A Personal Finance Guide

Your Wealth is Hidden in the Fragments of Your Life - Part 9

If you are a typical citizen of an industrialized nation, your life is a Debt Induction Engine. In the Western World, we tend to view our income as a mold into which we pour our lifestyle. After we fill the mold completely full to the very brim, we crave an even more expansive lifestyle and hock our future to obtain it. As you operate your financial life, it just naturally induces debt. It is like a steam driven locomotive. The engine takes off ponderously slow very gradually gaining speed and momentum. As it runs over the years, you become bound with increasingly greater amounts of debt.

In this article, you are going to learn how to transform your Debt Induction Engine into a Debt Destruction Engine. As this debt-destroying locomotive operates, it moves forward with aggravating slowness. At first, this engine destroys debt at such a snail’s pace that it is hard to find the will to keep it running. It may take the first 3/4 of the total time the locomotive runs to destroy the first 1/4 of your debt. Then it finally achieves enough momentum in the last 1/4 of the total time the locomotive runs to destroy the last 3/4 of your debt. This process is called a Debt Destruction Engine because it starts slow and builds momentum just like an old-time steam driven locomotive until it finally achieves great power and speed.

Just below, we see 8 time payment accounts that do not include vehicle loans or the mortgage. There are 4 credit cards, 2 finance company loans, and 2 store revolving accounts.

Bill 1—Bill 2—Bill 3—Bill 4—Bill 5—Bill 6—Bill 7—Bill 8

To start the Debt Destruction Engine, we add “extra fuel”, which is like adding wood or coal to stoke the locomotive’s “boiler”, every month by paying an extra $25 on the target bill, which is Bill 1, until it is paid off.

Pay Bill 1 plus $25 Extra Fuel also applied to Bill 1.

Pay just required payments on Bill 2, Bill 3, Bill 4, Bill 5, Bill 6, Bill 7, and Bill 8.

The Debt Destruction Engine starts out with wheels spinning, fighting for traction, barely moving. After Bill 1 is finally paid off, add the same “extra fuel” plus the amount you were paying on Bill 1 to the new target bill, which is Bill 2, until it is paid off.

Pay Bill 2 plus amount that was paid on Bill 1 plus $25 Extra Fuel, all applied to Bill 2.

Pay just required payments on Bill 3, Bill 4, Bill 5, Bill 6, Bill 7, and Bill 8.

When Bill 2 is paid off, add the “extra fuel” plus the amount that was paid on Bill 1 plus the amount that was paid on Bill 2 to the new target bill, which would then be Bill 3.

Pay Bill 3 plus amount that was paid on Bill 1 plus amount that was paid on Bill 2 plus $25 Extra Fuel, all applied to Bill 3.

Pay just the required payments on Bill 4, Bill 5, Bill 6, Bill 7, and Bill 8.

As each target bill is paid off, add the total amount that was being paid on the previous target bill to the new target bill. Keep doing this until all 8 accounts are destroyed. The larger the “extra fuel” is at the beginning, the faster the process of debt destruction. This extra fuel version of the Debt Destruction Engine with only $25 of “extra fuel” could take as long as 5 years to destroy this group of accounts.

Your usual time payment accounts (not including here the vehicle loans and the mortgage) can be destroyed in from 2 years to 5 years depending on the size and nature of your debt with this “extra fuel” attack. This version of the Debt Destruction Engine is slower than 2 other versions of the Debt Destruction Engine: Inherent Momentum and Inherent Momentum with Extra Fuel.

Inherent Momentum

Debt can be destroyed without adding “extra fuel” to the Debt Destruction Engine. Debt has a powerful residual inertia that can be focused against itself. This form of the Debt Destruction Engine operates even faster than its extra fuel cousin as it annihilates debt with its own inherent momentum.

We will use the example of the same 8 accounts that were employed in the previous discussion. The total of all the required payments is $1,300. We do not add “extra fuel”. We apply the same block payment of $1,300 until the 8 accounts are destroyed.

1st Month

The total of all the payments is $1,300 in the 1st month. We start by just paying the required payments on each of the 8 accounts.

2nd Month

The total of all the required payments is $1,296 in the 2nd month. The credit card and store revolving account balances have declined ever so slightly which causes the required minimum payments on these accounts to go down just a tiny bit.

In this 2nd month, you subtract the total required payments of $1,296 from the block payment you started with of $1,300 and you get $4. You add this $4 to the target bill, which is Bill 1.

So, in this 2nd month, you pay just the required minimum payment on each of Bills 2 through 8.

On Bill 1, you pay the required minimum payment plus $4.

In the very beginning, Inherent Momentum moves slower than the Extra Fuel Version of the Debt Destruction Engine. Inherent Momentum catches up quickly, as you will see, and then runs far ahead.

3rd Month - In the 3rd month, the total of all the required payments is $1,291. When you figure this, you get $1,300 - $1,291 = $9. You pay the required payments Bills 2 through 8. On Bill 1, you pay the required payment plus $9.

12th Month - In the 12th month, the total of all the required payments is $1,210. $1,300 - $1,210 = $90. You pay the required minimum payments on the bills other than the target bill. On the target bill, you pay the required minimum payment plus $90.

24th Month - In the 24th month, the total of all the required payments is $900. $1,300 - $900 = $400. You pay the required payments on the bills other than the target bill. On the target bill, you pay the required payment plus $400.

36th Month - In the 36th month, the total of all the required payments is $450. $1,300 - $450 = $850. You pay the required payments on the bills other than the target bill. On the target bill, you pay the required payment plus $850.

42nd Month - By the 42nd month, the 8 accounts are totally destroyed.

When you see how this works and see the TV ads for credit counseling services, you realize that these folks are using Inherent Momentum. They talk about a single block payment as in the example we just discussed. These “services” are doing what you could do yourself.

There is an inherent momentum that just naturally resides in debt itself. As long as there are no new purchases on these accounts, the total of all the required payments will constantly and relentlessly diminish. You continue to apply the total “block amount” that you employed at the beginning. You subtract the total of all the required payments from this block amount and apply the difference to the target bill every month. You can destroy your debt without any extra fuel. Your debt will implode on itself with the weight and power of its own inherent momentum. This version of the Debt Destruction Engine works especially well for those with a lot of credit card and store revolving account debt.

Inherent Momentum with Extra Fuel

In this variation of the Debt Destruction Engine, we simply add “extra fuel” to the block payment at the beginning. If the total of all the required payments is $1,300 and we add $25 of extra fuel, then we start with a block payment of $1,325.

In the 1st month, you pay the required minimum payments on each of Bills 2 through 8. On Bill 1, you pay the required payment plus $25.

In the 2nd month, the total of all the required payments is $1,291. $1,325 - $1,291 = $34. On Bills 2 through 8, you pay the required payments. On Bill 1, you pay the required payment plus $34.

Each month, you add up all the required payments to get a total. You subtract this amount from the beginning block amount. You then add this difference to the required payment on the target bill. On the other bills, you pay just the required minimum payments. You are simply using a higher block payment and this causes debt to be destroyed even faster.

3 Types Of The Debt Destruction Engine You Can Run

- Type 1 has Credit Cards, Finance Co. Accts., Store Revolving Accts.

- Type 2 has Credit Cards, Finance Co. Accts., Store Revolving Accts., Vehicle Loans

- Type 3 has Credit Cards, Finance Co. Accts., Store Revolving Accts., Vehicle Loans, Mortgage

3 Versions Of The Debt Destruction Engine You Can Run

Extra Fuel

- Type 1 with Extra Fuel Version takes 2 to 4 years, 5 years if you take it easy.

- Type 2 with Extra Fuel Version takes 3 to 5 years, 6 years if you take it easy.

- Type 3 with Extra Fuel Version takes 5 to 10 years, 11 years if you take it easy.

Inherent Momentum

- Type 1 with Inherent Momentum takes 1 1/2 to 3 1/2 years, 4 1/2 years if you take it easy.

- Type 2 with Inherent Momentum takes 2 1/2 to 4 1/2 years, 5 1/2 years if you take it easy.

- Type 3 with Inherent Momentum takes 4 1/2 to 9 1/2 years, 10 1/2 years if you take it easy.

Inherent Momentum with Extra Fuel

- Type 1 with Inherent Momentum with Extra Fuel takes 1 to 3 years, 4 years if you take it easy.

- Type 2 with Inherent Momentum with Extra Fuel takes 2 to 4 years, 5 years if you take it easy.

- Type 3 with Inherent Momentum with Extra Fuel takes 4 to 9 years, 10 years if you take it easy.

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