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Nancy Gragg
John Gragg

225 Avenue I Suite #201
Redondo Beach, California 90277

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Erasing your Debt

| August 25, 2016
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Debt & Budgeting

The first step is to take a deep breath, and have confidence that you can rid yourself of debt.  You don’t want debt to burden you for the rest of your life, so make it a point to start controlling your debt today.

Disclaimer! Don’t let the numbers scare you away from reading the article.  I am only using them as an example, but the main points are there if you don’t want to dive deeper.  Mr. Bill is only an example I use to tell a story of how to handle his particular situation.

Mr. Bill’s Debt Obligations

Student Loans: $50,000
Car Loan at Carmax: $25,000
Visa Credit Card: $10,000

  1. Categorize your debt correctly
  • The loans with the highest interest rates should be paid off initially regardless of the amount of the loan. This means if Visa has a 15% interest rate, and the car loan at Bank of America has an interest rate of 4%, then the Visa balance is your top priority.
    • Priority # 1 - Visa Credit Card @ 15% interest
    • Priority # 3 - Car Loan at Carmax @ 6%
    • Priority # 2 - Student Loan @ 5% interest 
  1. Refinance Immediately
  • Car Loan – This one is easy. I purchased a car at Carmax and by going to my local Bank of America branch I was able to bring down my interest rate by 3%, and now each payment goes more toward my principal. 
  • Visa Credit Card – Know your monthly payment, your current interest rate, how long you have been a customer, and if you have a good credit score. Once you get that together you should call and ask for a lower rate.  You should also look into Credit Card Balance Transfers, but make sure you do your research before pulling the trigger.
  • Student Loans – There is a ton of information out there, but start by going to Credible to learn a little bit about your options and where you stand.
  1. Cut your expenses
  • Check out my previous Blog 87,281 Reasons to Cut the Cord for one way to cut expenses. Here are a few ways to cut monthly expenses that can go toward your high interest rate loans.
    • Cable Television (replace with Netflix)
    • Starbucks Coffee habit (make your own coffee)
    • Eating out frequently
  1. Make a budget
  • Write down all of your fixed expenses (Rent, Car payment, gym, cable, internet, etc.) and decide which expense you can live without.
  • Determine how much you can afford to spend on the things that make you happy (dining out, happy hour with friends, etc.) and at the beginning of each month take that out as cash and don’t spend more than that amount.
  1. Make extra money where you can
  • This one is easier said than done, so I won’t go too far into this one. Some ideas:
    • Overtime
    • TaskRabbit (check it out!)
    • Side hustles (babysitting, house sitting, pet sitting, etc.)
    • Uber
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