I met Kim Kiyosaki, investment author from Rich Dad, Poor Dad a decade ago and asked her how she got out of debt? She and her husband Robert dug out from under a mountain of debt in the interest-heavy mid-eighties.
Here’s her timeless, step by step advice that’s worth sharing.
- Minimise bad debt (i.e. credit) that makes you poor and focus on good debt that pays (e.g. property investments). Prioritise paying off credit cards in full each month over buying new stuff.
- List all your loans as 3 columns – amount owed; minimum monthly payment; and number of months (divide the amount by minimum payments). Rank each debt from lowest number of months up – this is the order for paying them off.
- Most people can save $200 or more per month to get financially free. Pay this on top of the minimum payment to your first priority debt and minimum payments on the rest, so you kick it over fast whilst meeting all your obligations.
- Then focus on debt #2 and apply the entire amount you previously applied to debt #1 to it on top of its minimum payment, whilst still meeting the minimum payments for the rest. You’ll start seeing fast momentum.
- Continue this process until all you bad debts are paid! Woot!
- When you are done, keep going by paying all the freed cash now to good debt for your own future benefit.
Sounds easy? As Kim says, most good systems that work are simple.