Are you paying too much for your debt?

One of our biggest enemies in life is our debt whether it is recurring bills, credit cards and our loans. In a world where instant gratification is now an expectation and not a privilege, these debts are beginning to exploit that expectation and charge you a hefty price for it too. You might ask yourself why I classified recurring debt under this particular section. Well, it’s because we are underutilizing the services we are often provided and therefore overpaying on bills we can reduce or completely eradicate.

You Wouldn’t Leave Money On The Table 

You’re burning through cash without realizing the potential in managing your debt effectively to completely alter your wealth, well-being, and cash-flow. It’s important to look at any type of bill and say to yourself what is the maximum value I can reach for all the dollars spent. It’s easier said than done of course because you have to look at all your bills and figure out what types of perks, incentives, t.v shows, programs, or whatever is available to you. Now, you don’t have to go as far as me and read the disclaimer and call every 1 (800) number to find out the exact specifications, but just know a little bit about the products you use and how they work will give you an advantage over the company and over your debt. Strictly, your recurring bills should be put on a rewards credit card that earns you some cashback as these are fixed expenses that you must pay anyway and should be earning ‘free’ points on these purchases, but it should be done AFTER you have demolished the debt.

Those Bags Under Your Eyes Are Because Of Interest

Have you found yourself staying up late expecting your check to be direct deposited into your back account to make sure your bills go out on time? This isn’t how life should be for anybody. I hate the word interest. Its debilitating, chronic disease that takes the money out of your pocket and into someone else’s, I’m going to show you how you can quickly tackle debt based on how I’ve shown a lot of my good friends how to eliminate their debt strategically while not having to sacrifice to much of their own social life.

Step 1: Track your spending as much as possible

Thanks to advances in technology we can easily track our daily, monthly, and yearly spending habits through bank statements, loan statements, and reward summaries on our purchases. This is an important first step because wondering where your money is going starts by itemizing where your money is going on a monthly basis. Each person may have a different expenses based on their own life stage and its necessary to put in every cent you spend into tracking it. It can be as vague or complex as you like but first we need to be aware of how much we are spending. For instance, my friends and I found out how much exactly we were spending on food a month. I didn’t spend more than $100 whereas they were above the $800 range!

Step 2: Define what discretionary income you can allocate to your debt

This part is easy to calculate because its taking into consideration taxes and mandatory payments leaving you with the discretionary spending balance. So, you add up all the minimum payments on your debt and monthly bills this will give you an accurate indicator of how much money you actually can put towards the debts. Just because you are paying more on some cards than others doesn’t mean its an effective strategy.

Step 3: Find out how much interest your paying on each card or loan

This is the critical stage and where a lot of people trip up and where most of our strategies are going to be most at play. Some say pay your biggest debts, some say start with your smallest, and some in the middle. From a dollar savings perspective the higher the interest rate the higher probability you’re going to want to pay down that first because its technically hurting you the most

  1. I personally feel we should have small wins to keep ourselves inspired and motivated. I don’t see the point at winning 1 battle when there is a credit card war going on. Pay down the debts that you can see is having the balance go down. I noticed that keeps people inspired to continue this good pay
  2. Pay down the debt with the highest interest first
  3. Pay down the debt with the lowest balances

Its important to compound your payments once you finish paying on debt off. So, if you finished paying down one credit card. Apply the same payment to another card and so on.

Rinse Wash Repeat

Understanding how much your paying to your creditors is the first step in becoming debt free. You have to consider living a minimalist lifestyle to dig yourself out of debt, but once you see the fruits of your labor there is nothing going to hold you back from making your financial security dreams come true.

Please feel free to comment below or message me, I love helping others figure out where, how, when, and why to start paying there debts off and living a manageable lifestyle.

Keep Life Simple

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s

%d bloggers like this: