My Moms Newsletter: Volume 1 Issue 1

Debt Reduction and Credit

http://tripleaaacredit.blogspot.com

Here is the truth from the time you guys reach the age of majority you are targeted by big business. Hellif the truth were told big business has been gunning for you from before your teen years.

Come to Me, My Pretty…

(

The Wizard of Oz

)What is the first thing that you receive when you enter college? Credit Cards. Credit cards and with sucha ridiculously low limit, such as $400. That $400 seems so innocuous, so small that you are made to feelas though you can not get into any trouble. What’s $400? The problems come when you begin to makethe minimum payment on the card, but the biggest violation is when you miss a payment or theminimum pay by date. You miss the minimum pay by date and your interest rate will rise from 3 to 6%to 25%. Wait…it gets better. The credit card company then attaches other fees and taxes and all of theselittle charges escalate and snowball and then next thing you know your $400 limit is now $1,200 of debtand they’ve got you.Guess what? It is not over. You pick up your second credit card, thinking that you will pay off the firstand now you are on the path to financial destruction.You begin to feel overwhelmed and you give up. Wrong Move.Do not use credit cards. For the rest of you already caught there is a way out, there is a way through.It is unfortunate that your credit ratings are wrecked long before you understand what the power of good credit ratings signifies to the powers that be and the world.A good credit rating enables the purchasing of homes, cars, and garners respect. Respect; is something Ibet you had not considered as part of your credit rating.I am going to show you how to get out of debt and how to build or establish triple A credit in 30 days.This is not for those of you looking for a quick fix or those of you not serious about getting out of debt.You will need to put in the same amount of effort to get out of debt as you did so easily getting intodebt. You will sacrifice some weekends and shopping sales to this process if you are serious about yourfinancial freedom. This is not for the lazy or those of you looking for the quick and easy way out.FYI: The newsletters will be kept to two pages. If more pages are needed then know it was important.Okay, here we go:The first thing to do is to know what you owe. How deeply in debt are you? Are you treading water bypaying the minimum or are you ignoring your outstanding debt that will one day be your own personaltsunami?We are going to address the debt you KNOW you have and have been paying; major credit card debt issomething we will address in a future newsletter release.

Excerpts from Wikipedia

:The

debt-snowball method

of debt repayment is a form of debt management that is most often appliedto repaying revolving credit — such as credit cards.

Methodology

The basic steps in the debt snowball method are as follows:List all debts in ascending order from smallest balance to largest. This is the method's most distinctivefeature, in that the order is determined by amount owed, not the rate of interest charged. However, if two debts are very close in amount owed, then the debt with the higher interest rate would be movedabove in the list.

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Commit to pay the minimum payment on every debt.

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Determine how much extra can be applied towards the smallest debt.

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Pay the minimum payment plus the extra amount towards that smallest debt until it is paid off.

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Then, add the old minimum payment from the first debt to the extra amount, and apply the newsum to the second smallest debt.

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Repeat until all debts are paid in full.In theory, by the time the final debts are reached, the extra amount paid toward the larger debts willgrow quickly, similar to a snowball rolling downhill gathering more snow (thus the name). The theoryworks as much on human psychology as it does on finance; by paying the smaller bills first, theindividual, couple, or family sees fewer incoming payment requests as more bills are paid off, thus givingongoing positive feedback on their progress towards eliminating their debt.

Simple Example

Ignoring interest rates, let's pretend you have the following debt (along with the minimum payments):

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Car Payment - $2500 balance - $150/month minimum

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Credit Card A - $250 balance - $25/month minimum

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Loan - $5000 balance - $200/month minimum

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Credit Card B - $500 balance - $26/month minimumYour minimum payments for all debt would be $401 per month. You would order your debts in thefollowing order (lowest to highest):

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Credit Card A - $250 balance - $25/month minimum

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Credit Card B - $500 balance - $26/month minimum

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Car Payment - $2500 balance - $150/month minimum

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Loan - $5000 balance - $200/month minimumNow, assuming you had $100 extra per month to send in, you would apply that $100 to the Credit CardA so that the payment for it would be $125 per month and the other debt would receive the minimums.