Step 2 - Pay Off All Debt Except the Mortgage

Pay off all debts except the Mortgage.

USE THE DEBT SNOWBALL

Pay off all debts smallest to largest, this is called the debt snowball.  In this process we are paying off the debt so fast it does not matter how high the interest rate is.  Take the smallest Debt and pay it off so we can take that $50 payment and apply it to the next largest Debt. 

Say the next payment is a $100 a month.  Now we can add the $50 to the current $100 payment.  That is $150 you apply it to the next largest debt you keep doing this until all the consumer debt is gone.

Consumer debt will be cars, credit cards, loans, family loans, anything but the Mortgage.

This also includes student loans, get rid of them, put them on the list with all the other debts and pay them all off as fast as possible. 

Now this is the point where a BUDGET would help with the process.  It is hard to tell how much money we have left or how much we are spending on things that are not important.

Click here to download a budget form. List all income. First, List all income.  Second, List all expenses.  Income minus expenses

WHAT TO CUT

Now let's pay off the debt even faster figure out what extra fat we have in the budget.

One example: we had a cell phone bill was roughly $1800 a year, and switched over to red pocket which is an NVMA. We were able to drop the phone bill from $1800 to just over $300 a year. 

Was the Service Great….. Well 1 GB of data was a bit tight, and we had to learn how to use free Wi-Fi….. Everywhere.  The point is we saved enough to pay off one credit card right there. 

Just remember we are only sacrificing a year maybe two years to pay off this debt, do we really need new shoes, shirts, phones, tablets, tablecloth, televisions?  Can it wait 2 years?

Now is the time to sell all the other stuff that's just filling up shelves in our home.  Do you really need all that crap?  I know we sure did not.  If we had not used it in the last 3 to 5 years it was sold….. And cheap.  Just buy a new one in 7 years when it is needed again, there will be no dusting, no cleaning, no tripping over it, no sorting and trying to find the items we actually use. 

The cash we get is probably worth way more going toward the debt payment anyway.  Remember 1000 at 20% interest is costing us around $200 per year. 

Introduction - Do not get into Consumer Debt

Step 1 - Start a Rainy-Day Fund

Step 2 - Pay off all debts except the Mortgage.

Step 3 - Build the Real Rainy-Day Fund

Step 4 - Get those investments going.

Step 5 - Save for Education

Step 6 - Pay off the Mortgage Early

Step 7 - Become Wealthy and GIVE

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