This is part 2 in a six part series.
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Strategy 2: Restructuring your debt to increase cash flow, reduce interest accrual and eliminate debt years early
There are two proven paths to building wealth: You can increase the amount of money you make, or you can increase the amount of money you keep. Restructuring your debt helps redirect money normally lost to debt and interest back into your pocket by maximizing your monthly cash flow and limiting interest accrual which when optimized can work together to eliminate all your debt in less than 5 years.
*A $200,000 conventional 30 year mortgage at 5.5% makes a payment of $1,135 of which $916 goes to interest each month. Over 5 years $53,000 has been spent on interest and only $15,000 to principal. Over 10 years $101,000 has went to interest and $34,000 to principal. Over 30 years that 5.5% costs you $208,000 in just interest.
*Credit card debt of $8,000 at 18% creates a monthly minimum payment of $200 and would take 320 months to pay at a cost of $11,400 in just interest.
*A car loan for $20,000 at 7% for 48 months creates a monthly payment of $478 and cost $2,900 of interest.
In this scenario the total monthly payment to service this debt is $1,135 + $200 + $478 = $1,813 of which $1,324 goes to interest each month.
With the right strategy of debt restructuring the monthly debt service payment of $1,813 could be reduced to $951 with interest costs cut immediately by $353 a month. The entire $228,000 debt could be paid off in less than 7 years saving over $100,000 of interest costs and at the same time increasing your monthly cash flow. Defeating debt requires a commitment to managing it effectively while you have it. If you do not have a strategy in place than chances are your debt is managing you.
Before considering restructuring your debt it is a good idea to speak to a experienced financial strategist who can customize a plan to ensure your success and safety. For a free analysis call Stephen Vincelli at 727-502-7157 or email him firstname.lastname@example.org. You can visit his site at www.faithandyourfinances.com.
Stephen Vincelli is a Financial Strategist specializing in self banking strategies of financial management focusing on becoming debt free and living debt free. He has ten years experience in the financial services and mortgage industry. He and his wife Kristin consider what they do their ministry because of the lives they have seen changed by practicing these strategies. They seek to educate clients to become better stewards and help them build wealth for the the Kingdom.