Business & Finance

Guest Column

How to Get Out of Debt Fast

8afea91e813e8fabed9c_untitled__15_of_20_-14_pp_11W.jpg
Carletta O. Beckwith, CPA
8afea91e813e8fabed9c_untitled__15_of_20_-14_pp_11W.jpg

Debt has all so comfortably been hailed the American way of life. According to the American Household Credit Card Debt Study published by the Federal Reserve Bank of New York, the average American in Debt carries $16,425 in credit card balances, which cost them approximately $1,300 a year in interest payments!

So, what do you do when you are drowning in debt? To be fair the increase in debt is not solely driven by an increase in lifestyle. According to Motley Fool, the rising medical and housing cost have grown at a much faster rate than income, which has resulted in Americans using their credit cards to make ends meet.

What's the Solution?

Sign Up for E-News

I am a supporter of Dave Ramsey's approach to using the snowball method to pay off debt fast! This approach is designed so that you tackle your debt in chronological order from the smallest to the largest. 

It may not always be the most appropriate when paying off debt with lower interest rates prior to paying off debt with higher interest rates since this will cost you more in interest expense.  However, the psychological aspect of tackling the smaller debt first tends to motivate individuals to stick to the debt repayment plan.  You should commit to a debt repayment plan that keeps you motivated until it is paid in full.  Be sure to consult a certified financial planner for guidance on paying down your debt as every situation is different.

If you decide to use Dave Ramsey's snowball approach to eliminating debt fast, here are the steps you must take:

  1. Make a list of all your debts from the smallest to the largest balance
  2. Make a list of all the minimum payments you are currently making toward each debt
  3. Determine how much additional money you can apply to your debt
  4. Take the additional money and add to the payment of the smallest debt
  5. Once the smallest debt is paid, take its payment and apply it to the next smallest debt, continuing to make minimum payments on all the rest. 
  6. Repeat until all debts have been paid off
Debts Balance Interest Rate Minimum
Credit Card 1  $700 15%  $25
Credit Card 2  $1,200 20%  $50
Car Loan  $10,000 4%  $184
Student Loan  $25,000 5%  $265

If you make the minimum on everything and add an extra $200 to the smallest debt-Credit Card 1, you will pay it off in approximately 4 months. 

Then you will tackle Credit Card 2 with $275 per month ($200, plus the $25 from minimum on Credit Card 1, and $50 from minimum on Credit Card 2), you will pay it off in another 4 months. 

Now you have $459 ($275 plus $184) that can be used to pay down the Car Loan, you will have it paid in about 20 months!

When you start paying off the Student Loan, you will have $724 ($459+$265) to eliminate your debt and you will be debt free in another 29 months!

The debt snowball method is an extremely powerful method.  Once you get started, you are motivated to stick with it.  Once you have all the debt paid, you can now start to use that money towards savings and investments! 

 

The opinions expressed herein are the writer's alone, and do not reflect the opinions of TAPinto.net or anyone who works for TAPinto.net. TAPinto.net is not responsible for the accuracy of any of the information supplied by the writer. Click here to submit a Guest Column.

TAP Into Another Town's News:

Sign Up for E-News

Franklin Township

Free Maker's Day at YingHua International School

February 19, 2018

It has been a big hit for the past years that is why we are doing it again.  Let's Make Things!  

YingHua International School at 25 Laurel Avenue, Kingston, NJ sponsors a FREE Maker's Day on March 3 from 9:30 - 3:30 pm.  Everyone is invited to join as for a fun learning experience for all ages.  Learn how things work!  From Science, Technology, ...

Following Florida Massacre, EB Schools Add Armed Officers to Security

February 17, 2018

EAST BRUNSWICK, NJ - At a meeting Thursday night, the East Brunswick board of Education unanimously approved a resolution to engage the East Brunswick Police department to place armed police officers at each school building in the district throughout the entire school day.  

In a report released by superintendent Victor Valeski yesterday, township officials asserted that the move ...

Bernards Police Locate Body of Township Teen in Wooded Area

BERNARDS TWP., NJ -  Bernards Township Police announced late Thursday afternoon that the body of a 19-year-old township resident, Lydia Comtois, had been located in a wooded area of Liberty Corner following a search by personnel and volunteers from numerous public safety organizations. 

A preliminary investigation indicated the young woman's death was not deemed to ...

Filthy, dangerous conditions, theft and assault alleged at recently-opened Newark shelter

Newark, NJ—Antoinette Jackson, Sonya Webb and Andrea Eaddy sit in a McDonald’s on a cold winter morning, not far from the homeless shelter they currently call home.

During the day, they count on places like McDonald's to stay warm. They must leave the shelter at 7 a.m. and can only return after 4 p.m., even when temperatures drop below freezing.

When the ...

Following Florida Massacre, EB Schools Add Armed Officers to Security

February 17, 2018

EAST BRUNSWICK, NJ - At a meeting Thursday night, the East Brunswick board of Education unanimously approved a resolution to engage the East Brunswick Police department to place armed police officers at each school building in the district throughout the entire school day.  

In a report released by superintendent Victor Valeski yesterday, township officials asserted that the move ...

Bernards Police Locate Body of Township Teen in Wooded Area

BERNARDS TWP., NJ -  Bernards Township Police announced late Thursday afternoon that the body of a 19-year-old township resident, Lydia Comtois, had been located in a wooded area of Liberty Corner following a search by personnel and volunteers from numerous public safety organizations. 

A preliminary investigation indicated the young woman's death was not deemed to ...

Filthy, dangerous conditions, theft and assault alleged at recently-opened Newark shelter

Newark, NJ—Antoinette Jackson, Sonya Webb and Andrea Eaddy sit in a McDonald’s on a cold winter morning, not far from the homeless shelter they currently call home.

During the day, they count on places like McDonald's to stay warm. They must leave the shelter at 7 a.m. and can only return after 4 p.m., even when temperatures drop below freezing.

When the ...

Big Little Railroad Shop in Somerville Runs Out of Steam; Store Closing

February 18, 2018

SOMERVILLE, NJ – The Big Little Railroad Shop, an iconic retail store for 27 years and a fixture on Main Street most of those years has run out of steam.

The hobby shop for serious model railroaders, which first opened in 1991, is selling out its inventory at reduced prices and will close its doors at 63 W. Main St. for the final time on Sunday, Feb. 25.

Owner Jen Lush and her husband ...

Somerville: Cobalt Apartments to Receive Land Development and Planning Award

SOMERVILLE, NJ - The Somerset County Board of Chosen Freeholders and the county Planning Board will honor six local projects, including the Cobalt Apartments on Veterans Memorial Drive at the 35th annual Land Development and Planning Awards at 6 p.m. Tuesday, Feb. 20, in the Freeholder Meeting Room, located on the third floor of the county Administration Building at 20 Grove St.

Free ...

By Trying to Help, You are Committing a Crime

 

SOMERVILLE, NJ - Somerset County Prosecutor Michael H. Robertson and Somerset County Prosecutor’s Office Chief of County Detectives John W. Fodor remind residents that should you come across images or videos depicting a child being physically or sexually abused do not share those images or videos online.

Images and/or videos depicting the sexual abuse of minors are considered ...

Big Little Railroad Shop in Somerville Runs Out of Steam; Store Closing

February 18, 2018

SOMERVILLE, NJ – The Big Little Railroad Shop, an iconic retail store for 27 years and a fixture on Main Street most of those years has run out of steam.

The hobby shop for serious model railroaders, which first opened in 1991, is selling out its inventory at reduced prices and will close its doors at 63 W. Main St. for the final time on Sunday, Feb. 25.

Owner Jen Lush and her husband ...

Somerville: Cobalt Apartments to Receive Land Development and Planning Award

SOMERVILLE, NJ - The Somerset County Board of Chosen Freeholders and the county Planning Board will honor six local projects, including the Cobalt Apartments on Veterans Memorial Drive at the 35th annual Land Development and Planning Awards at 6 p.m. Tuesday, Feb. 20, in the Freeholder Meeting Room, located on the third floor of the county Administration Building at 20 Grove St.

Free ...

AtlantiCast

AtlantiCast Medical Minute: Atlantic Orthopedic Institute’s Scoliosis and Spinal Deformity Center

On this episode of the AtlantiCast Medical Minute, we’ll take you inside the Atlantic Orthopedic Institute’s Scoliosis and Spinal Deformity Center, with the center’s director, Jason Lowenstein, MD.

Video Link: https://www.youtube.com/watch?v=1M7euCp86-c

AtlantiCast Episode 011

Breaking Atlantic Health System news on this week’s AtlantiCast! Plus, find out why Morristown Medical Center is one of the best hospitals in the nation when it comes to recovering from joint surgery, see the newest center for fighting brain cancer and an Atlantic Health System red-carpet premiere!