The Formula To Getting Your Debt Relief

Your debt relief formula

If you thought it is impossible to get out of debt without raising your existing income by some legal means like taking up an additional employment, you are wrong. It is very much possible for a common person to clear his/her debts with his/her current income, provided he/she sticks to a well formulated plan. The person does not need to sacrifice all his/her fun and ‘luxurious' activities for the purpose either.

The formula for debt relief

To begin with, you must calculate your total net income as well as your debts and minimum monthly payments. Exclude any additional amount you are paying for any debt. Now, take a portion, say five percent, of your net income and write it down on a sheet of paper. Follow it up by writing down each of your debts (excluding utility bills, insurance payments, property taxes, etc.) in a column at the left side of your page. Then write down your total balance and then minimum monthly payment by the side of every debt. Next, divide your total balance by the minimum monthly payment and write this amount next to each debt. Number the debts depending on the payoffs. Number 1 will denote the debt that has the shortest payoff number, and the next shortest payoff will get number 2 and so on. Continue the process till each debt is numbered. These numbers indicate the order of priority in repaying your bills.

Debt-free in quick time

Remember the five percent of your net income you wrote down at first? Now, add this amount to the minimum monthly payment for debt number 1. Then divide the total balance by this figure. This will give you the total months required to payoff the debt. When it comes to debt number 2, you add together the minimum monthly payment, the 5% of your net income and the minimum monthly payment of debt number 1 as it will be paid in full. Now take the total balance and divide it by the new monthly payment to find the total number of months required for payoff. Carry on the process with each debt till all of them are covered. In the final step, add up the total months required to pay off your debts to know how long it will take to make you debt-free. If you take a higher percentage of your net income than the 5% mentioned here, you can be debt-free in even quicker time.