Justin V. Cecil asked:


We are going to go through this step-by-step with a hypothetical scenario. Joe Smith will be our hypothetical debt-ridden participant. We will show Joe step-bystep how to eliminate his debt so just imagine you are in Joe’s shoes and applythe same techniques.

Joe’s efficient budgeting has saved him an extra $50 per month. He has these debts at these monthly payments:

Debt 1 – $800 @ $90 per month

Debt 2 – $1,200 @ $110 per month

Debt 3 – $5,300 @ $202 per month

Debt 4 – $10,000 @ $280 per month

STEP 1

Joe will pay the minimum balances on all his debts except the smallest (Debt 1).He will use all of his extra money ($50 per month) to payoff his smallest debt first(regardless of interest rates). Thus, Joe will be paying $140 per month on Debt 1($90 original payment + $50 additional from budgeting). Joe will continue payingthe minimum payments on Debts 2, 3 and 4.

• This technique is recommended because Joe can quickly payoff thesmallest debt of $800. Once he does, Joe will feel GREAT because hehas accomplished his first step to debt freedom. This will give Joe theconfidence and drive to continue paying off all his debt.

• Though not recommended, Joe may be disciplined enough to take on alarger debt balance first which carries a larger interest rate. Joe could goahead and do this, but he needs to be careful not to become discouragedand quit.

• If Joe had two debts with similar balances, then he should pay off the onewith the highest interest rate first.

STEP 2

Joe has paid off Debt 1. He should now use the monthly amount he was payingon Debt 1 and begin eliminating Debt 2 of $1,200 (which is actually lowerbecause he has continued paying the minimum payment). Here’s how it works:

• Joe will apply $50 extra from budgeting, plus $90 from Debt 1, plus theminimum payment of $110 for Debt 2.

• Joe will be paying a total of $250 per month on Debt 2 until it is paid in full.

• He will continue paying the minimum payments on Debts 3 and 4.

STEP 3

Joe has paid off Debt 2. He should now use the monthly amount he was payingon Debts 1 and 2 and begin eliminating Debt 3 of $5,300 (which is actually lowerbecause he has continued paying the minimum payment). Here’s how it works:

• Joe will apply $50 extra from budgeting, plus $90 from Debt 1, plus $110from Debt 2, plus the minimum payment of $202 for Debt 3.

• Joe will be paying a total of $452 per month on Debt 3 until it is paid in full.

• Joe will continue paying the minimum payment on Debt 4.

STEP 4

Joe has paid off Debt 3. He should now use the monthly amount he was payingon Debts 1, 2 and 3 to begin eliminating Debt 4 of $10,000 (which is now lowerbecause he has continued paying the minimum payment). Here’s how it works:

• Joe will apply $50 extra from budgeting, plus $90 from Debt 1, plus $110from Debt 2, plus $202 from Debt 3, plus the minimum payment of $280for Debt 4.

• Joe will be paying a total of $732 per month on Debt 4 until it is paid in full.

STEP 5

JOE IS DEBT FREE! He has paid off $17,300 in debt and now has an extra$732 per month including:

• $50 effective budgeting

• $90 Debt 1

• $110 Debt 2

• $202 Debt 3

• $280 Debt 4

So what should Joe do with the extra $732 per month, blow it? No way. Now itis time for Joe to become a millionaire. Visit PeskyDebt dot net to learn how to turn the extra $732 per month into $2,594,263.39 over time.



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