Your Questions About Eliminate Debts Fast

Mary asks…

get rid of credit card debt with out reposesing?

eliminate credit card debt for good with out repossessing and get out of debt fast.

John answers:

You pay them to eliminate the debt. My caution to everyone who is willing to sell their soul right now for a dollar never, ever, ever trust someone who signs up the day of your question for the sheer purpose of spamming for as long as they can without being reported.

Sharon asks…

Is it really possible to pay off my 30-year fixed rate mortgage in 5-7 years?

I saw a so-called expert on a news broadcast this morning who said people in Australia and Europe have discovered a way to leverage their debt and finances in order to pay off their home mortgages at a faster rate without changing their monthly payments. How is this possible? It was quickly suggested that a Home Equity Line of Credit (HELOC) was the secret, but what does getting more debt have to do with eliminating debt?

John answers:

Yes, it’s possible. But it may not be advisable.

A HELOC is the secret. Without getting into the details, you’re not borrowing more money. You’re using the HELOC like a checking account, shifting money (from your paycheck into it), then paying the mortgage out of it. And the sophisticated software that you pay for also tells you when to make additional contributions.

The systems I’ve seen cost something like $3,500. The argument is that you’ll save that much in interest in the first year. And maybe you will. But it is expensive up front. The only real requirement (other than perhaps your ability to obtain a HELOC in today’s credit environment) is that you have a monthly positive cash flow…that your income is exceeding your expenses. The numbers don’t work if you’re going into debt every month.

You can accomplish something sort of similar–not as efficiently–by making extra principal payments on your mortgage every month. Like I said, the program I’m familiar with is a lot more efficient, but it’s pricey.

Hope that helps.

Ken asks…

eliminate credit card debt?

I live paycheck to paycheck, if i could knock out some credit card debt I would have more money to do the things I want. What is that fastest way to knock some of my debt down, so that I can actually save some money and enjoy life a little more?

John answers:

My wife and I were in the same position and got sick of it. We make a good income but had nothing to show for it. We not only wanted to get out of debt, but really have a firm personal financial plan so that when we are ready to retire, we can walk out the door with a truck load of cash. Getting out of debt and staying out of debt is just one step (the most important one) to a good financial life. Please read a book called the Total Money Makeover by Dave Ramsey before you do anything. If you read it, I guarantee you will be stunned at all the dumb things you have done with money over the years. I read it and I felt like someone hit me in the face with a bat by the time I was done. This is a very sound, logical plan that works. It is nothing tricky. It is nothing extravagant, just stuff your grandmother would tell you to do that most of us have forgotten. You have to live on less than you make. Plain and simple huh? Stop using debt. Pay cash for everything or use a debit card. Do not buy useless things you don’t need in the first place. Don’t bu stuff you can’t afford, with money you don’t have to impress people that you don’t really care about. Get on a strict budget and stay there. Once you see how much money you bring in versus how much goes out on paper in front of your eyes, you will be blown away. Squeeze your budget to the point of choking it to death. Every extra dollar your squeeze out, send it directly to the debts and kill the debt as quickly as possible. No restaurants, bars, movies, vacations, etc until the mess is cleaned up. You will have to learn to say no to yourself and your friends.
Now this program is not easy. The hardest part is changing yourself. Money management is 20% head knowledge and 80% behavior. You have to change your attitude and behaviors in order to win. Like I said, the debt elimination portion of this is just one step in 7. Actually debt elimination is step 2. Step one is getting a $1000 emergency fund set up. This is just for emergencies only. Dinner out with friends is not an emergency. You just need to do a budget and get yourself organized. Most people do not do a budget and most of them are broke. Not really a very difficult parallel to draw here. The steps after debt elimination are to save up a full emergency fund of 3 to 6 months of expenses. Then it moves on to investing 15% of income, saving for kids college, paying off house and investing fully for retirement and the like. See, debt elimination is all part of a master plan. My wife and I have been on the plan since Nov. 08. We have not used a credit card since then and don’t need one. We do not spend money on dumb stuff we don’t need. We could take a first class, 2 week trip to hawaii with all the money we spent on DVD’s that are now in a box collecting dust in the basement. We have paid off 2 car notes and a credit card note along with or ever reducing mortgage amount. We have gotten about 20k of debt out of our lives in 10 months just by getting organized and not spending on useless crap. The biggest key is the budget. You have to tell your money where to go and not wonder where it went. Do you know where every dollar is going and how you are going to spend it next month or are you just praying that there is enough money left in the checking account to cover all the bills? Just thought I would ask.
Read the book and get a solid plan. Nothing great was ever built without a plan. It is not difficult. It takes patience and self discipline. You need to get mad at yourself enough to change how you are doing things. Where do you want to be 5 years from now? In the same situation your in now or no debt and saving for a house or retirement? The old saying is the trip of 1000 miles begins with the first step. You have realized you have a problem. The other old saying is that 90% of fixing a problem is realizing you have one in the first place. You’ve come 90% take the other 10% trip. Read the book, get a plan and win with personal finance. You will retire very well off. That is the end goal. Not where you are going to eat next week. It has worked exceptionally well for my wife and I. Please,Please, Please do yourself the biggest favor in life and get you financial house in order. There is nothing more important than that in the long run. Quit living paycheck to paycheck and start accumulating real wealth. If we can do it anyone can.
Good Luck. I wish you all the best.

James asks…

Can YA Cons answer a question about taxes without being political?

We are now $9-10 trillion in debt with countries like China and Russia holding the notes and acting like they already own our market place. Unemployment numbers are climbing, and retail sales are dropping. The median income is going lower and lower, and people are having to hold 2-3 jobs to make ends meet. Meanwhile the wealthy are gaining even more wealth. There are more people entering the poverty level, while all the best manufacturing jobs are leaving the country. The wars in Iraq and Afghanistan are costing us billions of dollars a day, and Social Security and Medicare are being drained faster than they ever earned. The infrastructure to our country is literally falling down.

Exactly how is the government supposed to operate, balance the budget AND eliminate the ever increasing debt WITHOUT raising taxes?

I know a lot of you are going to say things about welfare, the price of freedom is not free…yaddah yaddah yaddah

But try and present a viable solution that places an equal burden on every segment of society or just shut up. This is a request for answers that are policy driven, not for political ranting.
Not a single policy response…

Where is the money going to come from to pay for the government’s debts if we do not raise it through higher taxes?

John answers:

Nobody likes the answer to this. But the truth is that government has grown to an unsustainable size.. Raising taxes has been shown to actually hurt revenue collections…and now that so many are dependent on the government for employment you cant go slashing that to nothing right away either.. The great society was a failure.. The baby boom and record trade deficits killed it…we now face a 53 trillion dollar entitlement deficit. If you are going to save the Government entitlements you will need to raise taxes and slash government spending.. And you cant do that in a service economy… We’ve shot ourselves in the foot…
And the massive “adjustment” to our economy, energy policy, and monetary policy just might mean the end of freedom as we knew it unless there can be a strict return to constitutional government.

Thomas asks…

What is “fiscal responsibility”?

Politicians and journalists talk frequently about “fiscal responsibility”—lamenting that we don’t have it now, but that we need to acquire it to avoid financial disaster. Curiously, though, few of them ever define what they mean by that term; either they think it goes without saying, or they think equivocating better serves their agenda. Does it mean “eliminating” the deficit? If so, should we sometimes run surpluses? Or does it mean getting the deficit “under control”? If so, what the heck does that mean? Here are several possible, mutually-exclusive meanings for “fiscal responsibility”:

• reducing the debt (dollars)
• completely eliminating the debt (dollars)
• balancing the budget (i.e., keeping the dollars of debt constant)
• reducing the debt burden (growing GDP faster than debt)
• maintaining a constant debt burden (GDP growth=debt growth)
• keeping unemployment low and inflation under control (…forget debt, it doesn’t matter as long as those two stats are in good shape)

Six different ways of defining “fiscal responsibility.” A foggy atmosphere like that is definitely not conducive to a rational debate.

In my judgment, a strong parallel to the growth-friendly federal policy I advocate can be found in the way corporations fund their own growth. They almost never use 100% equity financing; similarly, they almost never use 100% debt financing. You can bet there’s a point somewhere in between those two extremes that minimizes the cost of capital for funding growth projects. (To test that assertion, pick a few NYSE companies at random, and see how many of them have zero long-term debt. And if you lucked out and got Microsoft in your random sample, you found the needle in the haystack—the exception, not the rule—For the federal budget, think of tax receipts as “equity financing” and deficits as “debt financing.” When a prudent measure of borrowing is used to supplement tax receipts, tax rates can be lower than they would have to be to “balance the budget.” That’s a growth-friendly policy.

Because borrowing permits tax rates to be lower, private sector business-builders have more after-tax resources to fund their ideas for better hot dog stands, day-care centers, plasma televisions, bullet-proof vests, video games, alternative-fuel auto engines, and anti-gravity machines. (Did I leave anything out?) In other words, they have more financial resources to create new products, new services, new jobs—and new tax receipts from all those for our government. That, by the way, is how we can “increase taxes” without increasing tax rates. It is happening as we speak, and the short way to say it is “economic growth.”

John answers:

Very nice observation. I sense a touch of frustration, which I share. Your thought is well written and articulate. Hopefully many people read this.

In my humble opinion, “fiscal responsibility” should be defined as the immediate deconstruction of the obese bureaucracy and the minimization of the gab b/w the rich and poor. Such a reality could be achieved in several ways. A few suggestions could be:
1. Flat Tax
2. Term limits for all legislators
3. Prohibition of lobbyists
4. Many, many more

But hey, what do I know? I’m not running this country. The oligarchs are.

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