ICFE eNEWS #14-10 - Jun 9th 2014
10 Tips For Dumping Debt
By Jim Garnett, a/k/a Ask Mr.G, a member of the ICFE's Board of Educational Advisors
- Choose to live differently. I like Dave Ramsey's philosophy: "Live
like you must live now, so you can live like you want to live later."
Dumping debt begins with a determined attitude which then compels us to
- Stop creating debt. Stop using your credit cards, stop borrowing,
and live within your means.
- Spend less than you make. If you are running out of money before you
run out of month, you are spending more than you make. Click here to
download my "Debt Doctor Budget Sheet" to help you decide how much and
where to reduce your spending.
- Avoid going into debt to pay off debt. Borrowing to pay off debt
requires no change in your spending habits and therefore, does not
produce long-lasting results. It is similar to digging a hole in your
front yard to fill in a hole in your back yard.
- "Snowball" your debt payments. List all your monthly payments and
keep paying at least that minimum on each debt. Soon you will be paying
more than is required, and the extra amount will be placed on the
principal. As one debt is paid off, transfer that payment to another
debt, until eventually you are making payments on only the final few
debts. These payments will be much larger than the minimum required,
with the extra going to principal. Some people prefer to pay off the
smaller debts first, others will pay first the ones with the highest
- Fund an emergency savings account. Quickly acquire $1000 in an
emergency savings account, and fund it each paycheck with an automatic
payroll deduction. After acquiring $1000 in the account, then shoot for
three months income in the account, then six months. We will either pay
for emergencies by planning ahead, or we will pay for them by using
credit and going into debt.
- Get your credit report. Go to http://www.annualcreditreport.com and
get a free credit report. Take care of any delinquent debts, and dispute
any information that is incorrect.
- Use automatic payments. Pay as many things (including savings) as
you can with electronic, automatic payments. What we do not see or
touch, we do not spend.
- Focus on getting out of debt instead of having tax deductions. The
deduction for $5000 of interest paid on a home mortgage entitles you to
no more than $1250 savings on your taxes. Ask yourself, "Would I rather
have the $1250 tax savings or have $5000 in my hand from not paying
mortgage interest because my house is paid off?" If I want deductions, I
will give more to charities instead of giving interest payments to
- Commit future monies to debt reduction. Make the decision right now
that at least 75% of any raises, bonuses, tax refunds, or any other
additional income will go to dumping your debt.
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023
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