Get Out of Jail

Being in debt is like being in jail. You want to get out of jail now.
Get Out of Jail

Being in debt is like being in jail. You want to get out of jail now. Getting out debt means you get out of jail. Of course this is not literally, it is figuratively. When you are encumbered by debt, you feel restrained. Debt keeps you from enjoying financial freedom. It robs you of your peace. It will cost you $95.30 in interest. 

Aren’t you tired of this? Don’t you want to break free? Is it too much for you? If so, it is time for you to take control and get of jail! Start by taking a good hard look at your financial situation. This means find out how much you owe and to whom you owe it. Stop avoiding it.

  1. Look at the mountain of statements you have avoided opening. Open them.
  2. Then, find the most current statements.
  3. Shred the rest. You don’t need them.
  4. Now, look at the pile in your hand. It’s smaller. 
  5. Look at each of your statements and organize them by the smallest amount owed to the highest amount owed.

By doing it this way, you are going to be using the Debt Snowball Method (DSM). There is another way called the Debt Avalanche Method (DAM). The advantage ot the DAM is that it saves you money on interest that you pay on your debt. The main disadvantage is that people feel discouraged because they don’t get the small victories as they do with the DSM.

Let me explain. When you use the DSM, you pay off the smaller balance debt first. You do this by paying as much as you can on that debt and making the minimum payments on the rest of your debt. When that small debt is paid, you then take the payment you were making on that debt and apply it to the next smaller debt, while you continue making the minimum payment on the rest of your debt. This method tends to encourage people because they see their debt disappearing. 

However, the smaller debts might have a higher interest rate than the higher debt. This means you will pay more in interest. You have to decide for yourself which method to use. How much are you willing to pay for your debt? How long do want to stay in financial jail? Either method provides you with a way to Get of Jail.

One thing you have to remember is that the longer you take to pay your debts, the more interest you will pay. Let’s say you owe $5000. The interest on it is 3.5%. If you decide you can pay it off in one year, your payment is going to be $424.61.  

Look at what happens when we take two years to pay it off.  Our monthly payment drops to $216.01. However, the amount of interest we paid for those two years is now $184.33. 

The loan amortization calculator I used for this example is a template from Microsoft Excel. If you have Excel, select a new document and type loan amortization in the search box. You will find it there. If you don’t have Excel, Google “loan amortization” and you will find some that you can work with online or for download.


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