Paying Down Debt Faster Using Strategic Asset Allocation

One of the big problems people in debt face is knowing how to best allocate their financial assets to pay off their debt.

It doesn’t matter whether you make $600 dollars a month, or $6000 a month if you are not properly allocating your money you will be broke forever.

The following strategy allows you to save for the future, make sure all your bills are paid on time and build excellent credit, all without regard to how much you make.

Okay so here we go, let’s just assume that you’re paid twice a month, and you earn about $900 per paycheck.

I would take that and divide it by the number of liabilities you have, plus add in the cost of paying yourself.

For example, if I earned the $900 I would take that and divide it by three.

$300 would go to paying myself in an interest bearing savings account or money market account, $300 would go to paying student loans, and $300 would go to paying credit card bills.

Employing this strategy helps you to break the cycle of minimum payments and gets you out of debt quicker, by doubling up your monthly payment.

This strategy also helps to show your creditors (like your credit card company) that you can handle an increased debt load which will make your credit score skyrocket.

Instead of paying the minimum payment. You’re paying up to $600 per month.

When paying yourself, your goal should be to pay yourself enough to where you have eight months of expenses covered in a liquid account for emergencies.

Any extra should be invested.

And once you build up to an eight month emergency fund then you can allocate more money elsewhere, like paying more towards your student loans or to your credit card.

Likewise when your student loans are all paid off, then you can focus more attention on paying your credit card bills or saving.

What if I don’t have enough cash?

The most common question from people when implementing this strategy is, “What if I still can’t pay all of my bills?”

Well, the simple answer is simply you need to make more money or reduce your spending.

Try substituting that $120 cable bill for a cheaper alternative such as Netflix.

This asset allocation strategy ensures that all your financial bases are covered and that you’re not neglecting any area accidentally.

Try implementing this strategy over the next couple of months, and you will be pleased with how well it works for you.

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