Dealing with Debt

Debt is the financial cancer of middle income America. I use the word “cancer” very carefully considering so many families have been affected by this disease. However, it best represents what is happening when families get into debt. Putting it simply, cancer is when cells multiply uncontrollably. It starts small and continues to grow until it affects the entire body.

Debt affects us the same way. Most people tend to look at debt from the position of what is the monthly payment. They evaluate a loan with the idea of how the payment fits their monthly budget. The debt load creeps up until we find ourselves owing large amounts and not having the cash flow to make a significant change if we had to. The danger is that cash flow can change very quickly and it is not totally within a person’s control.

As consumers, we evaluate debt by seeing how it fits within our income. However, there are more important things to consider. Ask yourself what criteria you would use to evaluate a loan. If you are like most people, the first thing that came to your mind is the interest rate.

Interest rate is an important key, but by no means the most important. People have been trained to look at this number and assume that a lower number means that you will pay less to the lender. The interesting thing is that you can change the effect of that rate by how you make your payments. There is a difference between the rate and the effect of that rate. Is interest rate important? Yes. Is it the most important? No.

The type of loan is the next criteria people consider. Is the debt a fixed loan, such as a car payment or is it a revolving loan, such as a line of credit. Comparing fixed and revolving is similar to comparing apples and oranges. The key here is how interest is calculated and how you intend to make the payments. When a person controls how they pay the debt, they also change the effect of the rate.

How the loan influences a person’s overall cash flow is the key. If you ever want to eliminate debt quickly and reduce the interest paid to the lender, then cash flow is the answer. Discretionary income applied properly will reduce debt quickly. However, discretionary income applied improperly does not provide the necessary traction to achieve debt freedom quickly.

Debt elimination starts with a decision and a determination to become debt free. It takes more than a wish, but an intense desire. Step two is the game plan that will allow you to gain financial traction. The game plan needs to be done wisely finding the quickest way to eliminate the debt. The final step is following through by implement the plan of attack and seeing it through.

Many people approach debt with the idea that they can get themselves out. Can they, yes. However, Albert Einstein said it best when he said that you cannot solve a problem using the same kind of thinking that it took to create it. Operation Crusader can help. We can run an analysis of your debt at no charge. Yep, that means “free” to see how quickly we can help you become debt free. Debt has a cure. Are you tired of being in debt? What are you going to do about it?

Bob Mlynek
www.OperationCrusader.com