In the last two worksheets you were given the ability to track your spending and create a balanced spending plan. The next step in total financial fitness is to eliminate all of your debt completely.

First, list all of your debt obligations on the chart below. The list should include any and all people or companies that you owe money to (e.g. credit card balances, store accounts, mortgage, auto loan, student loans, etc.)

Debt Obligations

CREDITOR	BALANCE OWING	INTEREST RATE (%)	MONTHLY PAYMENT

As you review the list above, compare it to your spending plan. Make sure that you included the monthly payment amount for each of these debts. If you didn’t, you’ll want to make those adjustments now so that you do not overspend your income. If you are using Mvelopes Personal, the system automatically sets up repayment envelopes for your credit cards and you should already have an envelope created for each of your other debts. Any adjustments made in Mvelopes will be quick and easy.

Once you have updated your spending plan, you can now look at how to quickly eliminate these debt obligations. In the chart below, prioritize the list from above in the order you would like to pay them off. This can be done by interest rate or balance owing. We recommend listing them by placing the highest interest rate at the top, with others in descending order.

Debts Listed in Order of Payoff

CREDITOR	BALANCE OWING	INTEREST RATE (%)	MONTHLY PAYMENT	ROLL-DOWN AMOUNT
Debt 1: (debt to payoff first)			(a)	(a)
Debt 2:			(b)	(a+b)
Debt 3:			(c)	(a+b+c)
Debt 4:			(d)	(a+b+c+d)
Debt 5:			(e)	(a+b+c+d+e)
Debt 6:			(f)	(a+b+c+d+e+f)
Debt 7:			(g)	(a+b+c+d+e+f+g)
Debt 8: (debt to payoff last)			(h)	(a+b+c+d+e+f+g+h)
Totals		-

In the above chart, you probably noticed the extra column titled ‘roll-down amount’. To quickly eliminate debt, you can enlist the debt roll-down principle. Once you pay off the first debt, put the amount of that monthly payment toward the next debt on the list. For example, if you were paying $75 per month on your American Express card and that card now has a zero balance, add the $75 payment amount to your Auto Loan, increasing the total from $200 to $275 each month. When the car is paid off, roll that total into your next debt on the list. By keeping your overall debt payment amount the same (even after you have paid off some debts) you can pay off all of your debts very quickly and save thousands of dollars in interest.

Accelerated payments are another method of increasing the rate of your debt reduction. An accelerated payment is an additional amount of money you take from your other spending categories and apply it to your debt payments. If you are using Mvelopes Personal, this can easily be done by sweeping any remaining balance from your spending accounts into your debt repayment envelopes. Applying this increased amount toward your remaining balance on each debt can shave off years of additional payments.

To see how the roll-down principle and accelerated payments work, use our interactive debt calculator. The debt calculator will show you how much you will pay for your debts over time and how much the roll-down principle and an accelerated payment can save you.

This entire process of spending management can be done electronically and in a fraction of the time. Come to www.mvelopes.com for your FREE 30-day trial.