Get Out of Debt The Easy Way

 

 

This morning on Fox & Friends they interviewed Dave Ramsey, a financial guy they turn to pretty regularly. And he is good. Very good. But this morning I was disappointed that Mr. Ramsey accepted credit for formulating the "debt snowball" method of erasing your family debts effectively. 

 

The reason I was so disappointed is that I had posted that strategy right here on my blog (also reprinted below) on October 3, 2007. That's 5 years ago! But that was not even the first time I wrote it - I also included it in my book published in 1991 - 21 years ago. And I first devised and used this method to rid myself of debt back in 1974. 

 

While it is incredibly flattering to have someone of Dave Ramsey's stature to tout a strategy that I had provided to my readers for over two decades, it is frustrating to know others often get credit for my work. 

 

Nonetheless, the more important thing is that the info is getting out there. And if Mr. Ramsey wants credit for it, so be it. As long as it helps people, that is what is important. While I would like the credit, I don't need it. 

 

But it is still frustrating.

 

[reprinted from 2007]

Wednesday, October 3, 2007

Getting Out of Debt

A lot of folks have asked me the best, most painless way to get out of debt. Short of dying, the following works pretty well:

1) List all your debts, with the balance and the monthly payment.

2) Choose the one with the smallest balance.

3) Do whatever you must to pay off that one, small balance. Have a yard sale, or sell unwanted items on eBay.

4) Now use the money you save from not having that payment each month, and apply it to the monthly payment of the next smallest bill. For example, if that smallest bill used to have a monthly payment of $25, and the next smallest has a payment of $50, you would now pay $75/month toward that next smallest bill, thereby paying it off much faster.

5) Whenever you come into "found" money (unexpected overtime, selling an item etc.), apply those funds to that smallest bill.

6) When that second smallest bill is paid off, apply that $75/month to the next smallest, until it, too, is paid off.

7) As each bill gets paid off, use the savings to apply to the next bill.

You will find that it starts out very slow, but soon snowballs. Take a look:

Let's say you are making payments of $25, $50, $100, $120 and $150 per month on various debts, for a total of $445/month. Let's also say you are paying $1500/month on a mortgage.

By paying off the smallest, you now apply that $25/month toward the next bill, paying $75/month. When that bill is paid, you now add that $75 to the $100/month on the next bill. Eventually, you will be applying the entire $445/month toward the last debt (not including your mortgage). At that rate, that last debt gets paid off very quickly. You now have an extra $445/month to improve your lifestyle, or apply it toward your mortgage, taking several years off the term of the mortgage - and saving you many thousands in interest payments.

 

If this is not fast enough, consider either turning a hobby into an income producing business, take on a part-time job and/or sell off unwanted (or unneeded) items.

 

[Brought to you by "The Simple Man's Guide to Real Estate"]

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