Cash Flow Index Debt Elimination
Updated: Jan 21, 2021
Today I want to cover the 4th and final strategy for getting out of debt faster. Make sure to check out my other videos and articles to educate yourself on the other debt elimination strategies.
Today I want to discuss the cashflow index method for getting out of debt faster.
Like the other debt elimination strategies, you need to gather your debt information on to one single page. You need to know the debt, the amount, the minimum payment and what you've been paying.
You need to find margin or that extra amount of money you can place on your debts each month to drive them down.
Once you have all debts in one place and your margin you are going to divide your debt by the minimum payment to get an index score.
Once you have an index score on all of your debts, you will want to start with the debt that has the lowest index score. This will tell you the fast route out of debt.
Essentially what you are doing is paying the minimum on all your debts except the one with the lowest index score. On that debt you pay the minimum plus the extra margin to pay it down fast.
Unlike the snowball method which seeks to pay off the smallest debt first, the index method might actually suggest a higher debt that when paid off makes your margin bigger so you can pay off the remaining debts faster.
One example would be every now and then the index method suggests you pay off a car before a credit card even though the balance is lower or the interest rate is higher because once you free up the cashflow going to the car debt you will pay off the next two debts faster.
I’ll be sure to do a more in depth video with numbers to help you make sense of this strategy. Today is just an overview or 10,000 foot view of an incredible strategy.
I hope you found this video helpful.
Getting out of debt is a great way to improve your understanding of money, improve your self esteem and your credit.
Plus with everything going on in the economy, getting out of debt might be the best investment you can make right now for yourself and family.
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