Debt Elimination (continued)

Also: Debt Elimination Plan 1,: Eliminate Credit Card Debt

Planning For Debt Elimination Without Surplus Cash

Previously we looked at using surplus cash each month to chip away at those outstanding loans, on our long road to debt elimination. But what can you do if there is no surplus cash every month?

So, you have examined your monthly outgoings, and there is nothing to cut out in the way of expenditure. Or you can make some savings, but it just brings your outgoings and income into balance each month, whereas before your outgoings were in excess of the income. Well, at least you have made some progress by bringing income and expenditure into equilibrium. But where does that leave you in your debt elimination challenge?

It is probably time to focus on those debts, and see what can be done to bring down the cost of those loans, and the monthly repayments. It may still be possible to plan for debt elimination in 5 years, especially with your newly developed anti debt mindset.

Taking out another loan will not, of course, bring instant debt elimination. However, it may be that a debt consolidation loan will give you a chance to structure your plan over a 3, 5 or 7 year period. With the right approach, this may be an excellent opportunity to improve your finances no end, resulting in debt elimination at the end of the loan period. The key will be in whether you are able to reduce your total loan repayments, and whether you are then able to set aside those savings each month.

Let us take an example, where the minimum monthly payment for the outstanding debts of $11,300 is $346. Let's say you are able to obtain a new consolidation loan at 10% annual interest. In that case, you would have repayments of $240 per month over 5 years, a saving of $106 per month, or $6360 over the 5 year period. Enough for a replacement second hand car? No need for any more loans? In which case, debt elimination, by our definition excluding the mortgage, could be achieved.

There are, of course, millions of permutations of figures, so you will have to consider your own. But the principles are always the same. Living within your budget, planning ahead, and saving for any future purchases in cash. That's a simple formula. All it needs to accomplish debt elimination is your new mindset; the mindset that does not want debt, borrowings, loans to be a part of your future life. The mindset that has patience in clearing the debt, and is able resist new purchases of optional items until the cash is available.

It is worth always remembering, if you cannot to afford to pay cash for something, then you cannot really afford it at all. The only exception is the house, where the investment potential and rent saving alter the financial viewpoint.

Once you have the cash-save mindset, you have all you need to clear unwieldy and expensive debt from your life, once and for all.