Debt Relief Inisight - How & Why to Get Out of Debt

Dec 21 20:17 2009 Jesse Niesen Print This Article


The first option you have is to whip out a check and pay it off,Guest Posting but if you're reading this now that's probably not an option you can pursue. There are possibilities you may not have thought of. You may be able to borrow against a 401k. You may be able to pull money out of your home through an equity line of credit or by refinancing and pulling cash out. You may have assets you can sell to come up with the lump sum amount to pay the debt off.

Overall, here's the thing you want, to find a way to stop paying interest and start earning interest. Why is this debt such a bad thing? Debt is a very bad thing if you have to pay the interest.

Debt can be a great thing if somebody else pays the interest for you and you're financing an asset that's putting money into your pocket. That's good debt but bad debt is when you're paying interest on it, especially on a depreciating asset. Buying a car is a good example of a bad thing to do with money overall. You're buying something that goes way down in value quickly while you're paying interest on it. You're paying for it again and again.

They asked Einstein:

"What's the most powerful force in the universe?"

Einstein said, "Compound interest."

Now, when you're in debt like this, you're not feeling the full force of compound interest if you're making some payments. That's the problem! You've got the most powerful force in the universe working against you 24/7. So one way or another when looking at these options to get out of debt or to deal with your debt, you want to find a way to stop paying this interest and start earning interest.

Why?

The basic formula for wealth, no matter who you ask, all boils down to this (if they're telling the truth); simply spend less than you earn and invest the rest for compounding interest so your money grows. If you do this then eventually you're going to become wealthy!

Your money will be working for you and you will no longer have to work for it. I imagine the goal for everybody is to one day retire, maybe one day sooner than later. If we ever want to do that we've got to get out of this bad debt. If you're paying interest, to me that sounds like a financial hardship; if you have to work for money so you can pay interest.

I have a client in Oklahoma. A good old boy, a really nice man, in his elderly years and for seven years straight he has been on social security. He has been taking cash advances from his credit cards so that he can make his minimum payments.

Think about that one... He's taking cash advances from his credit cards, where he has to pay 30% interest to make his minimum payments.

Those minimum payments are 80% interest or more. It's just a ridiculous cycle! I don't know if you have ever felt like this; being in debt and making these payments is somewhat like running on a treadmill with a backpack full of bricks. Somebody keeps dropping more bricks into the backpack and turning up the speed and the incline on the treadmill.

Unfortunately, unless you find a way to get out of the trap, that's your destiny.

So let's take a look at these options again...

Number one is paying off your debt. Whether through a refinance, a 401k or by pulling money out from under your mattress, if you can write a check somehow you can pay your balances off and stop paying interest.

Always think about the math. For instance, if you're earning 10% interest from a 401k you have to pay taxes on the capital gain that you get, and it's also not guaranteed, it's uncertain. It goes up and down. Let's say you're earning 10% or even 20% on some kind of aggressive 401k, you still have to pay taxes on it. Maybe it's a good rate of return, but think of the credit card debt that you have. Your interest rates are probably between 10% and 34%. The average in America is 18.9% (probably higher these days). Just look at your recent credit card statements and look at the minimum payment, then the finance charges for the month. You shouldn't be surprised if 70% to 90% of your minimum payment is going towards interest (out of your pocket and into the pocket of the creditor), but you should be very disturbed about it. If your interest rates were 20%, you would be doing better than my average client.

Think about the 20% interest you're paying on credit card debt. If you were to pay it off by taking money out of your 401k, where it's earning 10%, to pay off an equal amount of debt you're paying 20% on, that means a 20% after tax guaranteed rate of return. Paying taxes and still getting 20% on your money, and it's guaranteed! I don't know of any other investment out there available to the common public paying this kind of return.

Remember the Big Idea! (See Blog: "The Big Idea- How to Solve Your Financial Problems" if you haven't!)

We're going to look at a couple of ways to get some leverage and pay off the debt you have for even less money, an even better return on investment! You want to find a way to stop paying interest and start earning it, allowing yourself a chance at retiring in this lifetime!

10 BIGGEST REASONS TO BE DEBT FREE WITH BETTER CREDIT & CASH FLOW

The resolution I'm going to ask you to make today has the power to change your life in many profound and specific ways.

* People will respect you more.

* You'll have more power to control your life, your career, and your future.

* You'll be richer, happier, and more confident.

* You'll have a much easier time getting people to do what you want them to do ... on your timetable and on your terms.

I'm talking about becoming debt free with strong cash flow and credit, even to build wealth and become a cup overflowing.

Whether you're ___ ... or ___... or ___ ... you'll have much more success if you're debt free with strong cash flow and credit.

YOU HAVE YOUR OWN REASONS

I'm sure you have your own reasons to get out and stay out of debt, manage your spending, save money, and have good credit right?

How do I know?

Because you are here right now.

So WHY do you want to become debt free with better credit & cash flow?

Take a minute right now to think about WHY you want to get out and stay out of the "bad debt" you're in.

I know you "need to do something" about your debt.

I'm right here with you.

My success in life is directly proportional to how much I help others solve their financial problems.

Only if these words are valuable and useful to you will you recommend this to your friends and family. It might be the biggest gift you ever give them.

PLUS, SOME OTHER THINGS WILL HAPPEN.

Financially healthy people are automatically held in higher regard than those who struggle with debt and bad credit. You're seen as someone who's intelligent, successful, and dependable. Your thoughts and ideas carry more clout. People respect your opinions more and give more credence to what you say. They trust you more, because they can "feel" the sincerity and confidence that's associated with being debt free with good credit and positive cash flow.

I think you're getting the idea here. Your financial health can be the difference between getting people to champion your ideas - and having your ideas set aside (or, worse, dismissed altogether).

As Adam Smith said, "What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?"

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About Article Author

Jesse Niesen
Jesse Niesen

Hello! I'm Jesse Niesen of DebtGoToGuy.com, author of "Debt Free ASAP!"

I'd like to give you Free Instant Access to my "Debt Relief Guide" where you get Info (debt analysis, audios & videos), Tips & GUARANTEED Answers to Your Questions, so you can make "your best choice" to be Debt Free ASAP. I've made it easy for you to finally get this area of your life handled.

Plus, for a limited time I'm offering the 29-page, full-color "Debt Relief Analysis" & Guidebook I sell online at DebtReliefAnalysis.com for $27.00 as a free gift for all new subscribers to the Debt Relief Guide Online.

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Jesse Niesen
DebtGoToGuy.com
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