MONEY TALKS

Step One: Stop creating more debt.

If you want to dig yourself out of debt, the first thing you've got to do is stop creating it. How? Make it impossible to create more debt by destroying your credit cards! Sound scary? Sure. Because those cards give you comfort. You know that if an emergency arises, you'll always have something to fall back on. But let me ask you something. Suppose you were going to quit smoking. Would you leave a few cartons of butts around "just in case?" If you were giving up alcohol, would you keep a bottle or two of scotch around "just in case?"

For many people, credit cards are addictive, and if you're one of these crediholics you've got no room in your wallet for temptation. If an emergency actually does arise, there are other sources you can turn to than credit cards. But the truth is that you're much more likely to abuse that credit card than use it to meet an emergency. And by following these steps, you'll have plenty of extra cash on hand soon enough anyway.

Step Two: Rank your debts in order of fastest possible payoff.

Let's define exactly what a debt is. It's something you owe that you can theoretically stop owing. For example, your mortgage is a debt. But your property taxes are not; they're an ongoing expense. Your Visa bill is a debt. Your utility bills aren't. Your car loan is a debt, but your car insurance bill is an expense. OK? Now, the first thing you need to do is to simply make a list of your debts.

Throughout this process I'm going to be giving you a sample table first, then a blank one following it so you can do it yourself with your own real-life info. Write down your debts. Include the company or person you owe the money to, how much it is, and what the minimum monthly payments are. Whip out the old calculator and divide the amount you owe by the minimum monthly payment.

Now all that's left is ranking your debts in the order that they're going to be paid off. The lowest number is going to the highest place on the list: it's going to be number one.

The first thing you should understand is that the system we're using is designed to keep you on track by giving you the most reward in the fastest time. In other words, while we can't compete with Madison Avenue by promising you instant gratification, we're going to do the best we can to get you results as soon as possible, which we hope will get you excited and keep you going.

When you divide the amount of your monthly payments into the amount of each debt, what you're going to get is the number of payments you have left until that debt is gone. Focusing on the debt with the fewest monthly payments left means it will be gone the quickest, and you'll see the fast results from your efforts. That's important both for inspiration and because you'll free up more money as quickly as possible; money that we need to wipe out the next debt on your list in record time.

Step Three: Build a Debt Destroyer: set aside 10% or more of your gross monthly income.

If you're going to attack a powerful enemy, you use every weapon at your disposal. Ever watch cops at work? Arresting violent, dangerous people is risky business, so to minimize their personal risk, they use a powerful combination of mental and physical weapons. Mentally, they're alert, prepared and well trained. They know exactly what steps to take to conclude confrontations quickly, safely and successfully. Physically, they do what it takes to make sure they have the upper hand. Want to use your fists? They'll use a nightstick or mace. Want to use a knife? They'll use a gun. Want to use a gun? They'll show up with about 300. In other words, these are people who clearly understand that the way to win is to keep a sharp mental edge and an overwhelming physical one.
What we're essentially doing with step three is taking a lesson from the cops and developing our own mental and physical arsenal to subdue and ultimately exterminate debt. Now it's time to pull out the big gun and start putting that debt out of your misery. We call that big gun a Debt Destroyer.

In order to set aside 10% of your monthly income, the first thing you've got to do is figure out how much that number is. So start with how much you make a year. (This you'll probably know right off the top of your head. Although most of us develop amnesia when it comes to knowing what we owe, we're sharp as tacks when it comes to knowing what we make.) Divide that number by 12, and then multiply that number by .1 and you're there.

Most people would rather cut off their feet with a dull ax than to have a family budget. But there's really no reason to hate budgeting, because it's really no big deal. Budgeting doesn't mean doing without, it simply means paying attention and setting a few priorities. In fact, let's not even call it a budget, because that implies deprivation. Let's call it a spending plan, because that's exactly what it is. You start by keeping track of where your money's going. Once you've done that, then you're in a position to make decisions about how to allocate your money and spend it according to your personal priorities. And one of your priorities is going to be funneling money to build your Debt Destroyer. In fact, that's going to be your top priority!

When you see where your money is going, think about those expenses and set priorities. Make a line item in your spending plan for your Debt Destroyer, and build it by taking money away from expense items you can live without.

Step Four: Pay off your debts!

Start with the debt at the top of your list. Pay the minimum monthly payment, plus the Debt Destroyer amount (10% of your gross income) to that debt until it's gone. When debt number one is gone, target debt number two on your list. For this debt, pay the minimum payment + Debt Destroyer + the old minimum payment from debt one. When debt number two is gone, target debt number three on your list. For this debt, pay the minimum payment + Debt Destroyer + the old minimum payment from debt one + the old minimum payment from debt two. Continue with this system until all your debts are dust.

Step Five: When all your debts are gone, invest your Debt Destroyer + the total of all your old monthly payments. Convert that old Debt Destroyer into a Money Machine by using the money that used to create wealth for others to make you financially free!

By using these simple steps, you'll become financially independent in the shortest possible time. You'll have stopped trading your life energy for someone else's profit. For the first time in your life you'll be calling the shots. You'll be free!

If these steps seem a bit confusing, good. That's why I wrote a 200-page book with a much more detailed explanation.

Find more money advice at www.MoneyTalks.org.