4 Steps to Reduce Debt …

Is it possible to ease the burdening feeling of overwhelming and ever accumulating levels of debt The answer is yes.

Four Steps to manage borrowing money and reduce debt.

If you choose to borrow money from a creditor and allow yourself to get into debt – there are four key principles I can advise you to follow.  These steps will assist you in managing your borrowings wisely so that the money can work on your behalf instead of becoming a draining series of drudge payments and an overwhelming burden.

If you’d love to reduce debt then continue below:

Will your debt make you money?

Make sure that any money you have borrowed or plan to borrow will clearly make you more money than it will cost either in the near or distant future. Factor in all primary revealed and secondary hidden cost variables. Using other people’s (creditors, credit lenders or investors) money to make you more money is wise and leveraging such possibilities and potentialities can even make you great profits. But borrowing other people’s monies and in turn buying depreciating consumables for purposes of immediate gratification can transform potential wealth making ventures into long-term burdens.

If the borrowed money gives rise to more money than it costs then you have invested other people’s money wisely and leveraged your potential investment returns or profits. If you do proper planning and careful analyse your cost/benefit ratios you can be assured that your borrowed money will work for you. This will make you a master of rather than a slave to your borrowed money.  In other words, your money will be working for you instead of you working for your money and these actions will see you reduce debt.

Appreciate your debt to reduce your debt

After assuring that your borrowed debt will be making you more money than it costs, offering you a greater return on your investment (ROI), it is then wise to actually appreciate your credit lender.  You can do this by transforming your perceptions of borrowed debt into ones of investment, or creditor into investor.

Write a list of all the benefits you have or will have, directly or indirectly, immediately or gradually, received or will receive from the particular money that you have borrowed, enough to where you are actually feeling grateful for all the finance you have been lent.

Why? Because when you are grateful for the money you have borrowed it’s easier to generate more money and pay it all back. It is harder to pay back someone you resent or feel ungrateful for and emotionally burdened by.

By being grateful for the many opportunities that your borrowed money has provided you, you’ll make it easier on yourself to service your debt. In actuality, those who lent you the money are actually your investors who have believed in you when they don’t know for certain if you can even pay it back.

Chunk your debt into months, days, hours, seconds of service

Next step is to convert the total amount of money you have borrowed from your creditor or investor into annual, then monthly, then weekly, then daily, then hourly and then minute by minute amounts owed. Be sure to include both capital and interest.

By breaking your total debt down into smaller chunks of time and amounts it eases your emotions concerning your payments. By the yard it is hard, but by the inch, it’s a cinch. This method chunks down the total amount of debt you owe into psychologically more manageable time and repayment bite sizes.

For Example:

Total money borrowed or debt owing                             $160,000

Total money owing per year                                                  $19,200

Total money owing per month                                              $1,600

Total money owing per week                                                  $400

Total money owing per day                                                      $80

Total money owing per hour                                                    $10

Convert debt into service to reduce debt

Now, after chunking the amount you owe to your investor/creditor/venture capitalist down into more manageable time and repayment bites – it is then wise to convert each smaller unit of borrowed debt into the actual units of service you provide. This is what the investment world calls “debt service” and it is the actual cash required over a given period of time for the repayment of interest and capital on your debt.

If you are a healer for example and your average office visit is $50.00 and your average cost of doing business is 50% of that amount ($25.00), then it takes only 0.4 patients per hour to service the total debt.  This can also be equated to approximately 3.2 patient visits per day or 16 patient visits per week.

Once you have converted your units of debt, which in this case is $10.00 per hour into your units of service ($50.00) per office visit minus your cost of business of $25.00 resulting in a profit margin of $25.00, you can then focus on providing a more efficient service to your clients or customers so you can raise your income and lower your debt.

Until you do this mental exercise you will, in all probability, focus on your debt, which will tend to cause your service to drop. By focusing on your solution of service more than your assumed problem of debt your income will begin to grow, your service will solve, while your debt will dissolve.

By following the above four principles you will begin to lessen the burden of your debt, raise the return on your investment and start to focus on the activities that will ultimately see you reduce debt. So whenever you are confronted with the decision of taking on debt, be sure you are transforming your debts into investments.

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Author: Dr J Demartini

Author, Leadership and Performance Specialist, Educator, Business Consultant and Founder of the Demartini Institute www.DrDemartini.com

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