Debt Relief and
Do you want to be out of debt and financially free? If so read on. There is a proven method of achieving that. 100s of thousands of people have done it! And you can too.
You will learn a simple method for escaping from your debt – and no one can stop you! Your fate does not rely on uncaring negotiators, shifty lawyers, or corrupt politicians. YOU will control your own money to get out of debt faster than you probably thought possible – and then set yourself on the road to financial freedom!
What does it mean to be financially FREE?
It means your time is your own! You can do what you want, when you want, with whomever you want to do it. You owe no one anything and have income coming in that does not require any effort (i.e. work) on your part and is more than enough to cover your ongoing expenses. This program will show you proven methods of achieving financial freedom in the shortest time possible (short of winning the lottery, which is not a viable plan). With this program you can turn the odds are in your favor!
To chart your course to financial freedom, it’s helpful basic concepts. As with any goal, knowledge is the key to achievement.
Lifetime income. This is the total amount of money you will earn in your lifetime. This amount is a finite number of dollars, although we may not know what that amount is at this time. A typical amount would be $1,000,000. This figure comes from an average of $25,000 per year for a 40 year working life. Yours could be $1,500,000 or $2,000,000, but in any case it is a limited, if unknown, number. We’ll work with $1,000,000 because it is a round number likely to apply of many Americans.
Credit. This is what someone, or more usually, some institution is willing to loan you in dollars. Typically thought to be a good thing, everybody wants “good” credit, and it can be good. However, it probably works against you in a major way and you don’t even know it. We’ve all been brainwashed by the “system” to establish good credit. After you implement this program, you won’t need any credit and you won’t care how good or bad your credit rating is. (But it is likely your credit rating will improve, your charge is resisting the credit-mongers who want you in debt – to them – instead of financially free.)
Compound Interest Rate. This is the rate of return on money invested by you or some institution. When you are a borrower you pay compound interest; when you are an investor you earn compound interest. Usually stated in a percentage per year (such as 7% per year, which would mean $7 per $100 invested or owed per year). This program will get compound interest working for you instead of against you, as it currently does for the vast majority of the population.
OK, those are the basics. Let’s get started so you can be financially FREE ASAP.
Number One: Stop buying ANYTHING on credit! NOW! Did you know that when you buy on credit and pay over time you are paying a total of 3 to 5 times the original price of the item?! If you buy a house using a $100,000 mortgage, you will pay $300,000 or more over the thirty years for that mortgage. And the bank acts like they’re doing you a favor while they get rich off your sweat and labor. This alone is a substantial part of the average American’s lifetime earnings. But it’s even worse than that. To be able to pay $300,000, you must earn 67% more than that due to taxes (federal income tax and social security payments alone consume approximately 40%)! That means you must earn $500,000 to pay for that $100,000 home mortgage. ($500,000 taxed at 40% leaves 60%, or $300,000.) A substantial part of your lifetime earnings! But don’t use up all your anger yet – it gets worse.
You probably need a car to get work and chances are your spouse also needs a car to get to work. Most people need the car before they have earned and saved enough to buy one, so they get a car loan. Cha-Ching! The car company makes as much, and sometimes more, off the financing of a car than they do from the sale. We’re all conditioned to consider only the monthly payment – will it fit in our monthly budget? If we can get the payments for that $25,000 car spread over 5 years instead of 3, it’ll be soooo much easier to afford; the payments will be lower. But watch out, the total interest charges will be much higher. Even if you can get a car loan at 0%, you’ll still pay more. Have you ever heard of an offer that didn’t give you “0% financing OR a $1,000+ cash rebate”? i.e. you can’t get the lowest price and a 0% loan. And until you’re almost finished paying for the car, you will owe more than it is worth! Don’t ever think of getting in an accident and totaling the car – after your insurance pays the lender (not you) the book value of the car, you still owe the finance company. This unhappy situation arises because the value of the car drops fast as soon as it is put into use. In fact, in the first two years the value usually drops by half!
Our recommendation is simple: never buy a new car. Buy two-year-old cars and let someone else pay the depreciation on it and, as a bonus to you, deal with getting all the initial bugs out of it. Also, start buying cars only for cash as soon as you can.
How do you do this? This is a little “trick”, except it’s not really a trick. So long as your car continues to run, once it is paid off, continue to “make payments”, but to yourself. You can put this money in a CD, savings account, or money market account. In three or four year you can buy a car for cash. And you’ll likely pay less than someone who is financing. Note that as long as you actually can afford that monthly payment to yourself, it doesn’t matter what type of car it is. Some people will suggest getting cheap cars, but if you’re used to a luxury model and you’ve been paying those luxury prices every month, you can still use this method!
You’ll probably need a few other things along the way – such as furniture, appliances, TVs, DVD players, iPODs, fancy new phones (e.g. iPhones), computers (e.g. iPADs, Laptops, NetBooks, Desk Computers), vacations, and a host of modern conveniences. All of which you’ve been conditioned all your life to “fit” into your monthly budget. Buy it on your credit card or store account.
Beware! This is a trap. For every dollar you pay for an item which you put on the charge card you pay up to FIVE TIMES AS MUCH as the purchase price! That is, for $2,000 of furniture you’ll actually pay $10,000! An outrage. At these rates, it doesn’t take long for the money-grubbers to sap your entire lifetime income. This also robs you of the money you could have earned had you not needed to pay interest charges.
If you earn 10% per year on an investment, take that $8,000 extra that would have gone to credit card charges and invest it, and over 30 years you could have amassed over $139,600. This is the real cost of that $2,000 worth of furniture! Is your furniture worth well over $100,000? Considering those costs, many people will think about sitting on the floor, or boxes, until they can pay cash for the furniture. Just think about multiplying that price tag by 5 when you’re thinking of buying on credit.
Here’s a real gotcha. Some credit cards are structured such that you will never pay them off by paying the minimum payment. You’ve heard quotes suggesting that you won’t pay off a loan for 17 or 52 or 70 years? How about “NEVER”!? At an interest rate of 20%, hardly atypical even in days of low interest rates, you could have a minimum payment of 1.5% per month of the outstanding balance. At this rate or less, you will never pay it off unless you add to the payment. Consider: a $4,000 balance at 20% is $800 per year interest owed, 1.5% per month of outstanding balance is $60 and $60 x 12 months is $720 per year – not enough to cover the interest due!
Borrowed Money – Debt
We’ve all been conditioned by the media to expect to need to borrow money. It’s not your fault. The money-grubber institutions, the ones with the biggest gleaming granite and marble buildings, have made a concerted effort to instill this viewpoint in the general population. In doing so, they have tried to condition us all to focus on the interest rate and the size of the monthly payment when we borrow money. Trying to get the lowest interest rate becomes the overarching important factor. “Go for the lowest monthly payment.” They want us to focus on this, but they have distorted our focus! The MOST important questions when borrowing money are: how much total money will I pay and when will the debt be fully paid off?
The size of the payment is seductive, especially if we buy into “get the lowest monthly payment” philosophy. Typically the lowest monthly payment ends up costing us the largest total portion of our (limited) lifetime income. It’s better to get a lower interest rate than a higher one, when all else is equal i.e. the total dollars borrowed, the same rate of repayment, and the same length of term. But it’s rarely the place to start.
Consumer debt is not a good thing for the consumer, but debt itself is not completely a dirty word. That’s the other side of the media coin, now that there is widespread economic distress (the result, oddly enough, from hyperactive borrowing and a misunderstanding of debt. Hmmm…). It is possible to have productive debt. This is debt that allows you to start a business or undertake some endeavor that has a high pay-off, but which you could not undertake with only your own cash money. This category covers most home mortgages. Real estate investment also falls into this category. The idea is that this money is working for YOU, not just the lending institution. This isn’t money used for living expenses or household luxuries. However, productive debt is not necessary to achieve debt freedom, and regardless of how much productive debt you acquire (if any), you need to pay off the bad debt. Consumer debt is bad debt.
So, what did you say about mortgages again?
Ah, it’s good you’re paying attention! Very few people can buy homes for cash, and often a mortgage is necessary debt. (If you can really afford it – just because a bank offers a large mortgage, you don’t have to take every last bit of it!) With our system you will pay off your mortgage much quicker than the bank wants you to. You’ll avoid a lot of that interest charge. The analysis above is a reason to pay off your mortgage more quickly, not by itself a reason to avoid one altogether.
Frankly, this is one of the biggest rip-offs around. Yes, you need some insurance but most of the time you’re being sold based on the agent’s desire for commissions.
The fundamental (and ONLY!) purpose of insurance is to share risk among a large pool people, so that if you happen to be the unlucky soul who suffers a catastrophically expensive event, you (or your loved ones) won’t be financially ruined. Wealthy people don’t need insurance (except for liability in case they get sued); they self-insure since they can cover the cost of an unlikely event happening to them. Yet for the average American insurance saps a great deal of his lifetime earnings. Minimize what you spend on insurance.
Until you have become financially independent, buy only term life insurance and only if you have others who depend on your income for support. Do not ever buy any other type of life insurance. This is important! Do not buy whole life, universal life, endowment life, gimmicks, or any type of life insurance other than pure term. This is the lowest priced type of life insurance and it does not try to do anything other than actually INSURE you. Other types get mixed up with trying to be “investments”, at the expense of the fundamental purpose of your life insurance. (We say “investments” in quotes because insurance products are among the worst financial vehicles in existence.) Also, other types of life insurance pay almost the entire premium for the first two years as commission to the sales person, and ongoing commission after that as long as you hold the policy. With this sort of motivation insurance agents are going to go to great lengths to sell YOU what benefits THEM the most.
As for automobile insurance, most states require drivers to carry liability insurance. If you buy a new car and finance it, your lender will require you to also carry expensive collision and comprehensive insurance with them named as the insured. This is yet another reason to avoid buying cars with a loan and pay only cash. We recommend buying liability even if not required by your state. But we don’t recommend buying any other auto insurance. If you must buy other auto insurance, get the largest deductible you can afford to lower the cost as much as possible. Bet that something really bad will NOT happen – that’s what the insurance company does. And they win all the time – they WILL collect more than they pay out. If something does happen, proper insurance simply means that it won’t cause you financial ruin. Over-insuring is also costing you money in the long run.
Medical insurance is another type for which most people pay entirely too much. Yes, you could probably be wiped out financially by a major medical expense and that’s why you need major medical insurance. But you probably don’t need medical insurance to cover the cost of doctor’s office visits and routine medical care. If you buy insurance for this you most assuredly pay more than it costs. Remember – the insurance company always wins. Buy only major medical insurance, with the highest deductible you can actually afford, and then keep yourself healthy.
Credit insurance may be the biggest rip-off of all (despite a lot of competition!). This could just be why credit companies push it so hard these days (“only 79 cents per $100 insured!”). When you borrow money for purchases (already a thing to avoid) YOU pay THE LENDER for credit insurance so that, if something happens to YOU, THE LENDER gets paid. You’re giving this credit-monger a gift! You pay extra (premiums) to make sure the lender gets its money no matter what – essentially, the institution is both the issuer and the beneficiary. It’s like paying your life insurance company so that they can benefit instead of your family. Is this not insanity? Never ever buy this type of insurance and cancel any if you already have it.
If something does happen, of course you want to pay your bills. But let’s face it, credit card bills are the least important of your concerns in that situation. If you can put any money away for an emergency fund, this is what it’s intended to cover. If you just can’t live without insuring those credit card bills, try this “trick”: put that 79 cents per hundred dollars of debt into your own savings account. If you could afford the insurance or “credit protector” program, you can do that. If something happens, use this fund to pay those bills. One benefit of this, aside from controlling your own hard-earned cash, is that if you do have trouble making this “insurance” payment one month, odds are you won’t fine yourself for that month. Try getting that deal from a credit-monger company.
The Debt Relief Plan
So what’s the plan and how do you achieve debt freedom? By Debt Stacking!
Step 1. Make a commitment right now to yourself that you will become debt free and financially independent.
Easy, right? Write it down, it sticks better in your subconscious. You cannot skip this step! And find a way to keep your commitment. Maybe you can track your progress, watching the total debt go down every month. The specifics are less important than doing something so that when you see it, you will remember that you are gaining control and on a path to freedom. This path is exciting and liberating, but just as it takes time to dig a financial hole, it can take some time to climb out of it. No one’s going to “fix” all your debt for you immediately (be wary of anyone who says they can!) – so it’s up to you to take care of it on your own. Your commitment to escaping debt and achieving financial freedom is your best weapon against any force that threatens your goals. Ignore commercials that promise instant freedom – if it sounds too good to be true it is…. BUT freedom is within your grasp.
Step 2. To become debt free you first must know how much debt you truly have. This step is critical, because without a summary of everything you owe you won’t be able to set realistic goals. Write it down. Make a worksheet – include each debt (car, mortgage, student loan, credit cards by card, etc.), amount owed, interest rate on each, minimum payment per month, and number of payments remaining for each. Don’t leave anything out. If you need more space, make extra copies of the worksheet.
Step 3. In this step you will make a plan to eliminate all that you owe as quickly as possible. From the debt worksheet you have a list of all that you owe, the interest rate for each, required payment amount for each, and the number of payments remaining for each.
Arrange the debt items from the first to be paid off (at the current minimum payment rates) to the longest to pay off. Often, this relates to the total dollars owed on each, but not always (sometimes a larger debt has a much larger minimum payment and so will take fewer payments to kill off than a smaller total debt). We will use a technique called “debt stacking” to eliminate all of these debts as fast as possible. There are many other terms: snowballing, rollover, pyramiding, … but they all relate to the same simple idea.
Now, write down your monthly income. Add all your required monthly debt payments. Subtract the total monthly debt payments required from your total monthly income and write down the number. This is what you have per month to live on for ongoing expenses such as food, utilities, etc. This number should be positive. If it isn’t, you have a serious problem. You WILL need to increase your income somehow, maybe with a second job. You can also look at reducing living expenses. Our “secret” is simple, it is powerful, but it’s not a miracle.
Do not ever personally charge anything that you will consume within a month, such as food utilities. In fact, plan NOT to charge anything at all. Anything you do charge or buy on credit will extend the time it takes for you to achieve freedom from debt and become financially independent. It is a good idea to cancel (or lock away) all your credit cards except one general purpose card for true emergencies. (Some people have been known to literally freeze their credit cards so that it will take at least a few hours to get at them if the credit-mongers siren calls get to them! That “cooling off” period can help them stay on the path to financial freedom.)
Now, subtract your ongoing monthly expenses. Is your monthly income minus your monthly debt payments minus your ongoing monthly living expenses positive? This is your “accelerator”. If you have an accelerator already, you are in a good position to jump-start yourself on the road to debt freedom and financial independence.
Don’t fret if you don’t have an accelerator, you can still reach your goal, albeit a little more slowly (not too much more slowly, though!). And chances are you can save money on living expenses and “find” an accelerator. Even if you can’t, you CAN follow this program.
Now the good part. If you have an accelerator, use it each month to pay an additional amount towards ONE SINGLE DEBT – the first monthly payment on your debt list. This will usually be a credit card, but it doesn’t matter if it’s a student loan, a car payment or a mortgage.
Here’s the “secret” to debt stacking: When you pay off your first debt, take the accelerator PLUS the minimum payment you were paying on that first debt each month. Apply that new larger accelerator amount to the next debt on the list (along with the standard monthly payment to THAT debt), until that, too, is paid off. Repeat this process with every debt on the list, in order, one at a time. You’ll be amazed how quickly your debt can go away.
This method requires no extra income, but the results are amazing. Some people don’t believe it at first. You’ll pay off all your debts, including your mortgage, years before you would have otherwise! (Extra income doesn’t hurt, but it’s not necessary!) Do not make the mistake of paying a little extra on several debts each month. By marshaling your forces to take out one debt at a time, you’ll use every dollar to full advantage. Sun Tzu suggests not splitting your forces, and you don’t want to split your money! Focus on one target at a time!
Only pay the extra on one debt at a time and continue to pay the minimum required on all the others.
If you don’t have an accelerator, don’t worry. Just pay off the first debt you can. Once it’s paid, you have an accelerator to add to the second debt on the list.
Repeat the process of applying the payment amount of each debt (and those previously paid off) to the next debt on the list. It’ll take a little longer to get started, but once the process gets rolling, you’ll see how quickly the later debts disappear! Remember, avalanches can start with just a few pebbles.
Your total monthly expense for debt payments remains exactly the same as if you continued paying the minimum on all your payments, but you’ll be knocking down debts one after the other, instead of slowly digging out over years, decades, or even FALLING BEHIND! (Remember that 20% credit card with a 1.5% minimum payment?)
Some people think there may be some trick in here, but there really isn’t. It’s not how much income you have, but how you apply that income to meet your goals that matters. Lenders and credit organizations never talk about this method, exactly because it is simple. It’s totally in your control, requires no negotiation, and you can start right away. It also results in the credit-mongers getting less money in interest overall – but it’s YOUR money, not theirs. There are no tricks. Start today!