Money Challenge #3–How am I going to ever pay off credit cards/student loans

Oh what webs we weave….the old saying goes.  Now that the economy has taken a turn down, gas is going up, people are getting laid off, the question is, how am I ever going to pay down these loans?  I know one thing, it didn’t accumulate overnight and it won’t go away overnight, even though that is what bankruptcy lawyers like to tell people. 

You first have to start with the Monthly Income and Expense worksheet, that feeds into the Financial Statement.  If you don’t have these make sure you have all your bills listed on a piece of paper.  For any type of loan make sure you indicate, the APR (Annual Percentage Rate), the limit of the loan (credit card), what the minimum payment is and the remaining balance.  Taking the Cash Flow (income minus expenses) off the Financial Statement , you will then apply all the cash flow to the highest interest rate card.  You can then calculate how many months it will take to pay that card off, don’t forget to calculate(or look on your statement under finance charges) the interest owed each month and count that into your calculation.  If you need help with this don’t hesitate to contact me and I will help you work out a plan going forward.  We also have the Debt Pay-Off Worksheet  that actually has all the formulas in it to give you a plan including how long it will take to pay off each card.  The neat thing is that it becomes a snowball affect, once you can eliminate a card, that payment is now taken away from your expenses, hence increasing your cash flow which means the next card, you will be putting even more money towards the card.  Now if you are working to increase your cash flow(or just get out of negative cash flow) you probably want to look at eliminating the highest payment card, now if this does not coincide with the highest APR, you may want to look at the different balance transfer deals.  Prior to doing anything with balance transfer deals please contact me, they can be tricky and you want to make sure that you are doing the right thing.  The deals I have been getting lately are not helping my financial position because they are charging a 3% fee up front, now not everyone does this.   Capital One just gave me a 0% deal for 12 months, I had to weigh the $199 transaction fee with how much interest it would save me over those 12 months, I calculated it to save me about $20 per month, so about $240 for the year, it may not seem like that is a lot, but do 5 things that save $20 per month and they start to add up, it is possible.  Also when looking at balance transfers you need to make sure you can handle the payment, usually they are 2% of the balance, but always ask prior to taking the deal if you are tight on cash flow.    Another card that seems to be offering fairly good deals without huge transaction fees is Discover, but again every deal is different so don’t hesitate to contact us to bounce the deal off of us and we can determine if it is worth it for you.  Any other cards out there offering deals?  Use the Comment section if you know of any…

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~ by debt2dreams on October 25, 2008.

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