ICFE eNEWS #16-10 - April 11th 2015
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Ready For A Change
By Jim Garnett, a/k/a Ask Mr.G, a member of the ICFE's Board of Educational Advisors

If you are living "paycheck to paycheck" and never seem to be able to get ahead, maybe you are ready for a change?

The Martin's are a pretty average family, as far as families go. They "live paycheck-to-paycheck," don't have much in savings, and never seem to get ahead financially, regardless of the fact that both have received steady raises over the years. They say they are tired of living like this and would like to get out of debt. They are ready for a change.

One day they sat down together and discovered that they have a total of $257,430 of debt and are spending $2,463 every month making payments toward it. These debts include their mortgage, two cars, student loans, and five credit cards.

The Martin's have just met with a counselor and have been told that with a little preparation and a focused plan, they can be completely out of debt in about 10 years! Mr. Martin told his wife, "Imagine what we would could do with the money that we have been spending on debt! We could adequately fund savings, retirement, college educations for our kids, charitable contributions, and even a few special projects we'd like to do."

Here's an abbreviated version of what the Martin's were told they must do in order to realize their dream of being out of debt.

The Required Preparation

The Required Plan

This plan triggers a "snow ball" effect in paying off debt that enables it to be paid off much faster than we otherwise would. It does not require us to pay more toward debt than we presently are, just not to pay less.

If the Martin's divided their total debt ($257,430) by their monthly payment toward debt ($2,463), they would see approximately how long it will take to pay off their debt not including interest charged. That would be 104.5 months or 8.7 years!

Chances are that without a plan to get out of debt, the Martin's will pretty much have the same amount of debt in 8.5 years as they do now. When most of us pay off a debt, we are ready to create another debt to take its place. This tried and tested plan really works! We know because in 2008 we became debt free!

This article is certainly not an exhaustive study on the subject of becoming debt free. I would heartily recommend Dave Ramsey's book "Total Money Makeover," or if there is a "Financial Peace University" seminar near you, it is well worth the money to attend.

Are you ready for a change?

Ask Mr. G
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023

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Sent by:

Paul Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)

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