Saturday, August 24, 2013

Financial Planning

Financial Planning is a very important part in being able to pursue our dreams, regardless of what they may be. To be able to afford FullTiming or fulfill other dreams one of the important things to do is pay off all debts. And I have to admit we carry more than we should. Now there are many varying ways of accomplishing this, here are two I have come across the most. This pertains to credit card and loan debt. Mortgage debt would be a whole other story but fortunately that’s not a debt we have.
1) The first way is to gather together all loan/credit card amounts and minimum monthly payments. Next you need to figure out how much you can afford to put towards paying things down each month, You then substrate the minimum payments for all but the smallest debt from this amount. You pay the minimums on all higher balances and to the smallest debt you pay the remainder as well as any “found” monies each month. Doing this enables you to pay off the small amount quicker. The important part of this is when that debt is paid off you then take the full amount of what you paid each month plus the minimum payment amount of the next smallest loan/credit card and proceed to pay off that one. You continue to do this until all is paid off.
   The positive to this is quicker gratification of seeing a debt go away.
2) The second way is again gather all amounts and minimum monthly payments but now you also need to find the Annual Interest Rate of each. You apply the higher payment amount to the loan/credit card with the highest Interest Rate and proceed to pay each off in order of Interest Amount. If two happen to have the same Interest Rate you start with the highest balance due. Again as each is paid off snowballing the amount paid to the next.
  The positive of this method is paying less interest in the long run.
Both make sense, the biggest obstacle for me is paying only the minimum amount due on the others, that goes so against how I usually do things. 
***Very Important no matter which way is chosen:
 Remember to pay each one each month as you certainly don’t want any late fees added! Be honest with how much you can afford to put towards paying debt off.
Continue to snowball amounts as each is paid off (Remember your goals)
Be sure to apply “found” money to paying off debts as a way to get rid of them sooner!
And Stop Adding To Debt with unnecessary spending! (hmm define unnecessary spending!!!)