What’s up?

It’s Mike from Fabulously Broke, I hope you are doing incredibly FANTASTIC!

Today’s email is about how you can deal with your debt so you can save both time and interest fees. One of the easiest ways to liberate cash flow from your monthly budget is to restructure your debt. How can you do this? With your banker!!!! Set up a meeting with him and bring all your debt statements with you. You need to know the following 3 things about all your debt:

ü Monthly payments required at the moment

ü Exact balance owed

ü Interest rates that you pay

Day #7: Restructure Your Debt

Restructuring your debt needs to be done with the following goals in mind:

• 
  ü  Regrouping all your debt into 1 big fat loan
• 
  ü  Reducing the interest rate paid on your new loan
• 
  ü  Reducing the monthly payments on your new loan
• 
  ü  Liberating monthly cash flow (so you can pay for your insurance and invest!)

Debt restructuring can be done through a consolidation loan (this is usually a personal loan with an amortization of up to 5 years that will pay off all your debt and concentrate them into one single loan). If you have more than 2 loans, you would definitely benefit from putting everything together. It will most likely reduce your monthly payment and your interest rate! Your banker will be a great help to restructure your debts and help you save money. For once, you will have the impression that he is worth his salary ;-).

The easiest way to do it is usually by remortgaging your house in order to include all your payments in your mortgage.This is not something you should do annually. The purpose of having a new mortgage is not to use your house as your main ATM machine. This is a one shot operation that will make your monthly budget smoother. Once you do it, you are not going back to your banker to do it again in the future. Repeat after me: I shall not use my house as an ATM machine!!!

The problem with debt restructuring is that you need an important partner to achieve it: your banker. When you are at your first stop at the bank, chances are that your banker will easily be able to find a way so that you can reduce your monthly payment and the interest rate. However, if you have tons of loaded credit cards or previous credit issues, restructuring your debt may be challenging. I have bad news for you: you’ll have to live with your past mistakes and will be stuck with your current budget.

What‘s The Next Thing to Do: Deal with Your Debt

Get all your debt information and meet with your banker. Explore the different avenues that will achieve the goals mentioned in this section. We are looking at reducing your monthly payment as the #1 goal. You might be taking more time to pay off your debt and therefore might pay more in interest over time. This sucks, I agree. But the purpose of this exercise is to liberate cash flow that will be used for investing and acquiring assets. So, technically, you should be able to pay off your debts a lot faster once the ball starts rolling your way! You can bring your balance sheet and budget to show him some goodwill.

Now that we have covered your cash flow on every angle, we will start the fun stuff: investing!

Upcoming: Day #8 Live Like a Queen/King

All the best,

Mike

www.FabulouslyBroke.com