1. Debt Elimination
A Practical Approach

2. Debt Elimination – A Practical Approach
Debt Sucks
Debt limits your opportunities. How would you like to pick up and move across the
country, or maybe just closer to relatives, or to the beach, or to the mountains? Perhaps
you would like to make a career change, go back to school, or take that international
assignment for a couple years. Forget about it. You are in debt.
Debt forces you to put up with more crap. Debt forces us to put up with bad jobs,
poor living conditions, broken down cars, and disappointment.
Debt is the last thing you think about each night. Money problems is a leading
cause of insomnia. Instead of drifting off to sleep counting sheep you lie there thinking
about your bills. You obsess over it. You worry over it.
Debt plays by its own set of rules. Don’t believe me? Try carrying a large balance on
a credit card. One month your statement reflects an APR of 6%, the next 29%. What did you
do to deserve it?

3. Debt Elimination – A Practical Approach
Debt Sucks
Debt eats away at future earnings. For every dollar you pay in interest on debt it is a
dollar that could have been spent on something else or invested, and a dollar taken away
from your earnings.
Debt can make you desperate. Desperate times call for desperate measures. Being
neck deep in debt can make some people do things they normally wouldn’t think of doing.
Debt affects your entire family. Kids may not fully understand the financial
ramifications of debt, but they recognize Mom and Dad sure fight about money a lot. They
don’t know what debt is, but from listening to you they think they’ll always be in it, and
being in it must be bad.
Debt is a lousy employer. When you are in debt, and most of your income is going
towards bills you might as well consider yourself working for the debt.

4. Debt Elimination – A Practical Approach
Debt Sucks
So why do we do it?
• We’re clueless. We know the consequences. We know what being in over our head
does to us, but we continue to charge away
• Instant Gratification
• The internet
• Emergencies
• We thoroughly enjoy stress and disappointment in our lives

5. Debt Elimination – A Practical Approach
Is There Any Hope?
No. You’re Doomed.
Just Kidding. Of course there is, but it is going to take some work on your part.
Work?
Oh My God! You mean I have to work at this?
What Do I Need to Do?
• Have a Plan – Have a Goal
• Talk to your Significant Other – Buy In
• Discipline
• Sacrifice
• Expect the Unexpected
• Learn to Save Money
• Stop Using Credit Cards

6. Debt Elimination – A Practical Approach
The Hard Facts
There are a number of ways to get out of debt. Some work, some don’t. It all comes down
to you, your attitude and your actions.
• Debt Consolidation Loan - Helps if you have lots of high interest debt. Doesn’t get
you out of debt, it just crams a bunch of debt together with (hopefully) a better rate.
Problem with this is, most people get a consolidation loan and go right back out and start
creating more debt! Now you have the original debt PLUS the new debt. Not a good plan
unless you are very disciplined and stop creating more debt.
• Debt Reduction Companies – Most of these are a ripoff, trying to convince you they
will contact all your debtors and settle your debts for half off or more. Truth is they will
charge you a premium for this or just keep the money you send them and disappear. Even
if you do find a reputable one, your credit will be damaged because you are not paying full
payments or your account has been settled.. Both have a negative impact on your credit
rating.
• Debt Counseling - Not a bad idea for some. There are legitimate companies out there
like Consumer Credit Counseling. But, again, since you are making reduced payments your
credit rating will be damaged. And, like the plans above, you are not taking control of your
money. You are not learning anything. You are not changing your behavior.

7. Debt Elimination – A Practical Approach
Taking Control of Your Money
The only legitimate way of getting out of debt FOR GOOD is to change the
way you think and change your spending habits.
• Buy for need, not for want
• Dump the credit cards
• Start saving
• Keep track of what you spend your money on
• Create a budget and stick to it
• Visualize and believe - picture yourself debt free
• Stop being a victim of debt
• Snowball your debts
Snowball my Debts?

8. Debt Elimination – A Practical Approach
Debt Snowball
Coined by Dave Ramsey, “snowballing” your debts is a fairly easy concept to understand. It
is much harder to keep it rolling.
Concept:
Pay the minimum payment on all your bills except for one. Usually the smallest balance or
the highest interest account depending on your method.
Result:
As you make payments, the payments on the paid debts are added to the next debt in line
and, like a snowball, gather more payment money as the debts are paid off.

9. Debt Elimination – A Practical Approach
Snowball – Saves Time and Money
5 Credit Cards
1 Automobile Loan
Total Debt: $11,719
Extra Money Available Each Month: $100
Creditor APR Balance Payment
Radio Shack 21.00 $215.00 $15.00
Sears 21.00 $365.00 $23.00
MasterCard 19.80 $1,705.00 $49.00
Visa 15.90 $2,341.00 $73.00
Discover 12.90 $1,250.00 $27.00
Auto Loan 10.90 $5,843.00 $315.00
Totals $11,719 $502.00
It will take 12 years and 5 months to pay off these debts
Interest Charges: $4,917
Money Paid: $16,636
Snowball Method
It will take 1 years and 11 months to pay off these debts
Interest Charges: $1,599
Total Money Paid: $13,318
Money Saved: $3,318
Time Saved: 10 Yrs 6 Mos.

10. Debt Elimination – A Practical Approach
Step One
Gather all of your bills together. Don’t include reoccurring monthly bills like your utilities, gasoline,
food or insurance in the debt snowball. Use credit card bills, loans and mortgages only for now.
Step Two
List the amount you owe for each debt. You can arrange your list any way you’d like. Most list debts
.
in order from the least amount owed to the most. This will allow you to see results quickly since
all your smaller bills will be getting paid off first. You may also opt to arrange your list with the debt
carrying the highest interest rate first down to the debt with the lowest interest rate. Although this is
probably the best way to save the most interest in the long run, it doesn't provide you with the
psychological advantage of seeing your bills eliminated quickly up front.
Step Three
Add in the rest of your monthly fixed and variable bills--including utilities, insurance, gas, food etc.--
along with the MINIMUM PAYMENTS of your credit cards, loans and mortgage. Don’t forget to put
some money in savings!! Look at the remaining income you have left. We’ll call this money your
“pool” Put that “pool” money towards the Snowball Plan.

11. Debt Elimination – A Practical Approach
Pool Money
Savings
All loans, credit cards,
mortgage MINIMUM Monthly Net Income
MONTHLY PAYMENTS
All other fixed monthly Monthly Monthly
expenses (cell phone, Expenses Expenses
insurance, utilities etc.) Total Total
All variable monthly
expenses (gasoline,
food, entertainment,
etc.) Pool Money

12. Debt Elimination – A Practical Approach
Step Four
Focus your attention on the first debt on your list. Pay your regular MINIMUM payment plus your
POOL money. Pay the minimum on all other debts.
Step Five
.
When your first debt is paid off, take the amount you were sending to your first creditor including
the POOL money plus the minimum payment on your second debt. Keep doing this for each debt
on your list until, at last, you are debt free

13. Debt Elimination – A Practical Approach
Example of Snowball Process
Monthly Pool Money - $100
Creditor APR Balance Payment
Radio Shack 21.00 $215.00 $15.00
Sears 21.00 $365.00 $23.00
MasterCard 19.80 $1,705.00 $49.00
Visa . 15.90 $2,341.00 $73.00
Discover 12.90 $1,250.00 $27.00
Auto Loan 10.90 $5,843.00 $315.00
•Pay $15 to Radio Shack PLUS the $100 Pool Money ($115 total). Pay the minimum on all other bills
•When Radio Shack is paid off, the $15 Radio Shack payment, PLUS the $100 Pool money PLUS the $23
Sears minimum payment ($138 total) goes towards the Sears bill. Pay the minimum on all other bills
•When Sears is paid off, the $15 Radio Shack payment, PLUS the $100 Pool money PLUS the $23 Sears
payment PLUS the $49 MasterCard minimum payment ($187 total) goes towards the MasterCard bill. Pay the
minimum on all other bills
•When MasterCard is paid off, the $15 Radio Shack payment, PLUS the $100 Pool money PLUS the $23 Sears
payment PLUS the $49 Master Card payment, PLUS the $73 Visa minimum payment ($260 total) goes
towards the Visa bill. . Pay the minimum on all other bills
•Rinse and repeat until debt free.

14. Debt Elimination – A Practical Approach
Snowball Programs
There are a bunch of “debt reduction” programs on the internet. Some of these programs can
cost up to $3500!! That is absolutely ridiculous. What is the point of spending a ton of money
on a program when you are already in debt!!
Two programs I have used and can recommend.
Powerpay (online only) cost = FREE
ZilchWorks (downloadable to your computer) cost = $39
Powerpay: https://powerpay.org
ZilchWorks: http://www.zilchworks.com/zilchstandard.html

15. Debt Elimination – A Practical Approach
Example
Creditor APR Balance Payment
Radio Shack 21.00 $215.00 $15.00
Sears 21.00 $365.00 $23.00
MasterCard 19.80 $1,705.00 $49.00
Visa 15.90 $2,341.00 $73.00
Discover 12.90 $1,250.00 $27.00
Auto Loan 10.90 $5,843.00 $315.00

16. Debt Elimination – A Practical Approach
Emergency Fund
It is very important to have at least $500, preferably $1,000 or more, in your savings account as an
emergency fund. That way you aren’t tempted to use your credit cards for a car repair or some other
emergency bill.
.
Don’t start to pay your snowball debts until you have this done.
You can use the program to pay your savings account as the first bill.
If, for any reason, you have to take money out of your emergency fund, you will need to replace it as
a first priority. Use the same method as you did above. Using your extra money fund, to repay your
savings. Once the savings is back to the desired level, get back to your regular snowball debt program.

17. Debt Elimination – A Practical Approach
Example Budget - $300 Pool Money Available
Minimum
2012 Payment Due Date 2/10 2/24 3/9 3/23 4/13 4/27
$300 + $50 PMT $350 + $50 PMT $400 + $40 PMT
LOANS
mtg $1,050.00 10th $1,050.00 $1,050.00 $1,050.00
2nd mtg $300.00 29th $300.00 $300.00 $300.00
line of credit $75.00 20th $75.00 $75.00 $75.00
auto loan $200.00 6th $200.00 $200.00 $200.00
school loan $120.00 25th $120.00 $120.00 $120.00
CREDIT CARDS
a $225.00 13th $225.00 $225.00 $225.00
b $200.00 9th $200.00 $200.00 $200.00
c . $210.00 11th $210.00 $210.00 $210.00
d $120.00 21st $120.00 $120.00 $120.00
e $80.00 3rd $80.00 $80.00 $80.00
f $110.00 21st $110.00 $110.00 $110.00
g $50.00 25th $50.00 $400.00 $85.00 PIF
h $50.00 25th $350.00 PIF
i $40.00 8th $40.00 $40.00 $355.00
$2,830.00 TOTAL $1,875.00 $1,255.00 $1,355.00 $1,775.00 $1,795.00 $1,335.00
OTHER DEBT 2/10 2/24 3/9 3/23 4/13 4/27
Savings $200.00 $200.00 $200.00
Gas $50.00 $50.00 $125.00
Phone $50.00 $50.00 $50.00
Electric $200.00 $100.00 $100.00
Cable $100.00 $100.00 $100.00
Water $140.00
Sewer $110.00
Car Insurance $150.00 $150.00 $150.00
Cell Phone $85.00 $85.00 $85.00
Total Other Debt $200.00 $745.00 $640.00 $235.00 $150.00 $660.00
Total All Debt $2,075.00 $2,000.00 $1,995.00 $2,010.00 $1,945.00 $1,995.00
Total Income $2,500.00 $2,500.00 $2,500.00 $2,500.00 $2,500.00 $2,500.00
Net After Debt $425.00 $500.00 $505.00 $490.00 $555.00 $505.00

18. Debt Elimination – A Practical Approach
Financial Freedom
“If you will live like no one else now, later you can live like no one else” – Dave Ramsey
If you make sacrifices now that most people aren’t willing to make, later you will be able to live the
life those people wish they could live.
1. Make a budget and live by it
3. Pay cash for everything or use a debit card
5. Use the Debt Snowball Method to pay off all your debts
7. Live frugally (need vs. want)
9. Prepare for emergencies
11. Pay yourself first - invest regularly

19. Debt Elimination – A Practical Approach
Copies of Presentation
http://www.slideshare.net/rickz713/eliminate-your-debt-forever-11616743
Contact Me
rzimmerman@taleriscu.org
Thank You!