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How to become debt FREE!

By | Monster News | No Comments
We all experience hiccups in our lives, sometimes resulting in an increasing amount of personal or credit card debt. We meant to pay it off, but life happened and things got a little delayed. Suddenly the amounts are growing each month with the interest we have to pay and we lose control of our financial situation, damaging our credit and extinguishing our dreams of financial freedom and stability. So what strategies can you employ to get yourself debt free and achieve financial health?

 

DON’T PANIC, TAKE ACTION: The absolute worst thing you can do is to freeze up and take no action. This will make a bad situation far worse in a hurry. If you take action, you will set your path in motion and although it will be hard at first, your momentum will build quickly. The first step is to commit to taking action, no matter how long it takes to fix.

ASSESS YOUR SITUATION: This is a 3 step process. You are looking for an outline of your situation, not perfect accuracy in every detail.

  • Step 1: What do you own and what do you owe?
    • What do you own and what is it worth?
      • Do you own a home – go to www.zillow.com and guess at its value?
      • Do you own (not lease) a car – go to kbb.com and guess at its value?
      • Savings accounts?
      • Retirement accounts?
      • Any other personal assets – what are they worth?
    • What do you owe and to whom?
      • Back taxes?
      • Mortgage balance?
      • Auto loan?
      • All credit cards?
      • Any personal debt to non-family members?
      • Any other personal debt?
    • Step 2: How much do you earn?
      • Monthly paycheck after taxes?
      • Business/consulting income?
      • Unemployment benefits?
      • Disability benefits?
      • Retirement income?
    • Step 3: How much do you spend?
      • Mortgage/rent?
      • Monthly credit card/personal debt payments (principal and interest)?
      • Utilities?
      • Pre-school?
      • Health Insurance?
      • Groceries?
      • Clothing?
      • Travel & Entertainment?

CREATE A PLAN: In very basic terms, you need to use cash flow (the difference between Step 2 and Step 3) to pay off all non-secured (back taxes/personal/credit card) debt.

If you own a home and it is worth more than your mortgage balance, call MonsterLoans at 866.808.0377 to determine if you can consolidate some or all of your high cost back tax/personal/credit card debt into a low interest rate, longer term mortgage balance which could instantly free up A TON of monthly cash flow, even if the new mortgage rate is slightly higher than your current rate! Call our specialists today (866.808.0377) to find out if you qualify – they LOVE to help people achieve financial health!

After you have done this, take whatever the balance of the back taxes/personal/credit card debt remains and set that as your TARGET! You are going to get that paid off no matter how long it takes. You do this by focusing on Step 3 – how much you spend. You want to whittle as much of your spending down as you possibly can – focus ONLY on the essentials and free up as much cash as possible every month. Maybe skip the annual ski trip this year? Buy the store brand shampoo for a few dollars less? Make coffee at home rather than buy Starbucks and free up a few dollars a day? You will be surprised at how much cash you can free up by focusing on cutting all non-essential spending until you are free of your debt. Take your TARGET (the remaining debt balance) and divide it by 85% of the cash you’ve freed up every month. That is the number of months you have until you become DEBT FREE AND FINANCIALLY HEALTHY!!

What about the other 15%? That goes into a savings account to build up a reserve to protect you against unforeseen expenses (like transmission failure in your car, unexpected trip to the dentist, etc.) This will be difficult at first and you will feel like no progress is being made, but if you stick with it and as new habits form you will start seeing the power of your actions building toward FINANCIAL FREEDOM.

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