Debt Relief with this Simple Formula

Home
>
Debt Relief
>
Debt Relief with this Simple Formula

Debt Relief with this Simple Formula

Is there a way to get out of debt without getting a second job or having to increase your income in some way? Can the average person take his or her current income and pay off his or her bills in a matter of a few years, including the car and mortgage payments?

The answer is YES!!! You can do it without having to cut out all of your fun and extra-curricular activities as well. Now, you may need to cut down on going to the movies or going out to eat, but you will not have to stop altogether. It is a matter of putting together your plan and then sticking to your plan!

The process is fairly simple, most people just don't realize it. Anyone can get started right away, including YOU right now! Here is what you need to know:

1. What is your total net income?

2. What are your debts and minimum monthly payments? (Don't include any extra money you are paying towards any debt. You want only your minimum required monthly payments.)

Okay, are you ready to begin?

The first thing you need to do is take a percentage of your NET income (a good beginning point would be 5%) and write this amount down at the top of a blank sheet of paper.

Next, write down each of your debts (not including utility bills, insurance payments, property taxes, etc.) in a column at the left side of your page. Beside each debt, write down your total balance and then your minimum monthly payment.

Once you have all of these down, divide your total balance by the minimum monthly payment. Write this amount next to each debt. Taking the debt that has the shortest payoff number, number this number 1. Taking the next shortest payoff, number it number 2 and so on until each debt has a number next to it. These numbers indicate the order in which you will begin to pay off your bills.

Now, here is where your 5% comes into play. For debt number 1 take the minimum monthly payment and add it to the 5% figure. Divide the total balance by this new amount to get the total months it will take to payoff the debt. For debt number 2, you will take the minimum monthly payment plus the 5% plus the minimum monthly payment of debt number 1 (since it will be paid in full) and add them together. Again take the total balance and divide it by your new monthly payment to figure your total months to payoff. Do this with each debt until you are finished.

Once you have completed this, add up the total months to pay off your debts to figure an estimate of how long it will take you to pay off all of your debt.

Example:

Visa total balance $6300.00 divided by minimum monthly payment of $153.00 = 41 (months to payoff) 2 (second to payoff)

Auto Loan $13000.00 divided by minimum monthly payment of $356.00 = 36 (months to payoff) 1 (first to payoff)

Mastercard $5266.00 divided by $96.00 = 54 3 (third to payoff)

Mortgage $43,000.00 divided by $325.00 = 132 4 (fourth to payoff)

The auto loan is the first to payoff because it has the shortest amount of time before it is paid in full. Then your Visa balance and so on.

Net Income = $1500.00 x 5% = $75.00

Taking your first debt to payoff which is the auto loan:

minimum payment $356.00 + $75.00 = $431.00 total balance $13000 divided by $431 = 30 (months it will take you to payoff this balance using additional 5%)

Visa: $153.00 + $75.00 + 356.00 (since this loan amount is paid in full) = $584.00 total balance of $6300.00 divided by $584.00 = 11 (months it will take to payoff credit card)

Mastercard: $96.00 + $75.00 + 153.00 + $356.00 = $680.00 total balance $5266.00 divided by $680.00 = 8

Mortgage: $325.00 + $75.00 + 96.00 + 153.00 + 356.00 = $1005.00 total balance $43,000.00 divided by $1005.00 = 43

Add your months together: 30 + 11 + 8 + 43 = 92 approximate months to have all of your debt (including you home) PAID IN FULL! This is about eight years! Can you imagine being debt free in eight years???? That means that your home would be free and clear and you would have 100% equity!

If you apply the above formula to your financial situation, you can be debt free without getting a second job or without working extra overtime! Imagine the time you can spend with your family and friends instead of working. Of course if you take a higher percentage of your net income, you will pay off your debt faster!

This is something that anyone can do based on simple math. The trick to remember is to NOT use your credit cards. In fact, cut all but one up! Get rid of them and just keep one in case of a major emergency. Start yourself a savings account to begin building up your emergency funds. Eventually set goals for yourself to save for college funds, retirement funds, etc.

Remember this fundamental rule:

PAY FOR CURRENT EXPENSES WITH CURRENT INCOME

Carolyn Shipp

http://macarolyn.tripod.com/sbtips

In The News:

Country's External Debt Doubles
AllAfrica.com
By Sebastian Mrindoko, 23 May 2012 TANZANIA'S external debt has more than doubled to 9.78bn US dollars (about 15.6tr/-) when compared to the 4.45bn US dollars (about 7.12tr/-) recorded soon after implementation of Multilateral Debt Relief Initiative ...

and more »

Debt Consolidation Site Introduces New Small Business Debt Solutions
Empowered News (press release)
A debt consolidation website provides an advantage to budding or old small businesses through small business debt relief solution. Adriana Spears directs you to a website where you could find help in solving your debt problems.
Credit Counseling Site Announces Its Debt Settlement Service As One of the ...PR Web (press release)

all 4 news articles »

Washington Times
Euro Falls to 22-Month Low After EU Leaders Clash on Debt Sales
San Francisco Chronicle
May 24 (Bloomberg) -- The euro fell to the weakest level since July 2010 against the dollar after European leaders clashed over joint bond sales at a summit and offered no immediate relief for recession-wracked Spain. Europe's 17-nation currency ...
EU leaders focus on debtWashington Times
EU Chiefs Clash on Bonds Amid Call Greece Keep CuttingBloomberg
Which Way for Europe?Huffington Post (blog)
Wall Street Journal -TODAYonline
all 6,488 news articles »

Govt Awaits Oil Revenue Amid External Debt Rise Loom
AllAfrica.com
By Samuel Sanya, 22 May 2012 There are many reasons as to why Uganda needs to quicken the commercial production of oil, but top on the list is the reduction in donor aid and the faster walk out of debt. Uganda's external debt has grown steadily from ...

and more »

Publisher seeks relief from debt
Boston.com
Houghton Mifflin Harcourt filed for bankruptcy protection Monday as part of a deal with its creditors to eliminate $3.1 billion in debt, and the Boston-based publishing giant said the restructuring will allow it to invest in new ventures.

and more »

DebtConsolidation.com Helps Over 100000 Consumers Choose the Best Debt ...
MarketWatch (press release)
NEW YORK, NY, May 21, 2012 (MARKETWIRE via COMTEX) -- DebtConsolidation.com, the top-ranking debt consolidation company, today announced that the company, in conjunction with quality debt relief companies, has helped over 100000 consumers deal ...
Will consumers take on personal credit card debt to make business purchases?Debtmerica Relief
Growing Blog by Mel Thompson Is for Consumers Looking for Relief from Debt ...SBWire (press release)

all 6 news articles »

Guest opinion: Mortgage Debt Relief Act of 2007 to expire; act now
The News-Press
Homeowners faced with the loss of their home need to take positive steps to avoid severe income tax liability due to the looming expiration of the Mortgage Debt Relief Act of 2007. The MDRA was enacted with bipartisan support and signed into law by ...

Maryland offers tax relief on debt forgiveness
Baltimore Sun (blog)
Maryland will step in with its own relief if the federal tax break disappears. Under legislation signed into law yesterday, Maryland won't collect state income tax on up to $1 million of forgiven mortgage debt for singles, and $2 million for joint ...

Women, Children and the Challenges Debt Presents
PR Web (press release)
The providers of CareOne Debt Relief Services, thought leaders in the debt relief industry, recently published an infographic exploring recent trends for women with children in debt. There is a need for financial education for women dealing with ...

and more »

National Association of Tax Debt Resolution Companies to Set the Record ...
San Francisco Chronicle (press release)
TRS CEO Michael Rozbruch among tax relief experts convening to unearth challenges and polish an image tarnished by unscrupulous acts of a few bad tax actors Encino, CA (PRWEB) May 17, 2012 The National Association of Tax Debt Resolution Companies ...

and more »

Google News