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Are Your Ready To Become Debt Free?

Are You Ready To Become Debt Free?

 

Here’s the reality. When you own money to anybody, you’re in debt.

Don’t be fooled by the labels. It doesn’t matter whether it’s called mortgage, loan, overdraft, finance, credit card or store card. It’s not even relevant that they may be charged at different interest rates. They are all debts!

When you owe any money, you need to follow a plan to repay it as fast as possible.

Debt is the first of 6 different aspects we cover in the area we at WealthBuilders refer to as the ‘Foundation’.

In a previous blog post we looked at these 6 areas, which we have named as D.EB.I.T.S to help you remember them more easily.

Today, we’ll delve a little deeper into some of the ways you can tackle any outstanding sums you may have due, which will accelerate you towards your own debt free day much, much faster.

Are you digging yourself a bigger hole by not being fully aware of everything you owe?

You want to buy a home. You’ll borrow a vast sum and take many years to repay it. Your lender can charge you a low rate because it has plenty of time to make a profit. It even takes extra security by putting a charge on your home in case you don’t pay. This debt is labelled “mortgage”.

So you want to buy a car? It depreciates in value over a short term. Your lender has to make its profit in less time, perhaps five years. It charges you more and labels the debt “car loan”.

You want ready-cash to buy Christmas presents. Flexible, easy access money. Your lender may have very little time to make a profit. So it charges big money and labels this debt “credit card”.

The simple truth is that being in debt seriously damages your wealth.

Going Back To Basics

Help yourself bring it into focus. Get out six month’s bank statements. Grab a highlighter pen – the brighter the better. Then look through your statements and underline every entry where you make a repayment on money you owe. Then add up the numbers and see just how much you’re spending on debt. You might be in for a shock!

If you use online banking, this process can be even easier and will often highlight certain subscriptions and annual renewals for products and services you had completely forgotten about – and no longer need, meaning yet more pounds in your pocket which can now be put towards wealth-building activities.

Is Any Debt Acceptable?

A mortgage has the appearance of an acceptable debt. In fact, a large mortgage is often portrayed as a status symbol. A sign you have a substantial income to qualify for it. But here’s the reality. It’s a noose around your neck. And it could have a tight grip on your money for years and years. Is that acceptable?

Here’s a funny thing. When some people are asked if they have any debts, they say “no, only my mortgage”. It’s incredible. The lenders have successfully conveyed their potent message.

Prove to yourself the word debt has negative connotations. Tell your friends you have debts of £100,000. And watch their reaction.

Always refer to your home loan and any other money you owe as debt. It’s a constant reminder your cash is gushing out of your pocket. Highlight the negative and you’ll want to become debt free much quicker.

Marshall the forces and use the full power of your monthly repayment to eliminate your debts

This secret works on those debts you can’t transfer into your mortgage or loan. Its purpose is to eliminate what’s left.

You’ll kill off your most expensive debt first.

Do it like this.

Put all your debts onto the minimum payment. Then without altering your overall monthly payment, channel your money into your most expensive debt. You’ll have compound interest working at its hardest. Over the months, this debt will disappear before your very eyes. And when it’s gone, you’ll feel great. You’ll have cleared your most expensive commitment. Don’t forget to cut up the card and shred the paperwork!

Now comes the good bit. Take the money you were paying into your most expensive debt and add it to the minimum payment on your second highest debt. It’s obvious what will happen. You’ll have much more money working hard to eliminate this one. When it’s gone, move onto the next debt. Repeat the exercise until they have all disappeared.

This secret will bring forward your Debt Free Day surprisingly quickly.

On the journey to your Debt Free Day, the simplest, most effective way is to become debt free as quickly as you can. In the process, you’ll save a fortune in interest. Leaving you perfectly placed to save a fortune in cash.

There’s nothing more to it. Don’t put it off any longer. As they say, time is money! Think about yours. Then take action. Because knowledge without action is pointless.

If you don’t already have access to the WealthBuilders Members Area where you can begin to focus on building wealth at the same time as eliminating your debt, then you can register for free here.

It doesn’t matter whether you can afford the payments. The real issue is this. When you’re in debt, you’re voluntarily giving your money to someone else.

Kevin Whelan

Founder, WealthBuilders