NY Houses 4 Sale: Getting from point A to point B...

February 19, 2007

Getting from point A to point B...

You want to get out of debt and you don't know how. Budgets never worked for you, but you know that this is something that you need to do. Here is what I suggest you do - Make a list of every bill that you have. Set up five columns and list each account - write down the total amount owed, your minimum payments , the APR and the due dates for each bill.

For example -

Mortgage - $230,000 / $1,800.00 / 5.75%/ 1st.
Tuitions - $3000 / $300 / 0%/ 5th
Credit cards - You might have 1,2,3 or 10 - List them all separate.
Phone bills
Cell phones
Food bills
Insurance
Car payment - (however many you have)
Cable bills
Utility bills
Savings account *
Etc..

ADD up the minimum amounts needed to pay each bill - this is your monthly "nut".

Now make a list of all your accounts - make sure you include:

Checking account
Savings account
Cd's
Money Market accounts
Etc..

Make a list of all your monthly income.

<Some people like to do this on a spread sheet - I actually like doing it on plain paper - so I can see it in "black and white">

Allocate. Starting with the bills that need to be paid by a certain due date and work down the list. Start out by allocating only the minimum due on each account. Once you are finished with the allocating of the minimum's, if you have money left over, go back through your list and re - allocate which bills you want to pay off first. Take into careful consideration which debtor has the most amount owed and the highest APR. So lets say you have three credit cards and the balances are $1800/$2300 and $8,000. With APR's that are 13.99%/11%/3.99. I know knee jerk reaction would be to pay off the $8,000 - but I suggest you go with the highest APR first and concentrate on paying that off then then you can concentrate on the the next higher APR and so on.

If you notice, I added into the monthly bills "Savings Account", I did this because I firmly believe that when you are saving you need to see progress and you need to "pay yourself first".