Power Pay Your Way Out of Debt

By
Mortgage and Lending with Karen Pierce | Housing Counselor |Oregon NMLS 223305

 

Money WorriesMany of us know about debt. Some of us know we have too much debt. There are always those that want to shake their index finger at us and tell us all the bad things about debt, but this post isn’t about judgment. So many families have faced unemployment, divorce, death, medical and many other hardships outside their control where judgment doesn’t apply – encouragement does.

Any power pay program has to start with a budget containing a thorough, accurate depiction of your household’s income and expenses. These should be updated any time there is a substantial change – monthly if you have fluctuating income or known expenses coming, like a kid planning to head off to college a year earlier than anticipated as I learned this year!

There are many cool tools out there to help us be successful with paying down debt.  “Power Pay” programs that have you divvy up your net income and spend it out until you have eliminated your debt. Some keep envelopes for your budgeted expenses like Dave Ramsey’s program. Others are computer software programs or web-based programs like “Debt in Focus” the credit unions make available to their members. Our First Time Home Buyer Education Class text books offer worksheets, as do many Financial Fitness classes. I’m curious about what tools you have heard of for debt management that you find valuable…

Depending on the program it might be recommended you focus on the debt that bears the highest rate of interest, or it might recommend you knock out smallest balances first to get some successes under your belt. In my mind, since the goal is to pay the least amount of interest and have your available dollars pay off the debt as fast as possible, I would focus on the highest, non-tax deductible interest.

But it boilsdown to use whatever method leads to you being successful and sticking to it!

I work with a lot of families whose home loans’ terms are modified, many of whom received non-interest bearing principal deferments. Beware of chunking down on your mortgage payments if you have one of these, as the extra principal can go to the interest bearing principal balance owed on the mortgage first…folks with 2% modified interest rates they can deduct on their income tax returns  probably want to pay other interest bearing debt down first! This would be the case with most of the mortgages taken out lately since they bear incredibly low interest rates. They might even come out ahead putting this money into interest bearing savings, compounding the interest THEN paying the mortgage down.

Money is a tool…why don’t you put it to work for you?

See you out there!!!

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Karen Cooper Southern Oregon|California Mortgage ConsultantKaren Pierce - Housing Counselor/Certified Foreclosure Intervention & Default Counselor

               NMLS #223305

ACCESS - "Helping People Help Themselves Since 1976"

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Rainer
19,925
Marty & Jaclyn Reiswig
GoodFit Homes (with Keller Williams) - Centennial, CO
Specialty: First-timers

One of the sayings my dad drilled into our heads growing up was "Debt makes you a slave." Good advice! Thanks for the post.

Jun 26, 2012 02:42 PM #1
Rainmaker
233,066
Doug Dawes
Coldwell Banker Residential Brokerage - Georgetown, MA
Your Personal Realtor

A penny is 10% interest on a dime. Dave Ramsay is correct in what he teaches. To be debt free is the only way to be. Cash is king. We don't need fancy cars or fancy houses or fancy anything else. Can you imagine the good that could be accomplished by not having debt and then giving to your favorite charity

Jun 26, 2012 02:48 PM #2
Rainmaker
315,849
Karen Pierce
Karen Pierce | Housing Counselor |Oregon - Medford, OR

Marty & Jaclyn - I agree with your dad! Thanks for stopping by.

Jun 26, 2012 02:57 PM #3
Rainmaker
315,849
Karen Pierce
Karen Pierce | Housing Counselor |Oregon - Medford, OR

Hi Doug - Charities could use the redirection of those dollars, that's for sure!

Jun 26, 2012 03:16 PM #4
Rainmaker
1,238,160
John Pusa
Sellstate Pacific Realty - Glendale, CA
Your All Time Realtor With Exceptional Service

Karen -  Many people want to stay away from dept, but we are tempted with so many offers. Thanks for sharing an excellent blog.

Jun 26, 2012 06:26 PM #5
Rainmaker
315,849
Karen Pierce
Karen Pierce | Housing Counselor |Oregon - Medford, OR

Hi John - I've used many the "zero interest" offers in my time, too. If one is careful, they can be a good tools. What happens, though, is many people's best laid plans change and they rack up interest charges, and/or find themselves paying debt with debt which can eventually lead to bankruptcy. Thanks for commenting.

Jun 27, 2012 02:02 PM #6
Rainmaker
943,217
Joyce Kelley
Charles Stallions Real Estate Services Inc - Gulf Breeze, FL
Buyers Agent 800-309-3414 Pace and Gulf Breeze,Fl.

Money is the root of all evil if it controls you so your are wise tio suggest controling it and real estate investing is the sure way to go.

Jun 28, 2012 08:42 PM #7
Rainmaker
315,849
Karen Pierce
Karen Pierce | Housing Counselor |Oregon - Medford, OR
Joyce - it sure can be! Thanks for stopping by.
Jun 29, 2012 01:04 PM #8
Rainmaker
647,287
Barbara Hensley
RE/MAX Properties - Rockwall, TX
Homes for Sale in Rockwall County, Texas

Karen - excellent advise, sounds so simple, yet it is difficult for most people to get to the point of committing to do it.  Funny, the older I get the less things I want and I have gotten amazingly frugal, more from lack of interest in material things, but also from having a new awareness of the benefits of living good while living frugal.  I don't mean tight - I mean careful!

Jul 14, 2012 11:08 AM #9
Rainmaker
315,849
Karen Pierce
Karen Pierce | Housing Counselor |Oregon - Medford, OR

Barbara - You and me both on the shifting of priorities. I've spent a lot of time instilling in my teenager and sharing with clients "need vs want". I, too, simply find I no longer want the same things. Thank you for stopping by. I look forward to reading more of your posts.

Jul 14, 2012 11:18 AM #10
Rainer
175,944
Dave Sullivan
www.TheCreditGuy.TV - Birmingham, MI
The Real Story on Your Credit Score - TheCreditGuy

great advice Karin Debt will make you a slave and make you hate the thing you bought with it... 

Feb 03, 2013 12:35 PM #11
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Rainmaker
315,849

Karen Pierce

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