[Excerpt]: Millionaire Maker

by SMART BOOK on 2006-04-13 12:37:34

The following is an excerpt from the book The Millionaire Maker
by Loral Langmeier
Published by McGraw-Hill; December 2005;$24.95US/$00.00CAN; 0071466150
Copyright Š 2006 Loral Langmeier
A Five-Step Strategy for Getting Out of Debt

Most people with debt problems are so caught up in their Lifestyle Cycle or
their debt juggling that they can't imagine finding a positive solution that
will enable them to build wealth. Many would be so grateful to end the pain
and panic of debt that they don't think much further than that one issue.
Chuck Wallace had made the decision to remove himself emotionally from his
debt and the reasons he got into it. For him this became, as it should for
you, a pure business venture, a matter of simply applying dollars and cents
to abolish debt. Committed to putting the debt plan in place, Chuck had
relinquished the idea that he was too far in and only a windfall could save
him. Chuck also understood that it takes longer to get out of debt than it
does to get into it; but since, as he started to get out of debt, he was
also creating wealth, he didn't feel that he was losing any time making
himself a millionaire.

I know for a fact that because you want to, you can and will be able to end
your role as a debtor and become a lender. By diligently employing basic
debt elimination measures, you can get out of the debt cycle within three to
seven years and at the same time start to build your Wealth Cycle. It is key
to understand that these processes are simultaneous. The following Five-Step
Debt Elimination Plan is what we use for all of our clients. If you have
debt it will help you begin to get out of that debt, as well as into the
habit of the Wealth Account Priority Payment. As you move forward in this
process you will note that what makes this different from the other debt
elimination processes is that this approach allows you to live a normal life
while you eliminate your bad debt. I've actually seen books that make you
question why you need to buy any new clothes for a year. I don't know about
you, but that doesn't work for me. If you personally do not have debt, you
may know many others who do, and by helping them through this process, you
help all of us to live in a better society.

Step 1. Create a Debt Elimination Box
List all your consumer debt. Like your Financial Baseline items, this should
be done electronically so you can keep track easily. This list should
include all of your credit cards, charge accounts, any high-interest loans
that are not against an asset, and other outstanding credit or liabilities.
The list should include (1) the name of the creditor, (2) the amount you
owe, (3) minimum monthly payments, and (4) the interest rate. On our Web
site, www.liveoutloud.com, we have a debt calculator that allows you to
insert these numbers and easily create these calculations.

Step 2. The Factoring Number
To fill in the last column, the factoring number, the following simple
calculation is necessary. Take the number in column 2, which is the amount
of the debt, and divide that number by the number in column 3, which is the
minimum monthly payment required. For example, if you owe $7,000 on your
credit card and the minimum monthly payment is $200, your factoring number
would be 35. Fill in the factoring number for each item on your consumer
debt list.

Step 3. Priority Payoff Box
On a new list, take the debt with the lowest factoring number and put it at
the top. This debt is the first priority payoff. Continue to list the debt
in order of the factoring number, with the debt with the lowest factoring
number appearing in first place, the debt with the second lowest factoring
number in second place, all the way down to the debt with the highest
factoring number listed at the bottom.

Step 4. The Jump-Start Allocation
In addition to the minimum payments required, you are going to take $200
from your current spending and allocate this to your debt elimination plan.
This amount, about $7 a day, will greatly accelerate your debt elimination
plan. Don't scream. This is going to be easier than you think. And once you
put together your detailed Financial Baseline you will have a clear
understanding of where your money comes from and where your money goes.
Finding that $200 will not be difficult, and your cash flow from new assets
may create the extra money. In my experience, when you list every single
expenditure
in your Financial Baseline, you will find a cut that doesn't even come close
to forcing you to scrimp or sacrifice.

On the Financial Baseline of one of my clients, I discovered $600 a month
spent on sushi. After several attempts to defend this expenditure, she
finally, reluctantly, painstakingly, made a decision to spend just $400 a
month on sushi. My guess is that when you honestly dig up your expenditures,
you'll discover a few sushi-like items that you could, perhaps, not do away
with altogether but cut down on a bit. For those of you still smoking, you
can kill two birds with one stone: take care of your health and your wealth
by cutting out cigarettes.

Step 5. Debt Payments
Take the debt listed in the first spot of the priority payoff box and apply
the $200 jump-start allocation to the minimum payment listed with this debt.
For example, if the minimum payment is $350, add the $200 for a new monthly
payment of $550.While you continue to pay the normal monthly minimum
payments on all the other debts, you will pay, in this example, $550 monthly
on this specific debt until it is paid in full. When you're finished paying
off the debt in the number one spot, you will take the amount you paid for
those minimum monthly payments, plus the jump-start allocation, in our
example $550, and add this amount, $550, to the minimum payment on the debt
in the second slot. As you can see, the payments build and build as you drop
on down the list of debts and your capacity to pay off your debt accelerates
incrementally. Though you will be uncomfortable with this process at first,
when you witness the speed at which you make progress, debt elimination will
become as addictive as accumulating the debt once was.

In this plan, it is vital that you commit to making the minimum payments,
and also to adding the jump-start allocation. That number, the jump-start
allocation, must be specific and consistent. Additionally, you must have in
your mindset that as you pay off one debt, the minimum payments stay in this
debt payment pool and contribute to the next debt's payments. That is the
only way this will work. And it works wonderfully well. You will be amazed
at the speed with which you cross off each debt payment. And by the time you
get to the one at the bottom, the one with the highest factoring number,
which in reality represents the months it should take to pay it based on the
original monthly payment, you'll see that you'll pay that debt off much
faster than the factoring number indicated.

Making these commitments is tough to do on your own. I strongly recommend
that you share your priority payoff box with members of your team. At times,
you'll be tempted to use your credit cards or assume some additional debt.
If your close friends and advisors have been given permission to check in
with you about your debt, they will facilitate your process with a system of
checks and balances against your old impulses.

Copyright Š 2006 Loral Langmeier

Loral Langemeier is a master coach, financial strategist, and team-made
multimillionaire who reaches thousands of individuals each year. She is the
founder of Live Out Loud, a coaching and seminar company that teaches her
trademarked program Wealth Cycles.
For more information, please visit www.liveoutloud.com.