The Key to Smashing Your Debt
I have been asked several times what is the secret of smashing debts. This usually happens after we’re able to pay off our mortgage. Some people were astonished and somehow wondering if there’s a secret on how you can pay it down faster.
The truth is, every situation is unique, it’s for you to assess your finances. In fact, there are several ways to pay down your debt faster. All you need is the right attitude and endurance. Aside from that, we will tackle a good step towards smashing your debt, which we will discuss in this article.
The Rule of 72 Explained
The rule of 72 can be explained through this example: Say, you have a 10% interest rates and you want to determine how long will it take for your investment to double. Now, what you need is to take your interest rate, which is 10, and divide it into 72. This will give you 7.2 years to double your investment. However, it might not be perfect at all costs, yet it’s a great rule if you’re aiming for quick wins in terms of your investment with the rates provided.
How Does this Relate to Debt?
Your debt is termed to be an investment for someone who can profit from it while it’s costing you. The truth is, paying the interest rates of your debt will not eliminate it faster. In fact, it can double how much you owe when you sum up your interest payments and your debt principal. This is the main reason why it is best to pay more than the minimum payments each month.
Checking the Lifetime Value of What You’re Buying
For instance, you get a 5% interest when buying your house for a mortgage. Granted that your mortgage is $200,000, it will take you 14.4 years to double its worth following the rule of 72. This means that if you are not paying the principle, it will take you less than 15 years to pay for the interest, which amounts to $200,00.
Start Putting Extra Dollar For Your Debt Payments
If you really want to break free from your piles of debt, you must start putting an extra payment each month. If you pay more than your minimum debt payments, the extra payment will go towards your debt principal. By doing so, you can potentially pay your debt faster and can avoid paying on huge interest rates. It all boils down to your willingness to eradicate your debt and do all possible means to save more money towards debt payments. There are a lot of things that you can do to ensure your success; you just need the right attitude and the focus.
Moreover, if you think that you cannot come up with a feasible action plan or debt management plan, you can consult and seek professional help. During this time, you might be in doubt and confusion on how you can settle your debt; hence, getting an expert advice is a must before you set foot in paying down your debt. Besides, you can also explore the debt relief approach for Canadians and SEE IF YOU QUALIFY!
