Page 57 - Workbook1E

Discover Your Debt Free Day
11. Next was the Home Center where they bought a new washer and dryer. It was their smallest debt at $980 and 19.99% interest. Because of the small monthly payment of $24, it would take a staggering 70 months to pay off.
12. A Best Visa credit card for $2,125 at 9.99% interest also had small payments of $40, requiring 71 long months to eliminate.
13. Last they listed National Mortgage for their new home loan of $184,153 at 6.75% interest, and 360 monthly payments of $1,193 remained before they owned their home free and clear.
After listing all their creditors and debts (Steps 1 through 3) Erik and Tracy calculated their Real Debt (Step 4) for each creditor. The Real Debt was determined by multiplying the Monthly Payment times the number of Remaining Payments.
More Interest than Principle
When Erik and Tracy calculated the Real Debt for their home mortgage, they were shocked. The mortgage Current Debt Balance was $184,153— but with interest their mortgage Real Debt was actually $431,866! If they didn’t change their debt payment practices, they’d pay $247,713 in interest on their mortgage. Their interest was over 57% of the total amount they’d end up paying. It’s a great example of the power of interest working for your creditors, not for you.
Next they completed Step 5—Debt Summary, and recorded $251,994 for their Total Current Debt. They also added up their overall Total Monthly Payments for all their debts at $2,985 and recorded it in the box. This
#3 Monthly Payment amount would be key to paying off their debt much sooner and for less money since it would remain
constant even as they paid down their debts.
How Deep Is Your Debt?
It was the moment of truth—Eric and Tracy added up their Total Real Debt and discovered it was a whopping $517,142! They began to truly understand the depth of their “financial bondage.” Now you need to complete PART I of your Creditor Summary Sheet to discover the depth of your Total Real Debt and determine your Initial Debt-Free Day.
“We all run in debt for things we wouldn’t think of payin’ perfectly good money for.”
~ Kin Hubbard
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