Step 3 - Analyze Your Debt
The next step is to figure out exactly how much you owe. First,
make a list of every debt you have. Not just credit cards,
everything. Credit cards, department store credit, mortgages,
car payments, unpaid past-due bills, student loans -- everything.
You do not need to count items such as recurring bills like
electric, gas, cable, etc. These are not debt, they are
recurring expenses. At any time you could shut these off and not
owe any additional money, although it may make life unpleasant,
to say the least.
Once you have a list of what you owe, you need to determine what
your remaining balance is on each item, the current interest
rate and your monthly payment for each debt. On most loans
you'll be able to find this information on your monthly bills.
However, you may have to make some phone calls to get this
information for other debt. Add the remaining amount on each of
these items together, this is your total amount of debt. Also,
add together your monthly payments for each of these debts to
determine the total monthly cost of your debt.
Now, you need to determine how much this debt is going to cost
you if you continue making the payments you currently are. You
can do this by completing an amortization table for each debt.
Don't worry, we're not going to make you do this yourself, you
can use our amortization calculator located at
http://www.destroydebt.com/calculators/ . This will tell you two
key pieces of data: how much each debt is going to cost you, and
when it will be paid off. Add the total cost of each loan
together; this is the total cost of your debt. This number can
be scary at first, but don't get too worried yet, this should be
the last time you see this number.
If your total monthly debt is greater than 50% of your net
monthly income, or you have found yourself in a situation where
you are unable to pay your bills and have fallen behind by
several months, I would suggest you stop here and seek the
advice of a professional financial counselor. Otherwise,
continue on.
About the author:
This article has been provided courtesy of Destroy Debt,
http://www.destroydebt.com .
