Over the last two weeks I’ve been talking about debt freedom. I’m tackling it on my Monday blog, because I believe it’s specifically important for entrepreneurs to be wise stewards of their money! But I believe we all need to be wise stewards.
In America and the western world we are taught how to be consumers. But how we spend money should truly reflect what matters to us. The word “consume” literally means to destroy. But destroy what? Take it which way you like, but one thing consumerism does to us is destroy our power to get wealth. Because instead we’re frivolously spending it. And that’s why we in the US have found ourselves deep in debt. I want to help end that. So here are the first six tips, briefly, that we’ve discussed over the last two weeks as well as the final three for mastering debt!
- Cut up or freeze all but one card.
- Pay off current charges every month or stop using the card altogether.
- Make the minimum payment on all debts.
- List your current debts.
- Begin with debt paid quickest using the minimum monthly payment.
- Determine your winning percentage.
- Apply your winning percentage to the debt that can be paid off the quickest. To continue using our example from last week (listed above for reference), the debt we can pay off the quickest is Car 1 as it can be paid off (using the minimum monthly percentage, remember!) in 14 months. Now we’re going to take our winning percentage (which we talked about last week and is ten percent in this example) and add it to the minimum payment for that debt. Now you have an accelerated payment with an accelerated time frame. So instead of paying this particular debt off in 14 months, we can now pay it off in seven.
- Once a debt is paid off, apply total monthly payment to the next debt. Apply the total amount you were paying on the first debt to the next debt. NOW here’s where we start cooking with grease. You’ve tackled your first, quickest debt. Now take the total monthly payment (winning percentage included) from that first debt and add it to the monthly minimum of the next debt that can be paid off the quickest. In our example, take the accelerated payment from Car 1 and apply to the next shortest debt–here, Credit Card 1. Credit Card 1’s monthly minimum is $55.60 and we add the $1,062.65 from Car 1 to get a total accelerated payment of $1,118.25 a month. Now we can pay Credit Card 1 off in less than TWO months.Basically, you take the money that you no longer have to pay towards your first debt and apply it to the next. And again, when that debt (Credit Card 1) is paid off, you then take the total accelerated payment ($1,118.25) and apply it to the minimum monthly payment of the next quickest debt ($457.12 to get $1,575.37 per month). And then you repeat this pattern until you are debt free! The numbers we’re using here are random, but real numbers! This IS doable! With this example, I’m completely out of debt, including my home, in 84 months–seven years.
- Apply your vastly increase Winning Percentage to accumulating assets. Now this part isn’t often taught in debt-freedom programs. But the reality is that debt-freedom can’t just be an end in itself. On top of this stuff, I teach about bringing value to the marketplace and increasing income. In seven years, you will become someone. The question is who. We’ve got to change our mindset with debt. Debt limits us from being somebody, from living a purpose.
When you get to the end of this program, take all that “free money” you’ve got lazing around since you’re not paying off debts. And start putting it towards something. Start building your investment or passive income, what I call Level 2 Income, by taking those funds and investing them. Stocks, bonds, real estate, business, etc. Start building wealth–and if you’re like me, you want wealth because it gives you a platform to help change the world.
Why do you want to be debt-free? Let me know in the comments below!
This debt-freedom topic is a part of my Money Mastery teaching. I’ll be releasing this program to the public for purchase on December 1st! Stay tuned as it will only be available for 24 hours!
Come back next Monday to buy Money Mastery and get a tool that will teach you to be the Master of your Money!