07th May 2009
Saving money, part 1
As I said in the first article I posed; our first task should be to reduce our expenses and pay away debt.
I know many have one or more credit cards; these are a dangerous item; often stealing lots of interests and money for you. If you have several credit cards I would recommend starting paying additional to the card you have used the least off.
After you have paid down the credit card you have lowest loans on, you use the freed money to start paying on the new smallest loan you have; you will this time add the money you spent to pay the previous lowest loan to pay down what’s now the lowest loan. As you probably get from this idea; you keep increasing freed money as you pay down loans, and you use the new money to pay down the other currently lowest loan to get away from as many loans as possible.
I know it might be tempted to use the money you get from not having to pay the smallest loan to something else; but believe me. It’s much better to keep using money from the smallest loans you have paid down to pay on the larger loans to get away from all of them.
I can try illustrating what I mean by an example:
Loan Currently paying New payments
1 500 us$/month 970us$/month, after finished load2
2 300 us$/month 470us$/month, after finished loan 3
3 100 us$/month 170 us$/month, after finished loan 4
4 50 us$/month 70 us$/month, after finished loan 5
5 10 us$/month 20 us$/month
Remember; you only pay additional to the lowest current loan; and keep paying the current amount till the lowest current loan is paid down.
Your goal here would be to start paying 20us$/month on loan 5 till you have paid it down; after that you start paying 70 us$/month on loan 4 till its paid down; next we pay 170us$/month on load 3 till its paid down, and continue with this structure to remove as much debt as possible, in as short time period as possible.
Keep in mind you should avoid getting new loans while paying down your current loans; if you need something you should try to save for it and pay everything at once; it will often save you a lot of money not to create more debt where you keep paying interests to the bank.
And if you look at the example above; you will reduce the time of paying the bank significantly, and will not be a slave of loans as you used to be. The main purpose is as I stated; to reduce our liabilities.
There is another option, but it will take some more time to pay down the loans; and that would be to save 30-50% of what you free to a saving or investment account. Your new scheme would be like this:
Loan Currently paying New payments Put to saving account
1 500 us$/month 735 us$/month, after finished load2 235 us$/month
2 300 us$/month 385 us$/month, after finished loan 3 85 us$/month
3 100 us$/month 135 us$/month, after finished loan 4 35 us$/month
4 50 us$/month 60 us$/month, after finished loan 5 10 us$/month
5 10 us$/month 20 us$/month
It will take some longer time to pay down the loans with option 2, but it will free money so you are able to buy items or use for emergency later, instead of getting new loans.
What we have done here is simple: we try eliminating liabilities, and not getting new loans, we want a more secure financial situation.
When and if you manage pay down all the loans you could use 33% for investment, 33% for saving, and 33% for personal usage each month.
I will later look at different ways of earning money online to help pay some additional to your lowest loans; this might be helpful for those who are currently unable to pay more money to their lowest loan.
-Kentaki-
As I said in the first article I posed; our first task should be to reduce our expenses and pay away debt.
I know many have one or more credit cards; these are a dangerous item; often stealing lots of interests and money for you. If you have several credit cards I would recommend starting paying additional to the card you have used the least off.
After you have paid down the credit card you have lowest loans on, you use the freed money to start paying on the new smallest loan you have; you will this time add the money you spent to pay the previous lowest loan to pay down what’s now the lowest loan. As you probably get from this idea; you keep increasing freed money as you pay down loans, and you use the new money to pay down the other currently lowest loan to get away from as many loans as possible.
I know it might be tempted to use the money you get from not having to pay the smallest loan to something else; but believe me. It’s much better to keep using money from the smallest loans you have paid down to pay on the larger loans to get away from all of them.
I can try illustrating what I mean by an example:
Loan Currently paying New payments
1 500 us$/month 970us$/month, after finished load2
2 300 us$/month 470us$/month, after finished loan 3
3 100 us$/month 170 us$/month, after finished loan 4
4 50 us$/month 70 us$/month, after finished loan 5
5 10 us$/month 20 us$/month
Remember; you only pay additional to the lowest current loan; and keep paying the current amount till the lowest current loan is paid down.
Your goal here would be to start paying 20us$/month on loan 5 till you have paid it down; after that you start paying 70 us$/month on loan 4 till its paid down; next we pay 170us$/month on load 3 till its paid down, and continue with this structure to remove as much debt as possible, in as short time period as possible.
Keep in mind you should avoid getting new loans while paying down your current loans; if you need something you should try to save for it and pay everything at once; it will often save you a lot of money not to create more debt where you keep paying interests to the bank.
And if you look at the example above; you will reduce the time of paying the bank significantly, and will not be a slave of loans as you used to be. The main purpose is as I stated; to reduce our liabilities.
There is another option, but it will take some more time to pay down the loans; and that would be to save 30-50% of what you free to a saving or investment account. Your new scheme would be like this:
Loan Currently paying New payments Put to saving account
1 500 us$/month 735 us$/month, after finished load2 235 us$/month
2 300 us$/month 385 us$/month, after finished loan 3 85 us$/month
3 100 us$/month 135 us$/month, after finished loan 4 35 us$/month
4 50 us$/month 60 us$/month, after finished loan 5 10 us$/month
5 10 us$/month 20 us$/month
It will take some longer time to pay down the loans with option 2, but it will free money so you are able to buy items or use for emergency later, instead of getting new loans.
What we have done here is simple: we try eliminating liabilities, and not getting new loans, we want a more secure financial situation.
When and if you manage pay down all the loans you could use 33% for investment, 33% for saving, and 33% for personal usage each month.
I will later look at different ways of earning money online to help pay some additional to your lowest loans; this might be helpful for those who are currently unable to pay more money to their lowest loan.
-Kentaki-
Posted by Kentaki under 
Saving Money 
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