ICFE eNEWS #16-10 - April 11th 2016
Ready for a Change
By Jim Garnett, a/k/a Ask Mr.G, a member of the ICFE's Board of Educational Advisors
If you are living "paycheck to paycheck" and never seem to
be able to get ahead, maybe you are ready for a change?
The Martin's are a pretty average family, as far as families
go. They "live paycheck-to-paycheck," don't have much in
savings, and never seem to get ahead financially, regardless of
the fact that both have received steady raises over the years.
They say they are tired of living like this and would like to
get out of debt. They are ready for a change.
they sat down together and discovered that they have a total of
$257,430 of debt and are spending $2,463 every month making
payments toward it. These debts include their mortgage, two
cars, student loans, and five credit cards.
have just met with a counselor and have been told that with a
little preparation and a focused plan, they can be completely
out of debt in about 10 years! Mr. Martin told his wife,
"Imagine what we would could do with the money that we have been
spending on debt! We could adequately fund savings, retirement,
college educations for our kids, charitable contributions, and
even a few special projects we'd like to do."
abbreviated version of what the Martin's were told they must do
in order to realize their dream of being out of debt.
The Required Preparation
- Discover whether their monthly spending is greater or
lesser than their income. They downloaded a helpful sheet
from AskMrG.com that assisted them in listing everything
thing like housing, groceries ($200 per person per month),
car expenses such as payments, gas, insurance, and
maintenance ($50 per month), utilities, medical, lunches,
clothing, daycare, pets, contributions, savings, and
miscellaneous entertainment. They consulted their checkbook
ledger, their credit card statements, plus wrote down their
cash expenses in a small notebook for a month.
to get where we want to be financially, we must know where
we are. If we spend more than we make each month, we have a
couple of options to make things better: (1) make more, or
(2) spend less.
Without a monthly positive cash flow, we
will be destined to failure in our attempt to get out of
- Decide to stop creating additional debt. To create more
debt while we are trying to get out of debt is like trying
to fill up a bucket with a big hole in the bottom. The leak
has to be stopped before progress can be made. Stop using
credit cards for a while to give you a much better
perspective of what and how much you can afford to spend.
The Required Plan
This plan triggers a "snow ball" effect in paying off debt that
enables it to be paid off much faster than we otherwise would.
It does not require us to pay more toward debt than we presently
are, just not to pay less.
- View your debts as one debt. In three columns list the
names, balances, and the monthly payment for every debt you
have. Include such things as credit cards, student loans,
mortgages, cars, boats. Total balances and the monthly
payments so you know how much debt you have plus how much
you are paying on those debts each month.
- Pay each creditor his monthly payment and do not
decrease that payment until that debt is completely paid in
- Transfer the payment of each paid off debt to the next
smallest debt. Any extra payment applied toward a debt
almost always goes toward the principal and greatly
expedites the payoff.
If the Martin's divided their
total debt ($257,430) by their monthly payment toward debt
($2,463), they would see approximately how long it will take to
pay off their debt not including interest charged.
That would be 104.5 months or 8.7 years!
Chances are that
without a plan to get out of debt, the Martin's will pretty much
have the same amount of debt in 8.5 years as they do now. When
most of us pay off a debt, we are ready to create another debt
to take its place. This tried and tested plan really works! We
know because in 2008 we became debt free!
This article is
certainly not an exhaustive study on the subject of becoming
debt free. I would heartily recommend Dave Ramsey's book "Total
Money Makeover," or if there is a "Financial Peace University"
seminar near you, it is well worth the money to attend.
Are you ready for a change?
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023
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Also, visit the ICFE's new Web site: StudentDebtHelp.org
Paul S. Richard
President - Executive
Institute of Consumer Financial Education (ICFE)
About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation). The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely.
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.
The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org). CASDRAP disbanded in 2010, shortly after the web site project was completed. In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.
The ICFE is also an on-line help for consumers who spend too much. ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.
Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org. Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G, a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.