Slam the Door on Debt

February 28, 2018



Every summer as a child, my family would take a road trip.  Typically, these road trips were to see family members; however, these were road trips, nevertheless.  Back then, the electronic GPS or phone GPS was non-existent to ordinary folks.  We used the ancient Rand McNally maps that were as wide as the van sometimes and I used to love just staring at the maps examining the different vast city names and distances in between.  The point is that while we have traveled the route many times, a map was necessary.  Today, when traveling, we have a habit of setting the GPS in our phones are start traveling with full confidence in this little piece of technology.  We do this because it is highly efficient and reliable.  Without this great technology, we could probably still manage to figure out a way to arrive to our destination, but it wouldn’t be as efficient without it.  We would waste time, gas, and money. 


A financial GPS is highly recommended to families by financial planners because we want families to be efficient in saving money and time. 


If you still haven't made one, here is how you can easily make an effective plan or Financial Roadmap.


Know your debts: The first step towards making the plan is to identify your debt situation to be debt free soon. Carefully go through all your credit card statements, loan, and other statements. Calculate the amount you owe on various cards or loans etc. and identify the exact amount you have to repay. Sometimes you may even be shocked by the enormity of the amount you have to repay. However, the idea is to know how much exactly you owe so that you can make arrangements accordingly and be debt free.  Also, you will need to observe the interest rate being pushed on your debts.  We will talk about compounding interest later but once you review the interest rates on your debts,  you need to understand the Rule of 72.


Rule of 72: 

Even if the Theory of Relativity wasn’t enough by the great physician, Albert Einstein, he also is credited for the Rule of 72.  This ruling declares a simple mathematical formula that states how long an investment would take to double one’s money.  Yes, DOUBLE your investment.  Take for instance, a child inherited $500 from his grandparents and puts into a bank Certificate of Deposit earning 1%.  It would take 72 years for his investment to double.



     72 years /  1% interest = 72 years

     72 years / 3% interest = 24 years

     72 years / 6% interest = 12 years

     72 years / 9% interest = 8 years


You can see from the formulas above why seeking a higher interest rate is better.  Although the higher the interest rate, the riskier an investment is going to be.  However, I want you to consider this. 

Ever thought about how banks make their money?  Yes they loan it out but lets put things into perspective.  You put $1,000 into a bank and in return you may earn 0.01% on this amount sitting in your checking account.  How thoughtful of the bank, you think.  The bank then will either loan this out for the going interest (lets say 4%).  The bank already made a nice gain from you.  But what if banks had loaned money to you in the form of plastic?  Yes, credit cards.  They generously pay you 0.01% while charging you from 12-23% or more.  With the rule of 72, the financial institutions are raking in the dough very easily.  Consider this the next time you want to charge something onto your credit card. 


Prioritize: Once you have come to know the exact amount you have to pay back, you need to prioritize the payments. Consider which ones you will be paid quickly and which ones later. The best thing to do if you have some debts is to choose those that have higher rates of interest and pay them back promptly. Otherwise, you will be paying more every month including the interest, and it will be difficult to be debt free. Another option is to select the debts you can payoff the fastest to free up some capital. In the diagram below, I have an example of the Debt Stacking Payment Plan.  This plan is designed to allow your monthly payments be consistent while taking next paid off debt payment and applying to the next debt amount.  If you are consistent, you will be amazed at how quickly debt can be tackled and the amount of interest you save.   Make the priority list according to your convenience.


Devise a plan: After creating your priority list, it is time to devise a plan to be debt free. The payment plan should help you to pay off the priority loans easily. So try to put all the extra money towards the payment of the loans. You can also make double payments to decrease the repayment amount. In case of the other smaller loans, you can make the minimum payments until you are ready to pay them off.

Automatic payment: To be debt free quickly, use the automatic repayment method. The best option to make timely repayment is to set up an automatic repayment from your bank account. This can save you a lot of time and also be assured that the payments will be made on time. There is no need to fear about deferring the payments. However, ensure that your account has the amount during that time. By following these procedures, you can easily clear all your debt to be debt free.


I consider debt to be a global epidemic because nations have fallen and collapsed because of their inability to control their spending habits.  At the end of the 2017 fourth quarter, the Center for Microeconomic Data (CMD) report that “Household Debt and Credit reveals that total household debt reached a new peak in the fourth quarter of 2017, rising $193 billion to reach $13.15 trillion.”1




According to a study by NerdWallet, their analysis found that the “total credit card debt continues to climb in 2017, reaching an estimated $905 billion – a nearly 8% increase from the previous year.”2 The study also found that the average credit card balance is approximately $15,654. While grocery bills and medical expenses saw huge increases in 2017 from credit card activities, it is time to recalculate our financial GPS and get started.



1 Center for Microeconomic Data (2017). Household Debt and Credit Report. Retrieved from 

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