Turn debts into income

Turn debts into income
Copyright © Jose Love


�The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and then starting on the first one.� - - Mark Twain

This lesson will largely concern financial matters because this is an area where I know from personal experience most people need help. That is not to say it is the most important area or the only area that needs attention but if we are having financial problems it is often difficult to concentrate on other areas of our life
no matter how important.

If you are in the fortunate position of already having no financial difficulties or problems and you are debt free then bear with us, as there are many other important things to learn and appreciate included in the text.

Let us first consider the meaning of 2 words, Happiness & Pleasure.

These are often confused and misused so here are some definitions to ponder:
Happiness is a state of well-being characterized by emotions ranging from contentment to intense joy experienced when in a state of well-being.
Pleasure is the gratification of the senses or of the mind; agreeable sensations or emotions; the excitement, relish, or happiness produced by the expectation or the enjoyment of something delightful, or satisfying.

Amusement; sport; diversion; self-indulgence; frivolous or dissipating enjoyment; hence, sensual gratification.

To put it another way, happiness is a lasting state that can be cultivated and maintained by our mental processes where pleasure is a momentary state caused by some external event. Buying a new car may provide us with pleasure but it may not bring us happiness, especially if the payments are difficult to maintain. Even if bought for cash the pleasure will usually be short lived as we become accustomed to ownership and soon we will desire a bigger, better car or the latest model.

The same applies to almost all material possessions. We want them; if we can�t have them we are saddened and if we do get them we receive only a short term �lift� from possessing them. They do not produce happiness; in fact the obsession of always wanting more will often produce dissatisfaction quite the contrary of happiness.

So one of the first things we should attempt to cultivate is a selection process whereby we ask ourselves not if an action or acquisition will provide us with pleasure, but will it provide us with increased happiness?

"He that loveth pleasure shall be a poor man." - - Milton

To understand this better when you are happy, minor unpleasant events usually do not disturb you. When you are unhappy, you feel as if everything is against you. You may compensate for it by eating chocolate and sweets because this gives you pleasure; yet you stay unhappy.

A person may smoke cigarettes, drink excessive alcohol or take some other form of drugs because it gives him pleasure, yet, this does not make him happier, especially if he acknowledges the fact that it is not be good for his health.

Happiness is the main goal and purpose of life and it is born within us. We do however allow outside events to cloud our happiness as on a cloudy day the clouds hide the sun, but the sun is always there. The clouds of thoughts, worries and desires cover and hide our happiness. We have to disperse them in order to experience it.

Then the happiness that is inherent in the soul and is always there shines forth.

We should always seek happiness as a goal even at the expense of pleasure!

Happiness is here, within you. Just calm your mind and stay relaxed, and you will experience it. You do not need to wait for it to come. You do not need outer circumstances and events to bring it. A calm and detached mind is the gate to true happiness. It is your decision to choose happiness.

So building on what has been said above, let us start to apply this to our lives and specifically in this lesson to our financial situation.

The man who goes alone can start today; but he who travels with another must wait till that other is ready, and it may be a long time before they get off. - - Henry David Thoreau

Now you will need a notebook.

Head a page with �My present financial situation� and put a date.

Remember that compound interest working against you is very powerful and will keep you shackled to poverty. Just a

small $1,000 credit card balance at the minimum payment level will take most consumers 6 years to clear (if no

additional spends are made) and cost around $350 in interest. These figures can be much worse where bad credit is involved or where for some �reason� card interest rates are over 15%.

Credit cards have made it so easy for consumers to �buy now, pay later,� many are finding themselves in a vicious-cycle of �robbing Peter to pay Paul.� With nearly a quarter of Americans having no money left upon paying for essential living expenses, �Americans are among the world�s most cash-strapped people, according to the latest semi-annual survey from ACNielsen�� (CNNMoney, 2006). Unfortunately, debt consolidation and settlement schemes only add to the problem, further damaging a person�s credit and keeping them in debt longer.

�Interest works night and day in fair weather and in foul. It gnaws at a man's substance with invisible teeth.� - - Henry Ward Beecher

Compound interest working for you will help you reach financial independence and faster than you ever thought possible.

Now on a new page put a sub-heading of �Debts�.

Here enter EVERYTHING you owe. There is no need for any special order but the information you set down should contain the information shown below as an example (note that the figures are illustrations only and not meant to be indications of
what you should or may be paying). The term if not in the loan conditions can be expressed by dividing the debt by the repayments and ignoring the effects of the interest:



Debtor�s Name - Outstanding amount of debt - Term-Ignoring-int.-Int.rate-Min.mo.Pmt.-Spcl terms or notes

My Bank Visa - $1,000 - 2 years - 15% - $50


Mortgage Co.- $100,000 - 30 years - 9% - $805 - Variable interest rate

Car Loan - $20,000 - 5 years - 12% - $445


Personal loan/Pal- $500 - 2 years - 0% - $20





Total - $121,500 - $1,320





Now add a new sub-heading �Commitments�

In this section you should put down all regular payments that are made for such items as

Insurances $ 25
Property taxes $300 $ 25

Utilities $150
(use an average for the year)

Telephone $ 80

Rent $600
Motor tax $240 $ 20

Etc. etc.

Total $900



Where these are annual payments add the annual figure but also convert this to a monthly figure as shown above.



Now add the 2 total figures together as �Total Recurring Expenses� in our examples this would be $900 + $1,320

making $2,220.



Now enter your �Monthly Income� after all deductions and taxes. E.g. $3000



This then allows you to calculate �Disposable Income� $780 ($3000 - $2220)



Your Disposable Income is what you have left for such items as food, clothing and entertainment but it is better to

prioritize these items into essentials and non essentials. For example Food is a priority but entertainment is not.

Try to make a budget for the essentials based on current spending as in the example below

Maybe :

Food $250

Gas $150

Clothing $200

Car repairs $ 50



Total $650 This would leave you with $130 for other expenses.



In reality you may have more or less depending on your personal situation. My experience is that IF you take time and care to list ALL expenses then you will
find at this point you have very little left over for leisure and entertainment.



My experience is also that often leisure and entertainment spends are made before the more essential spends and

often for more than the balance available. So at some point in the month there is a realization or panic regarding bills and debts, often expressed as, � Too much month at the end of the money!�



This is a syndrome of putting pleasure before happiness!



Armed with this information � take all the time you need to make it as complete as possible � you can now see just what your current financial position is. I have sometimes had clients who have actually had a negative disposable income at this point. Obviously in the latter case the spending on some items must first be reduced to bring rationality to the budget.



In any event it is now your task to decide on a figure that you will apply to paying off your loans faster than at the minimum level. Make the sum as large as possible but always affordable. It will be a priority and is your escape route from the credit cycle in which the banks etc. wish to keep you trapped!



Getting back to the example above lets decide to use $70 for debt elimination and keep $60 for entertainment and leisure.



Selecting how to best pay off the debts is next on the list.



Selection Rules

1. ALL the extra allotted ($70 in the case of the example) should be used against just 1 loan.

2. The selected loan should be the loan with the shortest term (in the example both Visa and personal loan have the same term, so both are possible candidates)

3.After satisfying 1 & 2 above select the loan with the smallest minimum repayment.



Using these rules the �Personal loan: would now be paid off at $90 a month and so will be paid off in 6 months.

This will then leave you with $90 to apply to the Visa debt which will not have changed much in the 6 months period but will now be paid off in around a further 9 or 10 months. This is a BIG improvement on the 6 years it would have taken!

Now we have $140 to apply to the car loan which will still have around $15,000 left to pay. However at the repayment level of $595 a month this $15,000 will disappear in 2 years 5 months and you will then have $595 a month to add to your mortgage payment.

This will knock 22 years off your mortgage and so that small $70 a month will make you debt free in about 10 years.

Knowing the power of this you may want to use a little less for leisure and entertainment and really get into a debt free situation.

Imagine having no loans to pay off, owning your house and car outright and all in the space of 10 years using just what you have now! You now have $1,400 a month that you can use to create your own nest egg instead of feathering the already too padded nests of the banks and financial institutions.

If you have problems with any of the above use the personal coaching facility provided with this course and get on the road to financial independence now!



Don�t allow ANYTHING to stand in your way.



�There would be nothing to frighten you if you refused to be afraid.� - - Mahatma Gandhi



The future depends on what we do in the present. - Mahatma Gandhi

Info courtesy of: Totalisation






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