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Go on a Debt Diet

they pay off all of their consumer debt and automobile loan, and then turn
the full force of their money to paying off their house four years later.
Add up the new fi gures, which are pretty impressive: This family, which

was in debt up to their eyeballs, is completely debt-free in five and a half
years. But the best is yet to come. Stan and Barbara now have $2,943 per
month to invest (the $2,675 original total of minimum payments, plus the
$268 debt termination money).
They now have in their hands the money they previously gave away to
lenders every month, but instead of spending it and buying more stuff—they
invest it. Please remember for all intents and purposes, this money was gone.
It was no longer theirs. They were giving it away. They did not have access to
it. It was not theirs. What they have done is powerfully take it back, and now
use it to make them secure. By investing that $2,943 every month for the next
20 years in an AIP fund (we will assume a return of 10 percent here), their
money will grow to $2.2 million by the time they reach 65. Stan and Barbara
not only get out of debt—they become millionaires.
Imagine that. Isn’t it amazing how simple becoming rich really is?

Your Debt-Free Date

To determine how long it will take you to become completely debt-free, add
up your debt, and calculate your payoff. Ideally, this should be 10 percent of
your gross income. If you can’t set this aside, put down what you can, but start
somewhere. Then determine how many years it will take for you to become
completely debt-free. Using this strategy, most families can become com-
pletely debt-free, including their home and cars, in three to seven years. My
debt elimination plan is simple and realistic. It has worked for thousands of
people, and I know it can work for you.
Some key thoughts: Right now, don’t worry about which account has the
highest interest rate. This plan accelerates your debts so quickly that the few
months you pay higher interest won’t make that much of a difference. Most
of you will be able to stick to the process described, and pay off your debt. For
many of you, I know that it is not possible to reduce the rates you are paying,
but if you can reduce the interest rate you are paying as described earlier, do
so. Then simply recalculate the pay-off ratio to determine the new pay-off
priority. Adjust as required.
The key to this process is momentum; as you see bills completely elimi-
nated, it becomes much easier to keep going. You gain enthusiasm and a real
sense of achievement.

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