Cash is King – Upside Down Mortgage Solutions

September 12, 2006

The “Get out of Debt” Plan and Forget the “Jones'”

Ok! I know I said you need a plan so I will share one technique I use all the time.  Take out a piece of paper and write out the people you owe money to, how much you owe them and what you pay them monthly.  Now get a monthly total for your debts or liablities so you know what you owe. Is it what you thought it was or more?

Turn the paper over and write out how much you make every month after taxes and then write down any yearly income or money that comes in from other sources.  I also want you to write down your tax return if you received one over the past two years.  Take the tax return number and divide that by 12 months so you can add that back into you monthly totals. How do you match up monthly to the debts?

Once you know what you owe monthly and what you make monthly you need to prioritize the debts based on necessity and interest rate.  Pay the debt you must pay every month and pay any extra money to the highest interest rates.  If you focus on the highest interest rates first you can start to pull yourself out of debt one payment at a time.  This plan will only be beneficial if you have some self discipline because we can all be tempted to purchase the latest and greatest item out there but when you are behind you need to focus if you are ever going to get caught up!

There are a few areas that we should talk about if we want our plan to work.  If you receive a large tax return you should consult with your tax preparer or possibly hire a CPA for an hour and make the proper adjustments to you paycheck with-holdings.  With this adjustments you can break your tax return into monthly cash flow instead of one large check at the end of the year.  This quick and easy item could save you thousands of dollars in yearly interest expense depending on the size of your tax return.

If you are going to take the time to write out all your debts and expenses you should take it a step further.  Know where you money is going in all aspects of your life.  This calls for a working “Spending Plan” or “Family Budget”.  Here is a free copy of a budget. http://www.toolkit.cch.com/tools/downloads/fambudgt.xlt It may seem a bit overwhelming at first but if you take the time to use a budget you will ultimately achieve levels financial maturity that you thought were years ahead.  Wait until you see how much you are spending on coffee at Starbucks or on eating out!  Once you see your expenses laid out in front of you it is easier to take the step necessary to become financially healthy.

I have help many people with their finances pulling some out of some serious situations and the single thing that all my successful clients have in common was patience.  It can take 10 minutes to create a lifetime of debt so unless you have a lucrative money making idea or career the only way to pay off the debt is one payment at a time.  If I can offer any advice please feel free to contact me at brent@brentlane.net and I would be happy to help.  My website also has several other articles and downloads that may come in handy when putting together your “Get out of Debt” plan.  www.brentlane.net

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