Start Over, Finish Rich
David Bach
, AOL
Nothing helps conquer fear or despair more than hearing about other people with lives like ours who have overcome hardship and moved forward to a stronger and better life. Speaking personally, whenever I read about someone who has done something I want to do, it gives me strength because I think, "If they can do it, so can I."
Courtesy Mike Reilly
"In the beginning of 2009 we saw the fall of Lehman Brothers, banks being given TARP funds and a whole host of other news stories signifying the end of the world. It was a pretty scary time for me being I have a wife and two children and am the bread winner," Mike wrote.
In this special video podcast for Walletpop, I spoke with Mike about how he took control of his finances:
The result? Within seven months, Mike paid off over $7,000 in debt and got a raise at work. He said, like corporations give out bonuses, he gave himself and his wife a bonus! To find out how he did that and how you can too, listen to the above podcast.
Mike also shared with us how within 7 months he paid off over $7,000 in debt! If you have debt like Mike did or like millions of other Americans, the past year has pushed your debt situation from not-great to red alert.
Mike also shared with us how within 7 months he paid off over $7,000 in debt! If you have debt like Mike did or like millions of other Americans, the past year has pushed your debt situation from not-great to red alert.
In my new book, Start Over, Finish Rich I devote an entire chapter to dealing with your credit card debt in 2010. Once you've accepted your share of responsibility for your problem and you've put your credit cards away, it's time to start reducing that mountain of debt you somehow managed to run up. The first big question you need to answer is whether you can afford to make the minimum payments on all your credit card accounts. If the answer is yes, then you can-and should-immediately start using my DOLP® Debt Reduction System. If the answer is no, then DOLP won't work for you, but later on in this chapter I'll have some other suggestions that will.
As I said earlier, DOLP stands for Dead on Last Payment-and it is meant to solve a problem that trips up most people who owe credit card debt. Generally speaking, people in real debt trouble owe money on more than one credit card. Often, there can be as many as a half-dozen accounts with balances due. So how do you handle that? Should you pay a little on all of them each month or concentrate on trying to pay off just one? And if so, which one?
Without a coherent plan of attack for paying off your debt, you really don't have a chance. The DOLP system is designed to give you that plan of attack by prioritizing your debts-that is, establishing the order in which you should pay down your various cards. Are you ready? This will take no more than 10 minutes.
DOLPING YOUR WAY OUT OF DEBT
1. Pull out your credit card statements and get them organized. Make file folders for all your credit accounts. Ideally, the folders should be red so they will stand out in your file drawer. On the front of each, use a big black marker to write the total amount you owe on that card. The point of all this is to get your debts organized. Having bills lying around your kitchen in a bowl, or in a drawer, or on top of the television, is not a system. So put down this book, go get the files, and start labeling them.
2. Get yourself a DOLP worksheet and fill it out. You'll find a blank worksheet on page 44. You can tear it out, photocopy it, or download and print out a copy for free from www.finishrich.com/dolp. Whether you do it by hand or use the interactive tool on the website, filling out the worksheet is really easy. You simply write in the name of the account, the outstanding balance you owe, the minimum monthly payment, and the payment due date. (For now, don't worry about the DOLP number and the DOLP ranking.)
3. Calculate each account's DOLP number. Give each account its own DOLP number. You calculate it by dividing the outstanding balance by the minimum monthly payment. For example, say you owe $1,000 on your Visa card and the minimum monthly payment is $50. Dividing $1,000 by $50 gives you a DOLP number of 20. Do this for all of your credit card accounts.
4. Assign a DOLP ranking to each account. The account with the lowest DOLP number is ranked #1. The account with the second-lowest number is #2. And so on.
5. Calendar the due dates. Enter the payment due dates for all your credit accounts in your computer's calendar system. Set your calendar software to remind you of each due date at least five days in advance so you don't make any late payments and add to your misery by getting hit with costly late fees and penalties. And sign up for those email alerts the credit card companies will send you when your bills are coming due.
6. Start paying down your debt-the DOLP way. Each month, as the payment due dates approach, make the minimum payment on every account . . . EXCEPT for the one with the #1 DOLP ranking. For that card, make as big a payment as you can manage. Ideally, your payment should be at least double the minimum. (Hopefully, finding your Latte Factor will make it easier to come up with the extra money you will need for this.) Using the examples in the sample worksheet, you would pay $65 to MasterCard, $35 to Sears, and at least $100 to Visa. Once a card has been paid off entirely, you retire it and start paying down the card with the #2 DOLP ranking-in the example above, the MasterCard.
YOU NOW HAVE A SYSTEM TO FREE YOU FROM CREDIT CARD DEBT
The DOLP system works by identifying the card you can pay off most quickly and then having you pay it off first. The point of doing this is to reduce the number of different cards you owe money on as fast as possible.
This is super important, because the more balances you carry, the greater the chance that you will miss a payment or go over a credit limit-and get hit with a huge penalty. The fact is, a card with even a small balance can cost you a fortune. If you miss a payment on an account with a $500 balance, the late fee could be as much as $50. If you exceed your credit limit at the same time, the fee could be $100. This is why credit cards with small balances are as dangerous as big ones.
TO DO IN 2010
*Recognize that the fundamental rules of money have not changed. Don't stop saving, don't stop investing, and don't give in to fear and despair.
*Commit to taking action on all ten Start Over steps, and start to believe again that you can live and finish rich.
Excerpted from START OVER, FINISH RICH: 10 Steps to Get You Back on Track in 2010 by David Bach © 2009 by David Bach. Reprinted by permission of Broadway Books.
$1 per book purchased is donated to charity: water, a non-profit organization bringing clean, safe drinking water to Africa.
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2009-12-28 17:03:21
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