How To Pay Off Credit Card Debt

Debt is a horrible master. Nothing saps wealth like being in debt. Just take your monthly payments, add them together, then times it by twelve.

How much do you spend on debt?

Once you get the number go to this compound interest calculator. Set as the interest rate a reasonable rate (try 6%). Then set the years to the average length of a car loan (5 years), then take your monthly amount you spend on debt and add it to the calculator. Select the compound interval to yearly. What is the number you get? Image what you could buy or save if you paid off debt!

How do you pay off debt? Follow these simple steps:

1. Get the current balances for your debt accounts.
2. Throw the amounts and list in excel or Google spreadsheets.
3. Sort the list from smallest to greatest.
4. Add due dates, minimum monthly payments
5. Pay off the smallest amount ASAP
6. Take the minimum payment you were paying for the smallest balance and add it to the next smallest balance. Ex: Visa minimum is $50 per month, Master Card is $100. After VISA is paid off, apply th $50 to the Master Card monthly payment making it $150
7. Keep doing this until you reach your mortgage.
8. At this point I would apply half of what you were spending on consumer debt to pay off your mortgage faster!
9. Celebrate!!

How to use YNAB to Recover from Financial Set Backs

My emergency fund went from $1,200 to nothing within two weeks.

An unexpected bill for a doctor visit a month ago. The car is overheated, my other car needed two new tires. A class was cancelled and financial aid now says we owe money. My son's medicine was more expensive than normal. 

Things for April were going well, but it is amazing how bad things happen quickly, silently, and without warning. In two weeks our funds dropped to zero. The financial peace we've been building now has taken a step back, and for the first time in awhile, I am feeling the strain of more month than cash.

What happens now? Use debt to bail myself out? Isn't that the mantra, have a credit card for emergencies. My plan of attack (my budget) is now thrown out the window. We are starting May with only $1,050 to budget for May. This only covers my mortgage, one week of food, and to keep the water and lights on. Not a happy place to be at for the average person, but I'm not too concerned.

I get paid next Friday (start of May basically) so does my wife. This adds a cool grand to our account, which will cover our basic needs and mandatory obligations for the month. My next paycheck then covers our comfort obligations and some fun money. Since May is a month that my wife gets an extra paycheck (I get two since I'm paid weekly), the rest goes back into the account. By the end of May our fund will be replaced, and next month paid for with May's income.

How did I do this? 

Using the income you've set aside for next month and any funds not budgeted. Fill the budget categories and go as far down your budget until you are left with zero or close to zero. Then, as you get paid, continue filling your budget until zero. For us, we will have May completely paid by my second paycheck for the month. If you overspend, just move funds between categories to make up for the shortfall. We are expecting the other 2 paychecks from my wife, and 3 of mine to cover June's expenses and refund our emergency cash reserves by the end of May. 

The key is to keep to your budget and spend less than normal, and not to give up.

How about you? How you been in this situation before?

How to Increase Your Net Worth

Want to increase your net worth quickly? Pay off your high interest debt (credit cards, payday loans, etc...). Take that money and split it between paying off other debt and savings. Below are quotes that should help motivate you and show current state of American finances.

Wired magazine, "In a 2006 survey, 30 percent of people without a high school degree said that playing the lottery was a wealth-building strategy. ... On average, households that make less than $12,400 a year spend 5 percent of their income on lotteries."

While some may argue that this does not apply to them, the concept is still the same. Any investment, whether in stocks, forex, gambling, binary options, that promise high returns with low risk and with little investment are most likely scams. Due diligence is required when it comes to investing. Get rid of the thoughts that high rewards can come to you via "risk-free" investments with "little or no money down". Also, gambling never succeeds in the long run, only the house wins. Prudent investing equals good returns with moderate risk.

According to David Wessel of The Wall Street Journal, Americans "spend about half of their food budgets at restaurants now, compared to a third in the 1970s."

I like going out to eat. I love the idea of not having dishes to clean up afterwards. It allows me to talk with my wife and enjoy the night out, but not long ago we use to spend around $500 per month going out to eat! Imagine what I could have done with 500 dollars a month? Pay off high interest debt, invest in mutual funds, donate to charity, but I decided that eating at Cracker Barrel was better investment. I don't suggest to become an ascetic and never go out to eat, or buy lattes again, but I just suggest to cut back. We reduced our restaurant budget to 100 dollars, and with the extra $400 dollars we paid off our two credit cards.

In the 1960s, wages and salary income made up more than 50% of GDP. By 2011, it was less than 44%, as dividends, interest, and capital gains made up a growing share of the nation's income.

Who are the wealthiest individuals in the nation? I can tell you they are not wage earners, so what does that say to you? Pursuing a higher wage works out in the short term, but in an increasingly global environment wages will continue to drop. Why pay $20 per hour for an American worker while I can pay someone $5 for the same labor. Look on freelance job boards. People in other nations charge rates below the USA minimum wage for skills that would land an American a decent job, like programming. This all leads that the only way to retire wealthy is to invest, and do so constantly.

According to ConvergEx Group, "Only 58% of us are even saving for retirement in the first place. Of that group, 60% have less than $25,000 put away. ... A full 30% have less than $1,000.

This is self explanatory. The sooner you invest, the more rich you'll be later.

On a final note, don't rely on some government pension. Only you know what is best for you and your family.