When it comes to money, people fall into three categories.

1. People that spend more than they earn.
2. People that spend all that they earn.
3. People that spend less than they earn.

It is thought that 90% or more of the population falls into the first two categories. In fact some annual surveys and research studies suggest that the average Australian spends 110% or more of their income each year! Amazing and scary.

The question these people need to ask themselves is this; “Would giving more money to people that are in the habit of spending more than they earn (or all that they earn), really help them move towards financial success?” Of course the answer is “no”. Their habits would see to it that they spend it all again.

Still, most people are under the illusion that if they could just earn (or win) some more money, it would fix their problems. Yet what they really need is to permanently change their habits. The challenge is that most people don’t know where to start.

What follows is your door to financial freedom. If you are drowning in debt or just treading water, here is your chance to transform your financial situation, your life and the lives of all those that come after you.

The Strategy

Sit down and take stock. Make a complete list of every single debt that you have. We are talking about consumer debt, not daily or weekly expenses (like fuel or train tickets). We’re talking about things like car loans, personal loans, credit cards etc.

Next, write down your monthly repayment for each item listed.

Now divide the debt amount by the monthly repayment amount to arrive at a ratio. (Interest rate and time are irrelevant to this ratio. We’re keeping it simple).

Loan	Amount	Monthly	Ratio
Home	200,000	2,000	100
Car	29,000	636	46
Visa	7,800	200	39
MasterCard	4,500	110	41
Furniture	12,500	600	21
Personal	14,000	400	35

Identify the debt with the lowest ratio, in this example it’s the furniture loan. Now take the additional $660 set aside from the monthly income and add it to the monthly furniture loan repayment. (This is the 10% extra set aside from the net income after allowing for the monthly payments).

Notice the monthly debt repayment now increases from $3,946 (+$660) to $4,606.

Concentrate this extra $660 on the furniture loan until it is paid off. When it is, apply this amount to the next lowest ratio loan.

In this case the Personal Loan, with a score of 35. Now the repayments on this loan can be increased from $400 to $1,660. That’s the original $400 plus the extra $660 plus the $600 being used to pay off the furniture loan.

Now that the furniture loan is settled, that extra amount can be used on other loans, which is were the power and excitement of this strategy really kicks in.

Proceed in the above manner until all debts are paid off. People are absolutely astounded how quickly they can be debt free; if they proceed in the above manner.

Note: Don't make the mistake of attacking the largest loan first, which is what most people do. Approaching the debts in the manner prescribed above is the fastest proven way to eliminate debts. For some people it will happen in less than five years, even those in dire positions.

It goes without saying that you’ll need to not incur any further debts while you go through this process. In fact, it’s probably best to destroy your credit card and avoid non-essential spending until the loans are paid off. Also, it is recommended that you delay all future purchases or upgrades in home or car.

The most common objection to this process is that people say they can’t afford to find the extra 10% we’ve set aside from the monthly income. Often this can be done without affecting lifestyle at all, just by being smarter and thinking about every dollar you spend.

When it’s done you’ll be in a very strong position, not just because of the significant cash stream to direct towards investments, but because your habits will have been changed forever.

If you have personal debts, implement and follow this strategy step-by-step. Set-up your debt elimination plan and relax, knowing your life is under control, because you are.