|
9 Steps To Get Out Of Debt - Part 5
By: Jeremy Zongker
Step 5 - Freeing Up Income
You were warned in the first article of this series that paying off your debt
was going to require some work and sacrifice. That’s what this article is all
about. Learning how to reduce the amount of interest you are paying on your debt
in step 4 is a great start. If you haven’t done so already, I’d suggest
recalculating the total cost of your debt with the reduced interest. You should
already be seeing a pretty big difference and that will help to give you the
motivation you’ll need for this step.
If you’re serious about getting out of debt, which I’ll assume you are if you’ve
made it this far, it’s going to take more than just reducing interest. It’s
going to take making extra payments. To do this, you’re going to need some extra
money. I’ll just tell you now, I don’t have a magic solution for this one; it’s
going to take some work. I think I can offer you a few tips to make it easier.
Before we get into the how, let me explain why this is so important. Using the
amortization tool from step 3 you can see that if you have a 30-year, $100,000
mortgage at 6% interest, your monthly payments are right around $600. The first
year, about $100 of that is going toward paying off the principal amount owed
and $500 is going towards paying off the interest. That means that by making
just one extra $100 payment, you can in effect shorten the length of your loan
by one month, saving you $600. The more often you can do this, especially
towards the beginning of a loan, the more you’ll save. The further you get into
a loan, the more principal and less interest you pay each month, so it has less
of an impact later in the loan. The principle is the same with other types of
loans, not just mortgages.
If you’re like most people, you’re already living beyond your means and don’t
have an extra $100 a month to pay make extra payments. There are options,
though. The first and most obvious option is to work more. If you have a job
where you are paid by the hour, then see if it would be possible to work some
extra hours. You could also consider the possibility of working a second,
part-time job. Even putting in just 5-10 extra hours a week can help a lot. You
could also go to a day-labor place to pick up work for one Saturday each month.
If working extra hours not your thing, or you’re just unable to, don’t worry;
there are other options. One is to come up with some one-time income, by selling
some items. Making a large one-time payment will help reduce your monthly
interest fees, helping you to pay off your loans much quicker. You can hold a
garage sale, eBay some items, sell an old stereo to a buddy, whatever it takes.
Almost everyone has something they’re not using any more that they could sell to
help pay off some debt.
The last suggestion I have for you on how to come up with some extra money to
pay off your debts faster is to spend less. First off, cut out all impulse
buying and buying any other entertainment items that you don’t need. Perhaps you
can do without cable TV, or high-speed Internet. Or you could keep your home
slightly warmer in the summer to reduce the electric bill. You could eat out
less often, not buy unnecessary items or buy generic brands. At one point in
your life, you have probably gotten by with less money than you have now, and
you can do it again. It may just require being a little creative.
In the next section, I’ll show you how to use this extra money to begin paying
off your debt in the most efficient manner.
About the Author:
This article has been provided courtesy of Destroy Debt. Destroy Debt offers
great debt relief articles for reprint, and tools and advice that provide the
debt help
|
