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Becoming Completely Debt Free in 5-7 Years
Applying The Baron Solution™ strategies, the average person can become completely debt free — including their mortgage, student loans, car loans and credit card debt — in 5-7 years using only their own income.
Permanently overcoming debt begins with the decision to stop using consumer debt and making all purchases with cash. Undoubtedly, the many years and billions of dollars merchants and credit card companies spend marketing and advertising will bring to mind many excuses as to why you “need” credit. However, realize a 40-year-old person who pays over $1,300 a month in debt at 7% interest for 20 years will be throwing away over a million dollars by retirement age. That’s right. They would be working over 20 years to make the banks and credit card companies rich while at the same time leaving themselves with nothing.
For those extremely wise individuals who are willing to take the next step, here are three quick tips to follow that will help you overcome debt and get on the road to wealth:
- Step one is to assess your current financial condition by pulling together a monthly budget and determining your monthly cash flow.
- Step two is to gather your credit card and other loan statements and record your total debt, monthly payment and interest rate for each debt.
When it comes to paying off your debt, there are primarily two BARON debt repayment methods that you can choose. You can either prioritize and pay off your debts starting with the highest interest rate non-tax deductible debt, or you can start with the debt requiring the fewest number of monthly payments to pay off.
While it may be faster to pay off your highest interest rate debt, many people find it easier to tackle the debts that can be paid off with the fewest number of monthly payments because they can quickly see their progress and the increase in their cash flow as their debts are exhausted.
- Step three is once you’ve established the repayment priority for your debts, free up any additional cash flow that you can. Using The Baron Solution strategies for budgeting, most people can find an extra $100-$400 a month to apply to their debts.
Take this extra money and apply it to the debt that is your top priority. This will accelerate your repayment schedule. Once that debt is paid off, move on to the next debt. Apply both the extra monthly amount and the amount you had been previously paying on the other loan to your next highest priority debt. Continue this process until all your debts are paid off. It is important that you continue to apply any newly freed up cash flow to your debts and that you resist the urge to spend it. Yes, it will require a lot of discipline, but it will be well worth the effort.
Remember, in order to change your situation and build significant wealth, you have to stop taking on new consumer debt, maintain minimum investment-, debt- and expense-to-income ratios of 15-15-70. And once you’re debt free, apply your monthly payments to rapidly appreciating and cash-flow generating investments. This will be essential to reclaiming your million-dollar lifestyle from the banks and credit card companies.