Understanding Debt: How far off are you from becoming debt free?

How far off are you from becoming debt free?

Once you have calculated your monthly expenses, monthly income, and total debt; you can start to figure just how far off you are from becoming debt free.

Start out by taking your total income and subtracting your total expenses. First try this with your past expenses including everything. Next try it with just the necessities. Hopefully at least one of these is a positive number. By figuring your monthly net gain for both you can see just how fast you could become debt free with and without making some serious sacrifices.

For example: Let's say you currently have no monthly net gain. Between paying off the minimum credit card bills, cable, a huge mortgage, a new car payment, etc, you just don't have anything left over, or worse, it may even be negative. Its obvious at this rate you will never pay off your debt. BUT with some serious sacrifices you can get to a monthly net gain of several hundred $'s. It may still take years, but at least you can make some progress in becoming debt free.

Try using our free Debt Management Software Tool to help calculate and track all this personal finance data. It will help you see how much quicker you can get debt free when you cut back on the "wants" from your monthly expenses.

Keep in mind that, as long as you stick to your plan, your progress toward becoming debt free will get better and better with time. This happens because you will pay off the highest rate debt first. By doing this your interest payments will be lower each month allowing more and more of your income to go towards paying the actual debt. A little progress at the start will yield high returns later and will get you on the road to becoming debt free.