Get Out of Debt $10 At A Time

Unless you win the lottery jackpot, there's truly no fast-food equivalent for getting out of debt. On the other hand, you don't have to sacrifice every one of life's little luxuries to pay down what you owe. A daily increase of $10 per day in your monthly payments can save an amount that truly will knock your socks off.

Still only willing to pay the minimum? Then let's take a look at the numbers. Say you owe $5,000 on a credit card with 29-percent interest and a minimum payment of $175. If you stick to the minimum, you're looking at 23 years of monthly payments with a total interest of over $10,000. That's more than double the amount you originally borrowed.

Makes you want to go into the lending business, doesn't it?

What's worse is this math assumes you never go over your credit limit or pay a single bill after the deadline. Commit one of these financial crimes and you're looking at an extended sentence. If you have more than one credit card, you could face the equivalent of several fiscal life sentences.

Before the new Credit Card Accountability Responsibility and Disclosure Act of 2009, (aka the CARD Act), lenders didn't have to reveal such painful details on your bill. Now, however, credit card companies are required to highlight them on your monthly statement. You can now see in black and white exactly how long it will take to pay off your current balance and the total amount you'll pay in the end if you stick to that minimum-payment system.

Now let's look at what happens if you add just $10 a day to your monthly payment on the $5,000 credit card debt. Not only will your interest charges total just roughly $3,200 over the period of payment, but you'll be out of debt in just 45 months.

Still not convinced? Apply the numbers to a home mortgage. For our example, we'll use a $200,000, 30-year fixed mortgage with a 6-percent annual interest rate. Your monthly payment should be roughly $1,200. Over 30 years, you'll pay a tad over $430,000, with $231,000-plus of that total going towards interest. Yep, less than half your payments are actually paying for your home. Boy, do mortgage lenders love that.

But what happens if you bust your butt to add $10 a day to the payments on that same mortgage? You'd own that home free-and-clear in 18 years, having paid slightly more than $330,000. In short, you'd save more than $100,000 and 12 years of payments, nearly cutting your mortgage period in half.

Carving out $10 a day sounds difficult, particularly for those who are unemployed or barely making ends meet. But if you're back on the financial solvency track, the $10-per-day tip can go a long way towards padding your bank account for that all-important retirement.

Photo by lemonjenny