Debt Free Plan

Let's talk about a debt free plan for you.

The reason this plan works is because of the debt to income ratios the creditors use to determine how much debt you can have.

In other words no matter how much you make creditors will only lend you a certain percentage of your income. Your extra monthly income will go toward paying debt off.

In the previous pages you should have figured out your "roll-up" amount. Or how much you can put toward debt.

Now letÂ’s go through the nuts and bolts of how this debt free plan works.

A family happy and debt free
  • Gather all the information on your debt. This includes current loan amounts, interest rates, and payment amounts. For mortgages this means just your payment do not include your taxes or insurance amount. The reason for this is because you will always be paying taxes and insurance. We are focusing only on your debt amount.
  • List them all in a excel spreadsheet or on a paper. It doesn't matter what you use. As long you as you are comfortable using it and your debts are listed in a logical order.
  • Rate your debts. Rate the debt with the highest interest rate #1, next highest #2, etc. This is the order you will pay them off in.

Here is an example

  Amount Outstanding Interest Rate Monthly Payments Remaining number of Payments Priority
Mortgage 99742 6.5% $758 229 (19 yrs) 5
Auto 1 10786 8.0% $488 22 4
Auto 2 8653 8.7% $247 39 3
Credit Card  2956 18.0% $52 127 1
Store Card 1898 17.9% $36 103 2

This graph should give you a basic idea of what to put down. Your debts may be completely different. That's ok, just put them down. List them all. Also list how many payments you have left.

When you divide this number by twelve it will tell you how many years it will take.

For my example family it will take them 19 years to get out of debt.

We are going to say this family takes home $3500/mo. The ideal for this program would be to get at least 10% of your income to pay toward debt If you can get more it will happen even faster!

But for now we will stick with 10%. Or $350 extra toward debt each month to start with.

  Payment with Roll-up Amount After First Roll-up After Second Roll-Up After Third Roll-Up After Fourth Roll-Up Total Months Remaining
Mortgage $758 $758 $758 $758 $1981 77 (6.4 yrs)
Auto 1 $488 $488 $488 $1223 $0 21
Auto 2 $247 $247 $735 $0 $0 21
Store Card $36 $488 $0 (paid off) $0 $0 11
Credit Card  $452 $0 (paid off) $0 (paid off) $0 $0 7

So take your roll-up amount ($350) in this case. And add it to your first debt payment. This makes your credit card payment $452. Make only the minimum payments to all your other debt.

After only 7 months this first debt is paid off. WOOHOO! You should feel very proud of yourself.

Then the next month take that whole $452 and add it to the minimum payment for debt #2 which becomes $488. Continue on to the next debt. Follow the debt free plan until you are out of debt.

In this example it would mean being out of debt. Including your house in 6.4 yrs.

Allowing you to build wealth from that point on.

Go To Debt Step 8



"A man in debt is so far a slave,"
Ralph Waldo Emerson.


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  • Millionaire Next Door
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  • Think and Grow Rich
  • Rich Dad Poor Dad
  • Cash Flow Quadrant
  • Maigc of Thinking Big
  • The Richest Man in Babylon
  • 6 Thinking Hats
  • How to Win friends and Influence People

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