An idea to help you get out of debt

Many people owe money to creditors. Be it a credit card, car payment, furniture payment or anything else. Most of us have taken a loan out on something and struggled with making payments.

This strategy is to pay down a single bill at a time and systematically concentrate the funds until you have eliminated all or a good portion of your debt.

Lets say that you owe money on several things you been paying on for a long time and each had a minimum payment:

  • a car $4,000 ($286/m)
  • 2 credit cards $4,500 ($35/m), and $1500 ($25/m) 
  • new carpet $2,000 ($105/m)
  • a new TV $500 ($125/m)
  • a mortgage $175,000. (1500/m) 

You've been making payments on all these things at once and pay a little extra on several trying to pay them down more quickly. Maybe your paying extra on the ones with the highest interest or once you would like to see go away. Paying them all down at once seems difficult and never ending. It's understandable.

I was making higher payments on nearly all the bills I had, trying to pay them down quickly but it seemed that I wasn't getting very far. I was paying a lot of extra money and it felt like I was simply not making a dent.

So, one day I added up what the minimum payments were, and how much over that I was paying each month. The extra amount was not very substantial, only $75 more a month. It didn't seem like a lot. But I decided that I would take all of that and only apply it to the item I owed the least on.

In this scenario we are paying $2076 minimum each month and we will say that we are also paying $75 extra towards a few of these bills. That's a total of $2151.

The one we owe the least on is the TV at $500. The payment on that was $125 a month and were going to add the $75 a month we've been applying to a couple others to that single bill. For me, this one was a zero interest loan but that's not the point, watch and you'll see why.

In the 3rd month the TV was paid off with $100 extra. I know that it would have been paid off in 4, but it was now done in 3. It doesn't seem substantial I know but it will... I took the additional $100 and applied that to the next lowest bill for that month.

The next month apply all the funds you've been paying to the next lower bill. So, now that we don't have the TV payment of $125. We add that to the $75 and we have $200 more to apply to the next bill. We have not changed how much we are paying in bills, only where its being applied.

Now we apply $225 to the next lowest one, one of the credit cards where the payment was only 25 on it's own. Keep paying that one until its paid off too. It does take a little time but in 4 or 5 months its done.

I found this to be a little bit exciting to do. I had dreaded paying bills before, but now I was looking forward to the effect of this compounded money on a single bill. It felt a little like a game in a way. It's a great feeling!

Now we are applying $225 extra to the next bill. That will probably be the carpet. So, the amount being applied to that one is $330 total each month. It's a lot and pays that one down in only a few months since it had been going down already each month with its minimum payment amount that was still being applied.

Now that the carpet's paid off the next is the Car and you add the $330 to that and your making more than double payments on the car at $616 a month.

Anyway you get the picture, your eliminating bills and just applying the overage of funds to the next item. Each time you do you've got even more extra to apply. You'll find that soon you only have a mortgage payment left.

If you can live with the payment amounts you've been making all this time then you can put the additional funds towards the mortgage payment and begin to see that one dwindle as well, but it is substantial and will take a long time to pay off. Doing this will cut down the number of years you'll pay on the mortgage substantially and recommend that you keep up on it to continue on your journey to get out of debt.

Good luck, and I hope that this was helpful to you!

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