Are you paying only the minimum on your debts? Do you have years paying interest without being able to eliminate your debts?
First of all, it is important that we have clear the difference between accounts payable and debts.
Debts are any account that can not be paid in a period less than 3 months or in which only the minimum is paid. Debts are accounts that generate stress. Those personal loans, loans that keep families distressed.
Accounts payable are simply payments that must be made in the short term. A balance of $ 120 on a credit card does not qualify as debt because:
For Donald Trump, a balance on his $ 15,000 credit card is simply a dollar to pay at the end of the month.
WHY IS NOT DEBT IMPORTANT?
According to a study conducted by Fortune magazine to the 400 richest people in the United States where they were asked WHAT IS THE NUMBER ONE FACTOR TO BUILD WEALTH ?, the answer was unanimous, not what the cousin in debt says, nor the overdrawn neighbor, if not the 400 richest people in the United States responded, that the number one factor in building wealth is not having debts.
The reason is very simple, the factor that allows you to build savings so you can invest them later on. However, when this income is destined for financing, how is it saved? How is it invested?
Revenue is the engine of any financial plan but if the key to that engine is the lenders it is impossible for that engine to start.
One of the main factors of this epidemic is that we have been conditioned and accepted debts as something normal, as part of our lives.
As says WARREN BUFFET, the second richest man in the United States, “In my opinion, it is silly and inappropriate to risk what is important, economic stability and peace of mind for a return or extra satisfaction through debt that is relatively less important”
Debts are a game of fools, spend today to have to work tomorrow to pay. It is a proposition in which you will never win because some day you will not be able to work more but the debt will still be there, making you work like a slave. “The borrower buys things he did not have and did not need, risking what he had and what he needed.” To risk what is important for you and your family, your salary, for what is not important, something material that loses value simply does not make sense “. -Warren Buffett
AND IT IS THAT LIVING WITHOUT DEBTS IS A LIFESTYLE
Life is too short to be worried about money and monthly payments. Life has much more to offer than the financial anguish caused by debt. DO NOT LET THEY SELL YOU THE IDEA THAT LIVING IN DEBT IS THE NORTH AMERICAN LIFESTYLE. HAVING DEBTS IS NOT NORMAL.
NOW; HOW CAN WE ELIMINATE DEBTS?
1. FIRST THAT EVERYTHING IS ATTENDING MONEY, ESPECIALLY YOUR EXPENSES AND IDENTIFIES WHAT IS THE PROBLEM
- Are you spending more than you earn?
- Have you lost control of your income and expenses?
- Are you an impulsive buyer?
- You are unemployed?
What is the reason for the debts? Remember that debt is not the problem is the symptom, neither banks nor credit card companies are the problem , why are you in debt? is the question.
2. THEN ONCE IDENTIFIED THE PROBLEM:
Focus ONLY on eliminating debt, do not make any financial transaction, initiate any kind of savings, retirement or investment plan before eliminating debts. (This part is very important since many people try to do several things at once, and in the end they do not achieve any.)
3 . ACCEPT COUNCIL ON THE MONEY OF PEOPLE WHO HAVE FINANCIAL SUCCESS, NOT THE BROKEN NEIGHBOR OR THE DEPRIVED, who generally recommend that you finance a car, or build your credit by making you become more and more indebted.
4. CREATE A PLAN OF MONTHLY EXPENSES (what many call a budget)
5. PAY WITH EFFECTIVE OR WITH A PRE-PAID CARD: Why only pay in cash or with a prepaid card? Because we only spend what we have, we avoid confusion.
MULTIPLIER EFFECT TECHNIQUE
First of all make a list of all your debts, credit cards, student loan, car loan, lines of credit on your property and any other debt, including the mortgage, in order from lowest to highest balance
In a column write the name of the creditor, in the following write the total amount of the debt, in the following the minimum payments
Then focus on eliminating the debts with the lowest balance first (regardless of the interest, I repeat you regardless of the interest, you must concentrate on the debt with the lowest balance, not the most interest)
Concentrate on paying the maximum in the account with the lowest balance and the minimum in the others
After paying the first, add the payment of the first account to the payment of the second and continue paying the minimum in the others
After paying the second debt, apply the first and second payment that you no longer have to the third debt and continue paying the minimum in the rest
Continue like this until you pay all your bills
KEEP YOUR MINIMUM PAYMENTS FIXED: when I refer to the minimum payment, it is the minimum you had to pay in each account when you started the program. What happens is that the more you pay, the minimum payment will be lower, keep the minimum payment fixed at the same amount as when you started the plan.
If you can not eliminate your debts, not including the mortgage of the house in a period of approximately 36 to 48 months, if you can only afford the minimum payment, if you are about to delay or you are already late, then you should consider the other 3 forms of eliminating debts.
1. Through the interest reduction plan.
2. Through the debt negotiation plan.
3. And as a last resort, bankruptcy.