POWER DOWN YOUR DEBT (6)
by adminIn addition to applying money from one paid-off debt to the next on
their list, Mark and Joyce could also apply an “Accelerator Payment” to their debt. For instance, should they find through tracking their spending that they have an additional $158, they could add this $158 on top of each of the accumlated debt payments, decreasing further the time it will take to get completely out of debt. They could also sell an asset and Get Out of Debt Report apply the proceeds from the sale toward their debt. Regardless of which of these additional methods for powering down debt that Mark and Joyce choose, applying them will only add to the amount of interest
they will save.
It has been our experience that by using the Power Down method of
eliminating debt, you can drop your interest expense to one-third the cost.
At the end of the 8.7 years, when all of Mark and Joyce’s debts are
completely paid off, they will continue to take that same amount they have been applying to debt reduction and put it into a savings plan, which will accumulate interest providing them with a very serious nest egg. That savings in interest of $125,792 that they didn’t have to pay to creditors can be used to increase their net worth at retirement.
Naturally, in a real-world setting many things can occur financially
that are not reflected on the reports we have just discussed. For example, it is unlikely that Mark and Joyce will go 29 years without incurring some other debt. Things such as cars eventually wear out and will need to be replaced, requiring new debt. When this occurs, instead of getting out of debt in 8.7 years, for instance, it may take nine. But using the Power Down method Mark and Joyce can see their debt and potential savings as a snapshot in time and by applying Principle 4 can save an enormous amount of money, even if the plan does change over time.
Now, of course, Mark and Joyce could choose not to power down.
Will they be out of debt in 30 years? Yes. But if they power down their debt, they will not only be out of debt 30 years down the road, but they will also have close to $1 million in the bank. Which should they choose? Which would you choose? The answer is obvious. Using the Power Down method, the money you save by not paying interest for years and years can be put to work in the form of compound interest, which over time will make you more money for the future. One of the greatest minds of our time, Albert Einstein, certainly understood the power of compound interest—he looked upon it as the greatest discovery of the 20th century.
We like to point out that compound interest is also the greatest opportunity of this century!
That’s because it doesn’t just work for the bill collector. It can work
in your favor as well if you understand how to harness its power.
Taken from : Money Mastery “10 Principles That Will Change
Your Financial Life Forever
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