6-Steps to Financial Freedom

Early payoff of debts has one great advantage - FREEDOM. Here is how to do it.

1. List your long term debts, like credit cards, house payment, a 2nd mortgage, car payments, etc.

2. Figure out how much spendable cash you have using my 3-Step Organizational Plan to manage your money.

3. Decide how much of your extra spendable cash you are able to and willing to apply toward these debts, whether it be $25.00 or $300.00.

4. Decide which debt you will apply any extra toward first, and pay just the minimums on the rest. Usually the best bet is to apply extra toward the smallest one first in order to get that paid off as fast as possible.

5. When the first one is paid off, take that total amount you were applying to it and apply it to the one you want to pay off next, usually the next smallest one.

6. When that one is paid off, repeat step 5 above until all debts are paid off.

Here's how it worked for us.

Our Goal: to have all debts paid off in time for retirement. We didn't want any house payments, credit card bills, car payments, etc. following us into retirement. We plan to have fun, not pay bills.

Our process: We listed our bills including credit cards, mortgage, 2nd mortgage and two car payments. Then we projected out when each would be paid off applying extra toward one, then applying that full amount to the next one, until they were all paid off. Following that plan would get all debts paid off in time to enjoy retirement.

Our result: This worked so well, we got all debts paid off nine years ahead of the schedule. In fact, now I have set the date for early retirement.

It will work. All you have to do is make the plan and follow it. Or to use a well worn phrase: Get 'er done!

See Update on this post at Organizing For Retirement posted 5/26/07.