked in- he pursued Debt Elimination by performing the following steps.

Added up his total amount due on his eight credit cards, as well as his car payment. That made nine creditors in total.

He then calculated percentages of total due for all of his accounts. For example- and rounding off for the sake of the explanation I am outlining here- $4,000 due on a specific card was 10% of the overall 40K owed.

He then added up the monthly interest assessed by all of his accounts, and then calculated percentages.  If his total monthly interest was 20% of outstanding balances, a specific credit card’s 2.5% a month would represent 12.5% of all interest assessed for a given month.

He then averaged the interest assessment and the outstanding amount due to each creditor.  In the above example, that particular creditor came out at 11.25%.

After calculating his average monthly income, leaving some aside for utilities, food, insurance and a non exorbitant amount of money to live on, he then came up with a monthly amount that would constitute a pool for bill-paying.

Each month, Ron would pay each creditor from that pool- with the exact percentage calculated by the means I just described.

Ron may have partied to celebrate his Debt Elimination, but I have to tell you the experience changed him. He’s matured.