Debt Relief Using Your Current Income

Carolyn Shipp Debt is a hard thing to live with, but we all have it and deal with it everyday. Sometimes it is manageable, sometimes you feel like you can barely keep your head above water and unfortunately many times you feel like you are drowning in it!

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

Much Luck to You,

Carolyn Shipp
http://bucksback2u.com/carolyn/rewards.html

About the Author

Carolyn Shipp is a business owner and single mother of two. She has had her own successful business for about a year now and enjoys the freedom working from home gives her.