Step #4 of 6: Eliminate your unsecured debt

By ROBERT K. CUNNINGHAM, Personal Finance Coach

RIGHT OUT OF THE GATE:  This blog/website and all its content is designed and produced for information purposes only.  No representation is made to guarantee the accuracy of any of the content contained on this website, nor should it be interpreted that specific investment recommendations are being made.  The reader assumes any and all risk for strategies which are acted on.

For many people, the prospect of paying off all of their unsecured debts – and for most, this refers to their credit cards and department store cards – are remote in the short term, and daunting regardless of the circumstances.

But truthfully, it doesn’t have to be a difficult task… provided you’re fully committed to the process.

Today’s post will lay out the steps for the quickest, most painless strategies pertaining to paying off debt.  To be clear, we’re not referring to a mortgage if you’re buying your home rather than renting, and we’re also not including automobile financing… although the reality is that if your credit card and other unsecured balances are manageable, you could choose to include your car loan in the system and get it paid off as well.

For our purposes, however, we are focusing on high-interest debt.  Credit cards typically charge 20% or more annually.  Nothing short-circuits your ability to get ahead financially… and BuildWealthEarly… than high-interest debt compounding monthly.

So let’s get to what you specifically need to do:

1) List all your debts in chronological order by minimum payment due date. The order in which you list your debts is your choice, of course, but I have found this particular method to be the easiest.  What is most important is to be sure the following information is included:  Creditor, account number, phone number and/or website address ( have your user name and password available), balance, APR ( annual percentage rate), minimum payment due, and due date for monthly payments.

Be sure this information is accurate, to the hundredth of a percent with regards to the APR.  I am about to explain why this is important.

2) For any creditors charging more than 12% interest, call and ask for a reduction. Yep… if you want this system to work at peak efficiency and effectiveness, you should be willing to call and talk to a human. The purpose of your call is simple, and should start with something along the lines of: “Hi, I am re-dedicating myself to getting my debts paid off, in full and in the shortest amount of time possible, and I’d like to request that you reduce my interest rate, which is currently at ____ (tell them specifically what it is).”

You want to be ultra-specific on the rate because it will assert that you’re serious about this endeavor.  Informing the company’s representative that your interest rate “is around 20% or so,” makes you come off as hap-hazard about the whole thing.  Furthermore, be prepared to ask for a specific figure if requested to do so.  “If you could see your way clear to suspend my interest entirely for the next six months, that would be greatly appreciated and will really assist me in getting my debt paid down.”

If that doesn’t fly, don’t be deterred:  “I understand that you can’t eliminate my interest entirely.  How about cutting it in half, then?”

NOTE:  You can attempt this communication via online chat, rather than by phone, but chat representatives often seem to have the least amount of authority.  In my opinion, you’re better off calling.

If you successfully achieve a reduction — and your chances at doing so are actually very good depending on the current rate — don’t push your luck by asking for more of a discount unless the awarded reduction is truly meager.  Anything that, say, represents a reduction of 25% or more (for instance, if your current rate of 20% is reduced to 15% or less) should be accepted on its face with gratitude expressed.

If you run into a rep who refuses any accommodation (reminds me of the film ‘The Godfather,’ when Vito Corleone asks the other Dons, “when have I ever refused an accommodation?”), ask to speak to a supervisor, and go through the same steps until success is achieved, or until they hang up on you (kidding).

3) Update your list’s APRs, and note the debt with the highest rate. This will be your first priority debt.  NOTE:  If you have two debts with the same APR, and one balance is significantly lower than the other, go with the lower balance debt first… but ONLY if the rates are identical, or virtually the same.

As many financial “gurus” have explained by calling this the “snowball” method, the trick is to dedicate all extra funds that you are setting aside for debt elimination to the designated priority debt, until it is paid in full.  You should have arrived at this amount of available extra funds by going through the first three steps of the “Six-Steps-to-Six-Figures” that have been laid out in this blog over the past month.

4) After determining your first priority debt, dedicate all that you can to it.  Here’s what you do:  Note the minimum payment due on your designated priority date, and add your total of extra available funds for debt elimination to this amount.  Don’t pay the extra funds total in lieu of the minimum, but instead pay it in addition to the minimum.  And pay it right now… even if the minimum payment isn’t due for another three weeks, or if you just sent the minimum payment in last week.

For all of the rest of your creditors on your list, pay the minimum payment.  Although it’s preferable to simply pay them all simultaneously right after sending money to the creditor for the primary debt, it isn’t crucial as long as you make each payment at least 3-5 days before it is due. DON’T BE TEMPTED TO IGNORE ANY OF THE OTHER CREDITORS, THINKING YOU WILL EVENTUALLY BE ACCELERATING THEIR PAY-OFF. There’s no reason to muck up your credit… just pay the minimums on time and let the system as it’s laid out here do its thing.

Regularly monitor the updated balance of your priority debt and when it falls below the amount you’ve been sending in on that debt, it’s time for an adjustment.  First, pay the full balance due on the primary debt but obviously not more than that.  Assuming this final payment is less than what you’ve been sending to this creditor, be sure to add the difference to the payment for your next priority debt.

To determine that next debt to attack, go back to your list and select the account with the second-highest APR.

Now this next step is important… send the following amount to the second creditor as soon as possible, but most certainly before the next payment is due:  Amount of total payment that was being sent to the first primary debt (plus the reduced difference in the last payment, as noted above), PLUS the minimum payment due on the second (new) primary debt.

The idea is to continue sending out the same amount of money every month while your debt slowly dwindles.  As it decreases, the amount you’re sending becomes more and more effective, and accelerates the pay-off process.  Thus, the term “snowball.”

5) Follow the same routine, in order of highest to lowest APRs, until your last remaining account is paid in full.  As each account is paid in full, just keep adding the previous total payment to the minimum payment of the new target debt.  If you stick with this system to its conclusion, it is impossible to fail.

NOTE:  An alternative to the above method which uses the APR to determine the order of accounts being paid off is to instead pay the smallest balance first, then next smallest, etc., regardless of APR.  The theory is that doing it this way will give you tangible results (i.e. zero balances) more quickly, and ultimately better encourage you to stick it out to the end.  The problem is that this approach will result in you paying more interest over the length of your debt-elimination trek.  For my money, I want to save every dollar available.  The math means more to me than the mental tomfoolery.

Ultimately, you will have earned a hearty congrats for paying off all your unsecured debt.  Just one last reminder:  Do NOT be a schmuck and run up more debt.  There’s a smart way to use credit cards, to gain access to some sweet rewards without going into more debt, and for that information please furnish your email address for a free report with the details.

In the meantime, thanks again for reading.

For more specific information on DPWLI and related strategies, please go to, and let them know that you were referred to that site via 

DISCLOSURE:  If you opt to purchase a product(s) from, I will qualify for an affiliate commission.

Step #3 of 6: Pay yourself first, do it always, and make the process automatic

By ROBERT K. CUNNINGHAM, Personal Finance Coach/Consultant

RIGHT OUT OF THE GATE:  This blog/website and all its content is designed and produced for information purposes only.  No representation is made to guarantee the accuracy of any of the content contained on this website, nor should it be interpreted that specific investment recommendations are being made.  The reader assumes any and all risk for strategies which are acted on.

Anyone who has spent even the briefest amount of time reading about personal finance has heard the expression, “pay yourself first,” but what does that truly mean?

Well, I’m glad you asked. 😉

Although it would appear to be among the most basic rules in the world of savvy money management, it is arguably the most difficult for many folks to adhere to.  It is promoted as being the first rule of finance, but I hope you will agree that the previous two steps I’ve laid out in this blog over the past two weeks – summarize your income and expenses, and establish a budget – should come beforehand.

If they didn’t, you wouldn’t have any accurate idea of how much to pay yourself.

That said, the primary concern over the long haul is to actually save, rather than obsessing about how much.  Establishing a habit of saving money regularly – and, preferably, automatically – will pay significant dividends, monetarily and otherwise, down the road.

With the power of compound interest – and, yes, it is every bit as cool as advertised – small deposits can eventually achieve surprisingly large results.

I always get a kick out of the demonstration of someone starting with a penny, and allowing it to compound 100% daily, for a month, and seeing how much they have after that time.  When asked to guess the answers, folks usually forecast a few hundred dollars, but the truth is that if you start with a penny and double what you have every day for 30 days, you end up with more than $5 million.

While that seems amazing to me, I prefer to focus on realistic numbers.  So let’s take a hypothetical 22-year old college graduate who starts with $500, and every month adds $300 to it.  And let’s say she earns a 5% annual return (yep, I want to stay conservative and achievable here), each and every year, and the interest compounds annually.

After the first year, she would have saved $3,990 ($500 plus 11 months of adding $300 per month = $3,800 x 5% rate of return (ROR) = $190.  $3,800 + $190 = $3,990.

How much will she have in 20 years?  If you calculate 19 more years at $3,600 contributed per year, the total amount SHE put in, not including any interest earned, would be $75,800.

Now to the whole point of this exercise:  At 5% compounded annually, her account balance after the two decades would actually be $123,067.  That’s more than $47,000 in earned interest!

THAT is why Albert Einstein purportedly said that compound interest is one of the most powerful forces in the universe.

One other vital point:  Starting early is crucial.  Starting late is better than not starting at all, of course, but the power of compounding isn’t only remarkable, it’s a little quirky.  To wit:

We have two business partners, who we will call Ben and Jerry (I love ice cream, but any resemblance to real people of the same names are purely coincidental).

Ben starts saving $200 per month at age 21, does so every month of every year until he reaches age 30, then stops because he gets married to a spendthrift who eats up their budget. Ben saved regularly for nine years, contributing a total of $21,600 before stopping cold turkey, never to contribute another dime for the rest of his life…

Go with me here.

Jerry does just the opposite.  He doesn’t save anything at all until his 30th birthday, when he decides he’d better get started and begins putting away $200 per month, just like Ben.  But Jerry goes one better – he doesn’t stop after nine years, but instead puts in that same $2,400 annually every year for the rest of his working life – until he retires at age 65.  That means Jerry puts in $86,400 over the entire savings period, more than four times what Ben saved.

Assuming both earned 6% compounded interest annually, each and every year (again, it’s about the comparison – stay with me), who would end up with more money in their account at age 65?

Jerry, right?  I mean, he put four times more money in.  Of course he will have more in his account.


Ben’s account balance, despite putting in a fourth of what Jerry did, is just a bit less than $1.2 million.  Jerry has only about $650,000.  It isn’t even close.

As the character Leonard on the TV sitcom Big Bang Theory likes to reply slowly, “whaaaaat?!”

Because Jerry started late, his efforts are dwarfed by Ben’s even though Jerry put a lot more money in.  Einstein wasn’t trippin’ with his statement.

OK, fine, you’re saying.  That’s very cool, but what if you don’t have much to save at all?  Not even 200 bucks.  Sure, let’s discuss that.

Let’s say you’ve assessed your income and expenses, created your budget, and the best you can do is save $40 per paycheck.  My first reaction, honestly, would be to instruct you to go back and try harder to cut expenses, acquire a side hustle, sell unneeded material possessions, etc. to improve your savings commitment.

But you tried, and it’s $40 a check or fuhgetaboutit. You’re paid on the first and 15th, so we’re talking $80 savings per month.  Fine, we can work with that… as long as you commit to making your savings automatic by having the $40 direct-deposited into the bank account of your choice, a task that most companies can and will readily accommodate.  If not, you will have to take the extra step of manually transferring money to a savings or investment account… IMMEDIATELY after depositing your check and before ANY bills are paid.

This is the key to the philosophy and, fairly obviously, the whole point of “pay yourself first.”  These are logistical concerns, however, and for now I want to re-focus on the saving.

At $80 a month, earning 5%, you can have more than $5,500 accumulated in just five years.

Hey, I realize $5K isn’t going to buy you a Maserati… won’t even get you to a down payment on a Maserati.  But it’s a pretty good start toward getting into your first home, isn’t it?  Or you could knock out a big chunk, if not all, of your credit card debt with five grand, could you not?

To repeat, the true importance of this is about the habit of saving.  Simply put, the ability to save – even in small amounts until such time you can afford to contribute more – is mandatory to getting ahead and, ultimately, building lasting wealth, whether you are diligent enough to build that wealth early or not.

Pay yourself first, friends.  Don’t think about doing it, and don’t do so just part of the time, after your birthday or Christmas, or after you receive your tax refund.  Do it each and every time you get your paycheck, without fail.  The gains really will compound nicely for you.

Thanks for reading.

For more specific information on DPWLI and related strategies, please go to, and let them know that you were referred to that site via 

DISCLOSURE:  If you opt to purchase a product(s) from, I will qualify for an affiliate commission.

Step #2 of 6: Establish a legitimate budget

By ROBERT K. CUNNINGHAM, Personal Finance Coach/Consultant

RIGHT OUT OF THE GATE:  This blog/website and all its content is designed and produced for information purposes only.  No representation is made to guarantee the accuracy of any of the content contained on this website, nor should it be interpreted that specific investment recommendations are being made.  The reader assumes any and all risk for strategies which are acted on.

In last week’s first installment of our six steps to six figures, with at least six advantages, I wrote in detail about how to go about summarizing your income and expenses.

Yeah, I know that wasn’t exactly a hoot in terms of entertainment value, but it’s a must if you expect to proceed intelligently with personal money management.

Now, we will delve into Step 2 – putting together a budget.  What precisely does budgeting mean, for our purposes?  Well, the best way to explain it might be like this:  Last week, we deduced where your money is going.  This week, we will determine in advance where it’s gonna go.

Over-simplification?  Perhaps.  But when it comes right down to it, only you are in control of where your money goes.  What it’s spent on, or where and how much is saved, is decided by no one else.  So if you care enough to read this blog and get some suggestions on how to go about controlling all of this, why not go the distance and actually implement these techniques?

Looking back at the numbers you arrived at last week, in which of the following categories do you fall:  A little money left at the end of the month, or a little month left at the end of the money?  Let’s consider each scenario, and lay out an example budget:

Some extra money available:  Good for you!  It means at the very least that your income is satisfactory for your current lifestyle and your spending isn’t ridiculous.  But it doesn’t mean you can’t drastically improve your situation (yes, I used a double-negative. I find them handy on occasion.  Please don’t bother the writing police).

Are you saving any money on a regular basis? If not – and we will discuss why this is so vital in future posts – you’re going to remedy that here and now with a commitment to save at least an amount equal to your current monthly surplus.  For example, if your monthly net income is $2,500 and your expenses added up to $2,300, you’re going to put at least $200 into savings (or investing) monthly.  You will do this first, preferably automatically via a payroll withdrawal conducted by your employer, with the money transferred directly to your savings or investment account of choice.

Making this automatic is more efficient, and it reduces the chance that you will blow off this step in favor of the $229 dress at Forever 21 that you believe makes you look hot and is on sale for $179.  Don’t get me wrong… people need clothes and I like to see folks dressed up, but there should be a category in your budget that this fits into – pun intended. And honestly, $179 will buy you a whole friggin’ wardrobe at Ross.

So we have our $200 set aside for savings, and the next step is to total up our fixed expenses – rent, car payment, cellphone bill, gym membership, etc. – because these are (usually) constant and unable to be significantly altered. When we have that figure (let’s say it’s $1,500), we add it to the $200 and what’s left is for our monthly discretionary spending.

$2,500 income – $200 to savings – $1,500 for fixed expenses = $800 discretionary money available per month.

Discretionary, or variable expenses, are things we pay for that cost us different amouns each time.  Food (groceries and eating out), gasoline/car maintenance, utility bills, entertainment costs, and we will also include a miscellaneous category.

The last step is just a matter of attempting to spend less than the $800, so we can add to our $200 monthly savings total.  If we spent, for instance, $300 on groceries and $300 on eating out, might we able to drop that $300 restaurant cost to $240 or $250?  Seventy-five dollars a week for groceries (this includes toiletries, pet supplies, and anything else bought at the grocery store, not just food) seems reasonable.  But $10 a day eating out might be excessive.  Perhaps you could commit to giving the fast-food dollar menus a longer look and reduce that overall cost to $8 a day.  Do that and you just gained $60 more for savings.

What about your cellphone? Do you need unlimited data, or might you be able to go on a cheaper plan and be just as connected?  That gym membership… are you going regularly?  Can you change your routine to allow for exercising at home and eliminate it?  Go to Starbucks a lot?  Could you taper that back a little, being that it’s at least $4 a pop (just three “coffee breaks” a week is $50 per month. Small changes can really make a difference).   Find that extra $40 of savings somewhere, and combined with your cutback on eating out, you can boost your monthly savings up more than 30%, or another C-note.

Spending more than you make:  The difference between this scenario and the first is that instead of choosing whether you want to decrease costs in order to save more, you HAVE to cut costs just to save anything at all.  This is where discipline comes in – you have to want to improve your financial life, long-term.  Bypassing instant gratification – at least some of the time – is crucial to accomplishing more important goals, short- and long-term.

Let me take a quick detour, briefly, to talk about discipline.  I’m telling you right now:  If you’re looking for a way to get ahead and be smart without sacrifice or discipline, your wasting your time on this site.  I can and will coach you, if you’ll have me. I enjoy passing along my decades of experience to folks who can benefit via a much quicker learning curve than I had.  But EVERYTHING worth having comes at a cost.  Are you willing to pay it?

Last spending category I didn’t yet get specific with is “miscellaneous.”  The definition of this category, quite simply, is any expense that doesn’t fall into one of the other categories.  Clothing, for example, falls into this slot.  I suggest you put entertainment there, too, but the main point is to be reasonably frugal across the board.   It’s not a crime to go the movies, of course, but consider going to a matinee and saving as much as $6 per ticket.  It’s that type of thinking you should be willing to attempt in order for this process to truly be effective for you.

To practice sound budgeting fundamentals, never let your miscellaneous costs exceed your savings commitment.  That simple practice will make it less likely that you spend on non-essentials.

OK, one last reminder – no, two reminders – as you put together your budget.  First, figure every cost into this.  Do you like stopping at AM-PM to buy those new Reese’s white chocolate peanut butter cups?  Me, too.  Best damn things since deep-fried raviolis.  But figure the $3 a week you spend on them into your costs.  Be detailed and thorough, if you really want this to work you.

Secondly, stick with your commitments.  Adjustments can be made, but not on the fly.  Say you under-estimated your gasoline cost by $30.  No problem, but find that $30 somewhere else in your budget.  Do NOT automatically reduce your savings allotment to accommodate your lack of foresight.

The savings commitment you have made should only go up, never down… even if you have to skip those peanut butter cups for a while.

Thanks for reading.

For more specific information on DPWLI and related strategies, please go to, and let them know that you were referred to that site via 

DISCLOSURE:  If you decide to purchase a product(s) from, I will qualify for an affiliate commission.