SERIES: Restructuring Debt – Part One

Welcome to the latest series at – Restructuring Debt

I am excited to embark on this series of posts because interest paid toward debt is one of the largest obstacles to gaining traction for one's own Debt Freedom March.

Part One – Know What You Are Paying

I have said and will continue to say that I believe that the top causes of financial failure are disorganization and the lack of a plan.  If you want to gain the maximum traction on your Debt Freedom March, you need to pay the minimum interest possible.

In many of my financial counseling appointments, we add up the amount of interest that is being paid each year, and it SHOCKS the ones who have been paying it!  There is something about SEEING IT ON PAPER that really connects us to the fact that paying interest is not a healthy financial plan.

I have developed a tool to help you easily calculate the amount of interest you are paying every month and year.  The [download#70#nohits] is an Excel spreadsheet tool that will help you organize your debts and clearly understand the amount of interest that is being paid on the debt.

The form is very user-friendly.  All you have to do is enter the debt name, the balanced owed, the monthly payment you are actually paying, and the annual interest rate of the debt.   Below is an example.

In this example, you can see that this person has four debts totaling $44,650.  The big issue is that $4,317 is being paid in interest every year.  In fact, only 53.6% of the monthly payments is being applied to principal reduction.

Now that we are organized it is time to look for ways to reduce/eliminate the interest being paid.  That will be covered in Part Two of "Restructuring Debt"!

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  1. Travis on August 13, 2008 at 10:05 am

    I love this….. This one eye opener is what caused my wife and I to have our I.H.H.E. moment and thus we have become Debt Free!!

    It was a few years back when we started to do more banking online that we “noticed” HOW MUCH out stuff was costing us!

    Sure the interest amount had always shown up on our paper statements, but they just kind of got lost with all the other numbers. It was there on the electronic statement that the credit card company made their mistake. They had put INTEREST into a separate column, and it caught my eye…

    Now, when making a large purchase, we never think in terms of how much down and how much per month…..

    The question we ask is How Much and can we find a way to buy it cheaper with cash money?

  2. Evelyn Guzman on August 14, 2008 at 10:55 am

    It is such a good idea to list down one’s debts according to the interest rate paid. This way it is easy to figure how to go about paying ones debts. No wonder the title of this article is Restructuring Debt. I can’t wait for the other parts of this series.

    Evelyn Guzman
    Debt Challenger

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