Accelerating Debt Reduction

debt reduction
by sunlightfoundation

Accelerating Debt Reduction

There is a system I learned about some years back that I thought was quite brilliant. It is a way to pay your debts by optimally leveraging the funds you are using to pay the debts.

This is how it goes.

1. Continue to pay all debts as you have been doing.

2. Take the debt that you can complete paying the soonest and focus on that one. If possible, choose a high-interest consumer debt, as those interest payments are detracting from your future and net worth. Pay extra on it if possible and get it paid completely as soon as possible.

That will give you some extra cash every month as you will no longer be paying that debt. Most people would now go and spend that money on something else BUT DO NOT REALLOCATE THOSE FUNDS FOR ANYTHING ELSE. These funds give us the secret to this system.

3. Choose the next debt that you can fully pay as rapidly as possible. Now use the extra monthly funds that you have freed up in #2 above and use these to reduce this next debt until it is fully paid. This is in addition to the funds that you have already allocated monthly to pay this second debt.

4. Once this second debt is fully paid, take the next one that can be fully paid the soonest and in addition to the funds you have already been paying toward that debt use the extra funds from the first two now-paid debts to pay this third debt.

5. Continue like this until all that is left is your mortgage debt. Meanwhile, set up a ‘Mortgage Checking Account’ or an ALL IN ONE account. In Canada, Canadian Tire Financial has such an account. In Canada and the U.S., Manulife has it and the account is called Manulife One. These are easily found by Internet search on Google.


Once your last debt (besides your mortgage) has been paid, put ALL the funds that have been going towards all these debts toward your mortgage to get the principal paid down fast.

This is in addition to setting up a mortgage checking account or All-in-One Account as above.

This will obliterate your debts (including your mortgage) in a fraction of the time it would have otherwise taken, will save you tens or hundreds of thousands of dollars in interest over the long run and gives you a much better shot at getting wealthy.

Most people don’t know about the above and it costs them their financial freedom and independence. Please pass on this information as a public service.

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