Debt Buster FormulaTM
In all of the reading I've done about how people can get rid of their debt more quickly, there are two basic ways that consistently come up: either to start with paying more on the debt’s highest interest rate or paying more on the debt’s smallest account balance.
Both of these debt reduction methods are effective, and I would be remiss in not stating that in all of the reading that I have done on personal financial blogging sites there is a tremendous amount of equally important material addressing the psychology of getting out of debt, the understanding that you must be committed to making it a priority in your life, and creative ways to come up with new sources of funds to accomplish this.
What you need to be doing, why you need to do it, how you can find the funds to do it with, and how you will feel after you accomplish this task can absolutely be life-changing.
If you are reading about the Debt Buster FormulaTM on someone else’s financial blog site, congratulations to the blog for providing you the tools to make this happen.
And thank you to those bloggers for allowing me the opportunity to share my story on this topic.
More than 20 years ago I met a Canadian high school math teacher who was in the Seattle area talking about his method of getting out of debt.
I’ll be honest, I really don’t remember his name, but I distinctly remember his methodology. Sometimes numbers stick better than names, at least for me.
His excitement about his process was infectious and he was eager to see if this might be of help to us in working with our clientele.
He also acknowledged the two methods I mentioned above, paying off the highest interest first or the lowest account balance first. And he agreed that they both worked fine if you were willing to work them.
After all, it’s really true that the financial choices you make matter.
His method was to use two key numbers associated with the debt you owe: the account balance and the minimum payment due.
The premise is simple; divide the minimum payment due into the account balance and you get a whole number. Here’s an example if you had two account debts.
Account debt #1:
The account balance is $6,780 and the minimum payment due is $154.
$6,780 divided by $154 = 44.026. Rounding off to a whole number of 44, your ‘debt factor’ is 44.
Account debt #2:
The account balance is $4,908 and the minimum payment due is $139.
Again, $4,908 divided by $139 = 35.309. Rounding off to a whole number of 35, your ‘debt factor’ is 35.
Given the example of these two accounts, make the minimum payment on the first account debt, then on the second account debt, in addition to the minimum, pay whatever extra available dollars you have on this account.
Why the second card?
Because the ‘debt factor’ number was the smaller of the two.
You always pay more on the smallest ‘debt factor’. Always pay the smallest one the most!!
I will tell you the Canadian math teacher who shared this with me adamantly stated that this was the most cost-efficient way to pay off debt faster.
He claimed to have done hundreds of calculations using every variable he could come up with when it came to debt payments and this method was the superior way of getting rid of the debt fastest. Don’t forget this was a math teacher doing LOTS of math problems to make sure what he thought to be true was actually true!
I can certainly remember my high school math teacher, Mr. Gregory, and I’m sure you can remember your math teacher too.
They’re math teachers after all, and they will do whatever it takes to make sure there is a CORRECT ANSWER to a problem. He was positive this was the best way to do this.
So, judge for yourself, but this is why I’m sharing this idea with you.
Don’t let the fact that you get to do some basic math put you off!
That’s why we’ve created the Debt Buster FormulaTM app. And it’s FREE! Simply click here to download.
You simply plug in the requested information for any debts you might have and the app will calculate the ‘debt factor’ for each debt.
Do this for any and all of your debts: credit cards, student loans, car loans, home mortgage, etc., and you’ll know right away which debt has the smallest ‘debt factor’ number. You’ll know where to focus your attention and make those extra payments to that debt.
You’ll want to repeat this every month when your new statements come – update your balance owed and the minimum payment numbers and the app recalculates the ‘debt factor’ for each of your debts.
If you happen to do a zero-interest balance transfer from one account to another, be sure to update the app when the statements come. That zero-balance transfer could have a big impact on the ‘debt factor’ number for those accounts affected by the transfer.
Don’t forget, when you get the smallest ‘debt factor’ debt paid off, you’ll now focus your efforts and funds on the debt with the new smallest ‘debt factor’.
This process will continue to keep you moving toward the ultimate goal of no debt.
We would appreciate knowing your thoughts on the Debt Buster FormulaTM. Whether you love it or hate it, let us know.
Email me at Charles@PelletonCapital.com. Thanks!
Congratulations for the taking the next step towards your goal of reducing and eliminating your debt!