What is the best way to get rid of debt? Oh dear, I have been through this wringer too many times. Forget the “counseling” and “consolidation” loans. Let’s discuss a common sense solution.
Let’s face it, debt is a serious and crippling disease! Too many people are suffering needless financial hardship just to keep on top of paying creditors. Like a bad habit or addiction, people end up digging themselves deeper into new debt trying to pay-off old debt.
Debt is one of the largest obstacles standing between many of us and the goal of attaining passive income that we can retire on. So I’ll share a strategy that has helped me personally get off this merry go round.
The Roll It Forward Method
Here’s an approach that I call the “Roll It Forward” method. This approach is useful for the common situation where one has multiple credit cards and/or loans to pay down. This is done using what resources you have. There is no trying to fight debt by taking out new loans.
Without further ado. Let’s say you have these four hypothetical balances that you’re paying off:
| Lender | Outstanding Balance | Minimum Monthly Payment |
|---|---|---|
| Credit Card A | $8,196.67 | $200 |
| Credit Card B | $2,205.18 | $70 |
| Personal Loan | $5,600.50 | $150 |
| Car Loan | $13,741.00 | $300 |
Your total minimum payments add up to $720 per month. You review your budget and determine that you have $850 per month that you can commit towards paying down debts. This means you have an additional $130 above what is required to make the minimum payments that you can put towards paying off the balances.
How Does It Work?
Find the debt with lowest principal balance remaining on it. In this example this would be “Credit Card B” with $2,205.18 on it. Pay the minimum $70 plus the extra $130 so that you are paying a total of $200 each month on this balance. Keep doing this until that balance is paid off.
When that is paid off, you will have three balances remaining and the extra $200 you were paying monthly on “Credit Card B” is now free.
Repeat the step above of taking the lowest balance remaining. This would now be “Personal Loan”. Pay its $150 minimum, plus the $200 you have gained, for a total of $350 per month into that balance.
Once that is done, you now have a total of $350 per month free. You then move on to “Credit Card A”. Pay its $200 minimum plus $350 for a total of $550 per month against that balance.
Once again, when that is done, you’ll roll the $550 forward into the “Car Loan”. At this point, you are now putting the full $850 per month you’ve committed in the beginning into that one remaining balance.
When that is done, viola!, You now have an extra $850 per month free and clear! Additionally, you have saved a ton of money that would have gone mostly to interest payments had you stuck only with the minimum payments.
By “Rolling It Forward”, you’re accelerating the rate at which you pay off your debts. This results in much faster pay off than paying only the minimum payment. By quickly paying off the “low hanging fruit” debts first, you essentially start a “snowball” effect that gets you rolling onto the larger balances. By paying these off faster, one see results sooner, gains more confidence and therefore will stick to the program.
This works well if even if you initially can cover only the minimum payments. Might take a little longer, but by paying off the smallest balance first, you will reach a point where you can pay more than the minimum payments sooner.
Now, how can we make this strategy even more effective?
Boost Your Income!
Well there’s the obvious choice: One could take on another job, trading away what precious time they have remaining in the day to make ends meet.
To get started quickly, one can participate in a rewards program like Swagbucks and earn a little immediate income on their online activities.
While that can be a good start, eventually you’ll want a more powerful way to earn extra income. One that does not require you to trade away your precious time. Family and free time to rest and relax are too important. We can do better than that!
Let’s not have to sell another hour of your time for an hour’s pay when there are better options! Instead, I have learned how to earn extra income by turning my own blog into a source of income.
How?
Through “Affiliate Marketing”. Please check out my post “What Is Affiliate Marketing And Does It Work?” for an in depth introduction.
In the past, I’ve tried the MLMs and other MMO (make money online) sites, even some that were scams. Nothing turned out to be a long term solution. After much soul searching and failed attempts, I have found a resource that really works. Something that can be built up around a niche I enjoy, and something I can be proud of!
So, without further ado, I will invite you to check out my review of a comprehensive training resource called Wealthy Affiliate and decide if this is something that can help you rise from the vicious circle of debt and “barely getting by”.
Conclusion
This concludes my two bits on how I’ve dealt with debt. I hope the “Roll It Forward” strategy I describe above helps in your quest to become debt-free and achieve financial freedom.
Debt can last forever if we don’t do something about it now. Our friends, family and precious time to enjoy life do not last forever. Do yourself GOOD! Getting Out Of Debt is GOOD!
Wishing you the very best, and please feel free to comment and share your thoughts below!
