# How to Eliminate \$682.00 Per Month in Debt

21:08 2008

Read this example of Joe Smith, who has accumulated \$682 per month from four miscellaneous debts, totaling \$17,300.  It shows how Mr. Smith started out by efficiently budgeting an extra \$50 per month to pay off these debts.  He pays them all off in these five simple steps.

We are going to go through this step-by-step with a hypothetical scenario. Joe Smith will be our hypothetical debt-ridden participant. We will show Joe step-by-step how to eliminate his debt; so just imagine you are in Joe's shoes and apply the same techniques.

Joe's efficient budgeting has saved him an extra \$50 per month. He has these debts at these monthly payments:

Debt 1 - \$800 @ \$90 per month

Debt 2 - \$1,200 @ \$110 per month

Debt 3 - \$5,300 @ \$202 per month

Debt 4 - \$10,000 @ \$280 per month

STEP 1

Joe will pay the minimum balances on all his debts except the smallest (Debt 1).  He will use all of his extra money (\$50 per month) to payoff his smallest debt first(regardless of interest rates).  Thus, Joe will be paying \$140 per month on Debt 1(\$90 original payment + \$50 additional from budgeting).  Joe will continue paying the minimum payments on Debts 2, 3 and 4.

• This technique is recommended because Joe can quickly payoff the smallest debt of \$800.  Once he does, Joe will feel GREAT because he has accomplished his first step to debt freedom. This will give Joe the confidence and drive to continue paying off all his debt.

• Though not recommended, Joe may be disciplined enough to take on a larger debt balance first which carries a larger interest rate. Joe could go ahead and do this, but he needs to be careful not to become discouraged and quit.

• If Joe had two debts with similar balances, then he should pay off the one with the highest interest rate first.

STEP 2

Joe has paid off Debt 1. He should now use the monthly amount he was paying on Debt 1 and begin eliminating Debt 2 of \$1,200 (which is actually lower because he has continued paying the minimum payment). Here's how it works:

• Joe will apply \$50 extra from budgeting, plus \$90 from Debt 1, plus the minimum payment of \$110 for Debt 2.

• Joe will be paying a total of \$250 per month on Debt 2 until it is paid in full.

• He will continue paying the minimum payments on Debts 3 and 4.

STEP 3

Joe has paid off Debt 2. He should now use the monthly amount he was paying on Debts 1 and 2 and begin eliminating Debt 3 of \$5,300 (which is actually lower because he has continued paying the minimum payment). Here's how it works:

• Joe will apply \$50 extra from budgeting, plus \$90 from Debt 1, plus \$110 from Debt 2, plus the minimum payment of \$202 for Debt 3.

• Joe will be paying a total of \$452 per month on Debt 3 until it is paid in full.

• Joe will continue paying the minimum payment on Debt 4.

STEP 4

Joe has paid off Debt 3. He should now use the monthly amount he was paying on Debts 1, 2 and 3 to begin eliminating Debt 4 of \$10,000 (which is now lowerbecause he has continued paying the minimum payment). Here's how it works:

• Joe will apply \$50 extra from budgeting, plus \$90 from Debt 1, plus \$110 from Debt 2, plus \$202 from Debt 3, plus the minimum payment of \$280 for Debt 4.

• Joe will be paying a total of \$732 per month on Debt 4 until it is paid in full.

STEP 5

JOE IS DEBT FREE! He has paid off \$17,300 in debt and now has an extra \$732 per month including:

• \$50 effective budgeting

• \$90 Debt 1

• \$110 Debt 2

• \$202 Debt 3

• \$280 Debt 4

So what should Joe do with the extra \$732 per month, blow it? No way. Now it is time for Joe to become a millionaire. Visit PeskyDebt dot net to learn how to turn the extra \$732 per month into \$2,594,263.39 over time.

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Justin V. Cecil

Justin V. Cecil, MBA

Debt Free Fanatic

http://www.peskydebt.net/

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