Using The Baron Solution™ debt-reduction strategies, the average person can become completely debt free including their mortgage, student loans, car loans, and credit card debt in 5-7 years using only their own income.
Debt is a scary place to be; it is emotionally and financially threatening. It limits your ability to meet daily expenses, invest for the future, and creates a long chain of financial difficulties. Like all problems, debt will dangerously compound if you ignore it, so you must confront it head on to positively change the condition of your life.
Begin your financial turnaround by writing down the monthly payment, interest rate, and total amount owed for each of your debts. Once you know where you stand with each of your creditors, attempt to lower your interest rates. This involves calling your creditors and asking for lower rates, transferring balances to lower interest rate credit cards, or more aggressive tactics such as home refinancing, to turn liabilities into lower interest rate, tax-deductible debt.
Next, create a realistic budget and eliminate unnecessary expenses. Take any free cash flow and use it to pay more toward your highest interest, non-tax deductible debt. On all other debt, pay only the minimum. Do this every month until that particular high-rate debt is paid off. Once that account has a zero balance, use the money you normally would have expended on your monthly debt payment, plus any free cash flow, to pay toward your next highest interest rate debt. Continue this process until all your debt is paid off. BaronSeries.com has resources, planning tools and coaching services to help you find an additional $500 to $6,000 a year in your family budget to apply toward your debt.
It is important to note that if you have savings, you should use it to pay down your highest interest rate non-tax deductible debt. It makes more sense to pay off debt at interest rates of 12-30%, than earn less than 3% interest in a money market or savings account. Also, remember the interest rate on your debt is equivalent to the after-tax return on an investment. So, if you are not outperforming on an after-tax basis the interest rate being charged on your debt, it is more advantageous to pay off your debt.
The mentality that created your current financial situation will not suffice to solve your debt issues. For most, the financial difficulties you face have taken years to develop, so they will not be solved overnight. As much as you would like to believe, there are no incantations or magical formulas for ridding yourself of debt, only the disciplined strategies of sound money management and investing. You must deal with the issues that drove you into debt before attempting to implement any debt reduction strategy. If you do not start with your own thought process, any plan of action will not be effective in the long-run and may put you in a worse financial position. To transform your life, you must change the way you think about finance and credit. On the occasions that you do use debt, it should be for the purpose of buying assets, not consumer goods that depreciate or have no value. Remember, it only takes a little bit of intelligent thought and action to make a big difference in your bottom line.
William R. Patterson is a national best-selling author and award-winning financial coach. His breakthrough book, The Baron Son, has been translated around the world and featured in the Forbes Book Club. William is an internationally recognized business authority who has been a featured guest on over 300 television and radio programs. William’s website, BaronSeries.com, is also winner of three 2008 Web Awards including Best Wealth-Building Site. For more information and coaching on THE BARON SOLUTION Strategies for Wealth and Business Success, visit: http://www.baronseries.com.