Pay less Interest & Pay Off Debts Faster

November 27, 2008

Pay less Interest & Pay Off Debts Faster
~James Dunn


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Pay less Interest & Pay Off Debts Faster
~James Dunn

This is no gimmick, nothing to buy, just good mathematics. The following is not the absolute fastest method of reducing debt, but it is easily understood and can be implemented by most anyone.

Some people live beyond their financial means and the following will not help them because they desire to spend more than they make. The more they save, the more they spend. Also, for people who are employed intermittently, they need to save enough extra cash to pay ahead their bills by whatever margin they need to prevent having insufficient funds and missing a payment.

If you have a few different interest bearing debts you are paying off, the following can help pay your debts off FASTER, and paying less interest, than making the suggested monthly payments.

List all of your interest bearing debts, including

* the monthly minimum payment
* your normal monthly payment
* the interest rate

Pay off interest bearing debts as follows:

* List all of your interest bearing bills in the order of their interest rates.
* Pay the minimum payment on all your interest bearing bills except the one with the highest interest rate.
* Take all of the money you would normally pay on your interest bearing bills, and pay it all towards the bill with the highest interest rate.

* When that bill is paid off, do not spend the money that is now freed up.
* Take all the monthly money that went into paying off the previous high interest bill and apply it all into the next highest interest bill.

* Continue doing this until all of your interest bearing bills are paid off.

To increase the pay off rate even faster:

Figure out how much cash is on hand at the end of the month after you have paid all of your bills, including food, gas, …

Anticipate non-monthly bills like car insurance, vehicle repairs, property taxes, …

Set 50% of the recurring monthly excess money asside for a nest egg to pay for unexpected expenses.

After the nest egg is sufficiently large, apply this recurring monthly excess to the highest interest bearing debt. This will increase the pay off rate and save even more money, by helping to pay off the principal, removing that portion of money owed that can have interest assessed against it.

If at all possible, save your money and only buy things when you have the cash to do so. This will allow you to purchase more with less money made from your labor.

A small program can be set up on a cell phone to track all debts and provide the user with the capability to make continuous assessments of both how to reduce debt responsibly and quickly. While also assessing the impact of making a planned purchase; or to justify foregoing an impulse purchase.


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