I have read a book called the Richest Man in Babylon a few times over the last few years, what it’s essentially about is the knowledge. Riches come in many form from money to knowledge, having the wisdom to seek someone else’s council and say look I need help. It’s knowing what you do know and do not know as a person, yet when you need that information it’s having the ability to go to them and ask for that advice.
Anyway onto today’s topic which does have to do with money and that is how do you get you debts under control or keeping money saved away. Everyone learns their spending habits from their family good or bad, some people learn that money is tight and that there is not enough for those bills regularly there is more to spend at the end of the month then money coming in. These people are struggling as they have not learnt proper spending habits or money management. Others have, a tip that I learnt on how to start getting your finances under control again from another book called money secrets of the rich.
This book principally is an extension of the Richest Man in Babylon principles which are explained simply for everyone. Yet the thing that most people need to do is stop spending so much money and find a way to get their finances under control. Sometimes it’s really budgeting and going from there, some people need to accept that they can no longer afford where they are living the area and the lifestyle.
Some people like living so close to work in a home with costs them so much money. For me the hard part is that area I am in is expensive and very costly, it’s where I have grown up and the trap is the housing. Anyway here are the tips that help people get control of their finances again. Take a look at which debts are being paid, there is often one that can be paid off rather quickly or which is near enough to being paid off. Now the trick is to work out which debt can be paid off the fastest you may have four debts one work 1700, one worth 1100, one worth 5000 and one worth 25000. These debts are slowly going down however the payment amount for each of them is different the 1700 debt needs 39 / month. Whereas the 1100 debt may require 180 per month, the 5000 debt may need to be paid off as cash is available and the 25000 debt may be paid as cash is available also so essentially the other two debts are being paid slowly. Looking at the debts which one would be paid the quickest.
The 1100 debt sometimes it’s easy to see and other times not. Now how to work this out is work out a pay off ratio which is about working out which debt can be paid quickest this is done by dividing the amount owed by the minimum repayment, now the number with smallest ratio is where you start. However the trick is to also ad 10% extra onto the debt and that way it starts going down quicker, what is 10% of 180 it’s 18 so essentially if you combine them both you are paying at least 18 extra which starts making that debt smaller and smaller until it’s paid off. Then what you do is take what was being paid to the first debt to the next debt and combine the 198 which you have free with the 39 so essentially it’s now 237 which means that if you pay that 237 rather 39 you are paying off a lot quicker and so the process moves on until you have paid all debts off.
I managed to knock over a debt of just over 1200 within 6 months using this formula and it is now working for the next one which is going to take 7 months. This works great to see the amount owing keeping on going down and down and down.
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Be a mentor with a servants heart Ben Drake
