Money Monday #6

remember Money Monday?

i've been meaning to resurrect it, but every monday brings new distractions.

back before i totally slacked off with this, a lot of you asked about debt and how to "get out of debt."

a lot of you also asked how having debt can affect you purchasing a home.  i'll give you the quick answer to that question: having debt will limit how much house you can purchase.  the qualifications are all based on ratios and percentages, so if you can hold off buying a house for 6 months or a year or whatever to pay down your debts, you'll be able to afford a more expensive home.

and now i'll teach you about a WONDERFUL resource that can help you pay down those debts quicker.

the best part about it is that you can use this at home... you don't need a debt management company.

it's called PowerPay.  and the website is powerpay.org

and you'll need to know 3 things about your debts:  interest rate, balance, and payment.

*follow the steps to make an account.
*next click on the PowerPay tab at the top.
*then enter in your creditor information.

your screen will look like this.

so say those are all my debts... if you can see at the bottom under "results" it will take me 5 years to pay off all those debts (paying the minimum payment) without power payments.

now... the MOST IMPORTANT THINGS about power paying down your debts is that
1.  it won't work if you add more debt
2.  the total dollar amount going towards debt reduction remain constant

then we can see how long it will take us to pay off these debts with power payments.  click on "payment calendar" in the bottom right hand corner under "what should i do next?"

(sorry this is small... click on the photo to enlarge)

*if we do these power payments it will take us 2 years and 7 months to pay off these debts instead of 5 years.  i don't know about you, but that sounds WAY better.  PLUS, we could save over $1700 in interest.

so how does it all work?

below the results will be a a payment calendar.

*as you can see... for a little while you are making all the regular payments, until one is paid off... then the MAGIC happens. 

*how this works is you would take the money that you were paying on a debt that is now paid off and apply that amount to another debt.  you can select which method from a drop down menu at the top, but it's best to apply to the highest interest rate first.

*fairly soon you're taking all those monthly payment amounts and power paying down your debts one by one.

this takes a very disciplined person to accomplish this.  you can see how important it is to not acquire any more debt.  but the amount of time and money you can save can big your biggest motivation!

on the first screen you can also add extra payments (a great one to use is your tax refund!!) and pay it off even quicker!

i LOVE this resource... and hope you have fun playing around with it.

there are many other things you can explore on this site like starting an emergency savings (extremely important), balance transfer benefits, power saving, spending plans, housing calculators, and more.

i hope this helped some of you!  email me with any questions you have and i'd be glad to help.

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