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May 14, 2008 11:09 am US/Pacific
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Money 101 Credit Repair: How To Tackle Your Bills
(CBS)
Here is a simple formula used by Certified Financial Planners and credit counselors that you can apply yourself to get started on the road to being debt free.
Take a few minutes with a clean sheet of paper and start by deciding what percentage of your net income is wasted on things you don't need, like the fancy coffee or the spa treatment. Most of us can easily come up with 5% or more.
Keep that percentage in mind as you do the following:
A) Write down your total net income for one month
B) Write down your minimum monthly payments (What you are required to pay)
C) On the left side page, list your debts (Not cable, phone, power or insurance)
D) Beside each debt, list total balance, then minimum payment due
E) Now, divide your total balance by the minimum monthly payment.
F) Write this amount next to each debt.
G) Take debt with shortest payoff time and call it #1
H) Take next shortest payoff and put #2 until each debt has a # assigned
I) Take #1's monthly payment and add it to the 5% figure we used at the top.
J) Divide the total balance by the new amount and that equals the months it will take to pay off debt #1
K) Continue down through your bills until you have the total payoff time.
PLEASE REMEMBER, you are going to pay toward principle balance every month, not just the minimum payment. The more you reduce the balance, the faster you become debt free. You really should only have one credit card during this process to prevent rebuilding debt. Always use your extra income to pay down the highest rate cards first!
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