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Avoid The Trap When You Consolidate Debt, Part Iii
By Ian McAllister, Thu Dec 8th
Avoid the Trap When You Consolidate Debt =================== To consolidate debt is a great idea with a trap built into it.The technique described here helps everyone in debt, but if youhave an ongoing credit card debt you desperately need thisarticle.
------------------- * Part I Don't get into debt. Ways to avoid it. * Part II The big advantages of student loan consolidation * Part III This article -------- The Trap -------- When you consolidate your debt, will you celebrate your freedomfrom credit card debt by going out and buying more on yourcredit card? Do you really want to live your life in debt, orwould you prefer to take charge of your finances? It's too easy to consolidate debt. If it hurts to get rid ofyour credit card debt you'll find it easier to resist gettinginto debt again. Are you getting married? If your partner likes to live in debt,and you want to become a millionaire, who is going to give way?Most divorces are caused by money arguments. Discuss it beforeyou marry. You should consolidate debt if you have no ongoing credit carddebt. The trouble when you consolidate debt is that the wholething loses immediacy when you have thirty years to repay. -------- List your debts -------- Make a table showing all your debts, the amount still owing andhow much you pay per month. Call the last column "Damage" andcalculate it by multiplying your repayments by a hundred anddividing by the amount that you owe. The larger the damage, themore harm it is doing to your finances. Imagine you had a fictitious list like this Mortgage , $100000 , $500 , 0.5 College loan , $50000 , $333 , 0.66 Personal loan , $10000 , $100 , 1 Car loan , $10000 , $360 , 3.6 Visa Card , $4000 , $250 , 6.25 Master Card , $2000 , $200 , 10 You should realise if you consolidate debt then nearly all yourmonthly payments will be interest, so your debt won't shrinkmuch. When you pay an extra $100 your debt shrinks by thatamount, and you won't keep paying interest on it either. -------- List your surplus -------- Using the methods in part 1 to earn and economise. Work out yoursurplus each month after all your expenses. Suppose you canspare an extra $456 each month. If there are two of you working,try to use all of one income to get out of debt, because youwon't always have both incomes. See which damage figure is highest. That is the haemorrhage youmust stanch first. In this example it is your Master Card. Add
your $456 to your monthly payment (mostly interest) of $200.You will shrink your debt by more than $456 because of payingless interest. You'll have smashed that debt in about threemonths. Now your self-discipline comes into play. Don't go out on anexpensive celebration! After 3 months you'll be starting tobuild the financial discipline to make you a millionaire. You've been paying $656 per month that is now surplus, so youadd it to your visa account. That makes your repayments $906each month. You'll get rid of your Visa debt in a little overfour months. Now you can pay princely sum of $906 + $ 360 = $1266 per monthon your car loan winning free in less than eight months... quitea lot less because of shrinking interest payments. To cut a long story short, when you start to concentrate on yourmortgage you'll have $1266 + $100 + $333 = $1699 to add to yourmortgage repayment of $500 per month. When you start making repayments of $2.2K /month your twentyyear mortgage will suddenly shrink to less than four years.You'll have everything paid off before your first child is tenyears old. -------- Is it worth the effort? -------- You may think that the big benefit is freedom from debt. Thebiggest benefit is the mindset that you've developed as youescaped from debt. You are now in charge of your finances... notletting the loan parasites continue to leech you of all yourmoney. But it gets better. An Australian kid used the above method toget out of hundreds of thousands of dollars of debt, then becamea millionaire while still in his twenties. He no longer needs towork, but he has a hobby of showing people how to becomemillionaires. There's just one problem. He isn't interested in helping peoplewho can't save up $20 thousand to invest, because he says theyaren't trying very hard. Now if you take your $2.2 thousand, andstart saving for $20K that will take you less than ten months. He says that mindset is everything. Now you have the rightmindset and have saved up $20K... --- Get more information before you start building your millions.Get more information before you start building your millions.See parts i and ii about debt consolidation. Betterthan student loans Consolidate debt. About the author:At 65, Ian McAllister has left his run a little late. He stillintends to have a go, but wishes he had learned these ideasearlier. Read more at http://studying-techniques.com/student-loans.html http://studying-techniques.com/student-loan-consolidation.html
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