(And that includes your mortgage!)
What does it mean to “Power Down” your debt? Powering Down is a method of eliminating debt through a systematic approach that dramatically accelerates your ability to get out of debt. To use this technique:
1. Rank your debts (from either highest to lowest interest rate, shortest to longest maturity, or lowest to highest balance).
2. Once you have determined which way you want to rank your debts and they are in a list, work to entirely pay off the first obligation in your prioritized list.
3. Once this debt with the highest rank is paid off, you then apply that debt’s payment amount to the next obligation on your list.
4. As you work through your list of debts, paying off each one, you will continue to add the previous debt payment amounts on top of each other, allowing you to more rapidly pay off loans by gradually increasing the amount available to you to make those payments.
What’s so wonderful about this method is that it allows you to get out of all debt (including a 30-year mortgage) in about one-third the time it would normally take. That means most people will be out of debt completely in 10 years or less. And you can do all this without any additional money out of your pocket.
To understand how the Power Down method works, let’s use the following example for “Mark and Joyce.” Take a look at their “Get Out of Debt” Report, which was generated using the My Money Plan software.
Mark and Joyce prioritized by putting the debts that could be paid off the quickest at the top of their list. You will notice on the report that the first debt listed is a VISA credit card. They began working to pay off the VISA card by applying a $55 monthly payment. When that was accomplished after nine months, instead of using that $55 they had been paying to VISA on other needs and wants, they began applying it to the second bill on their list (Medical/Dental) of $200. By applying the $55 to the $200 medical payment, they were able to pay off this second debt in 12 months instead of 14. If they continue this process, adding the combined amounts from each of the previous paid-off debts to the next prioritized debt, they will be completely debt-free in 9.26 years instead of the 29 years it wold have taken them had they not Powered Down.
Now of course in order for Mark and Joyce to stay on track with this plan and remain enthused about it, they need to start with a Spending Plan so they can stay in control of their money so they will have what they need to pay off debt. They will also need to create the Debt Plan that allows them to see the value of Powering Down so they will be motivated to stick with the plan.
To get help creating your own Spending and Debt plans using these valuable concepts, contact us at Money Mastery today: (801) 292-1099.