# Multiple Debt Elimination Example

Santiago shop-a-lot wants to eliminate the following debts:

Interest Rate ~ Regular Payment ~ Balance Owed ~ Name

18% ~ \$150 ~ \$7,000 ~ Debt #1

11% ~ \$90 ~ \$3,000 ~ Debt #2

6% ~ \$270 ~ \$12,000 ~ Debt #3

Total debt equals \$22,000 (7,000+3,000+12,000)

5% of \$22,000 is \$1,100 (22,000 multiplied by .05).

Santiago’s bills are due monthly, and he makes \$4,000 a month. He’s made some sacrifices and set his debt elimination percentage to 20%. That generates \$800 per month.

\$800 is just over three and a half percent of his total debt of \$22,000, which isn’t ideal but still effective. If you can swing it, you want your debt elimination percentage to generate an amount equal to 5% of the total debt you seek to eliminate each month. In Santiago’s case that would be \$1,100.

The best debt elimination plan calls for debt #1 to be dealt with first. Add the money generated by the debt elimination percentage to the regular payment for debt #1.

Debt #1: A \$950 payment (the \$150 regular payment plus the \$800 generated by Santiago’s debt elimination percentage) is made to Creditor #1. A regular payment of \$90 and \$270 continue to be made to creditors #2 and #3 respectively. Do this every month until debt #1 is extinguished. Now turn your attention to debt #2.

Debt #2: A \$1,040 payment (regular payments of \$150 and \$90 for debts 1 and 2, plus the \$800 generated by the debt elimination percentage) is made to creditor #2. The regular monthly payment of \$270 is made to creditor #3. Continue until debt #2 is history.

Notice the regular payment for debt #1 is included with the payment to creditor #2, even though debt #1 is paid off? That really ups your payment to creditor #2. That’s the start of your debt tsunami, snowball, pyramid, avalanche, or whatever other colorful metaphor you want to call it. Now on to debt #3.

Debt #3: A \$1,310 payment (regular payments of \$150, \$90, and \$270 for debts 1-3, plus the \$800 generated by the debt elimination percentage) is made to creditor #3. Make this monthly payment to Creditor #3 until Debt #3 is gone and you’re out of debt.

What about your own debt elimination list? Have you written it yet? If not, it’s time to get to it!