September Money Tip: Getting Out of Debt

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The key to getting out of and then staying out of debt isn't just about working harder and limiting your spending; it starts with the proper mindset.

To dig a bit deeper, the root of debt comes from consuming more than you produce. It is critical to be clear about purpose and how to produce in order to stay out of debt. One must always produce more than he/she consumes. Without discovering where there may be a scarcity mentality or limiting beliefs, debt will be a constant companion.

Once you have recognized and have begun to conquer the scarcity mentality around money, then you're ready for the tools that can help you with being efficient on paying off and understanding your debt.

One of the most effective ways to approach debt is to use the Cash Flow Index. The CFI is a scoring system to help you identify the efficiency of each of your debts. This scoring system will allow you to pay off the most inefficient debts first and then allow you to prioritize the order to maximize paying off your debt.

Here's how it works.  Take the balance of the loan and divide it by the payment of each debt. The resulting number is the CFI rating. The lower the number, the less efficient the debt is, and the sooner you should pay it off.

To pay off debt as quickly as possible, pay the minimum on all debts except the one with the lowest score. Then take all other available 'pay down money' and pay it toward the least efficient debt. Once it’s paid off, move to the next lowest score and pay it off. Rinse and repeat. This will pay off debt and free up cash flow in the fastest way possible!

Get Garrett's free eBook, 101 Answers to the Toughest Financial Questions on Earth, by clicking here!

For more information on Garrett B. Gunderson and to gain access to a complimentary Financial Health Assessment online, go to FreedomFastTrack.com/cfw.