Sunday, May 6, 2007

The Debt Elimination Plan

As the first step to eliminating debt from your life, I suggest you create a Debt Elimination Plan in order to get a clear picture of your debt situation and track your progress.

If your bills are in a scattered and disorganized state, I suggest that you first take the time to gather all of your outstanding bills from every corner of the house. Read Getting Organized to learn how to turn an out-of-control mountain of bills into something more manageable. Then, you will be ready to create your Debt Elimination Plan.

Now that you have a separate file folder for each debt after Getting Organized, you will need a simple, spiral-bound notebook for this next step. In this notebook, you will outline and track the progress of your Debt Elimination Plan.

On the first page of the notebook, list all of your outstanding debts by creditor and amount. You may choose to list them in alphabetical order. I recommend listing them in order of outstanding balance, with the creditor owed the highest balance listed first. Once you've listed all your debts on that first page, add up the outstanding balances to get a bottom line figure for the total amount of debt you owe.

For the time being, include only unsecured debt on your list. Do not include secured debt--this is debt that is secured by collateral, such as your home mortgage or your car loan. You will first want to get a handle on unsecured debt, such as credit card debt. Unsecured debt is the real killer.

Now that you've listed all your debts on the first page of the notebook, you will now assign each debt its own page on the following pages of the notebook. At the top of each page, write the creditor's name and the current amount of the outstanding balance.

For each creditor, you are now going to use a calculator to determine the percentage of your total debt represented by that particular creditor. For example, if your total debt is $15,000, and you owe Ace Credit Card Company $6,750 of that amount, you are going to divide $6,750 by $15,000 and discover that Ace Credit Card Company's outstanding balance represents 45% of your total debt. Do this for each creditor and note the creditor's percentage at the top of that creditor's individual page. When you are done, if you add up the percentages, the total should be 100%.

The next step will be to determine the amount of your Debt Repayment Fund, which is how much you will be paying into your Debt Elimination Plan each month.

Once you establish a monthly amount to be paid into your Debt Elimination Plan, you will pay a percentage of that amount to each creditor each month. For example, if Ace Credit Card Company represents 45% of your outstanding debt, Ace Credit Card Company will receive 45% of your Debt Elimination Plan funds each month.

Keeping a Debt Elimination Plan notebook is a simple and easy way to create a snapshot of your debt situation and to track your progress in eliminating all that nasty debt. Also, having a Debt Elimination Plan notebook provides a great psychological boost--it gives you something concrete to look at whenever you doubt that you are making progress! Before you know it, you will be debt free!

If you want help with a Debt Elimination, Sign in The Debt Elimination Today. This simple, user-friendly software program will solve the problem of debt elimination for you.

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