How To Drive Your Vehicle Debt Free

One major reason why people remain chained to debt and never build wealth is due to car or other vehicle payments. Aside from a home mortgage payment, debt obligations for vehicles rank as a top "income eater" for most American consumers.

Here is a common scenario involving a leased vehicle. Let's say, for example, you lease a $30,000 auto for six years. Allowing for taxes and insurance, your monthly payment will be about $400. At the end of the lease period $28,800 in vehicle "rent" has been paid. Odds are that another vehicle will be leased for a new six-year term with an equal or greater amount of hard-earned dollars going down the drain. A typical statement frequently heard is, "I'll always have a car payment." These words don't have to be self-fulfilling.

The average millionaire reaches this financial pinnacle because the majority of them avoid being chained to a monthly car payment. Wouldn't you prefer having $400 eventually going into your personal savings or investment account instead of lining the pockets of a leasing company?

Here is an example of a strategy that can eliminate car payments forever:

Step One-At the end of your current lease term, purchase a quality used vehicle for $6,000. Finance it over four years. Assuming an interest rate of 6.5%, the monthly payment will be $151. Let's round the amount to $170 to account for taxes and insurance.

Step Two-Subtract the new monthly payment of $170 from the previous monthly lease payment of $400. Put the difference of $230 into a savings or money market account. At the end of four years, assuming an interest rate of 5%, your total savings will be $12,200.

Step Three-After the initial four-year period, sell your paid-for vehicle and purchase a later-model used vehicle for $10,000 cash from your savings account, leaving a balance of $2,200. Continue to save $400 per month for another four years. The entire amount now goes into your savings account. At 5% interest, the balance will grow to $23,900 before taxes.

Step Four-Repeat this strategy of upgrading to newer vehicles and paying cash every four years. You'll eventually be able to buy a car of your dreams and still accumulate a substantial savings nest egg.

Making the transition from vehicle leasing to vehicle ownership involves some discipline and persistence. Is it worth the effort? Absolutely.

Driving debt free vehicles is much easier on the pocketbook and you'll certainly enjoy great peace of mind.

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Debt Collection

Here is an article for debt-ridden consumers regarding the inside story of debt collection practices.

Six months after Rob Hruskoci closed his business, a debt collector called and demanded payment that day for the $5000 balance on his business credit card.

Read full story...

Will You Succumb To Debt? Take The Debt Test

Financial disaster caused by excessive credit card and other debt can creep into daily living with treacherous and cumulative effects. There are leading indicators that can help determine whether or not you will succumb to debt. Take the Debt Test to find your level of debt contamination.

Answer the following 25 debt-related questions. Total your YES points. Then, find your Debt Range at the bottom to determine the likelihood of succumbing to debt.

- A collection agency has contacted me about unpaid bills (10 points)
- I have one or more leased vehicles (5 points)
- I am making some minimum monthly payments on credit card debt (5 points)
- I charge purchases to credit cards that were previously paid for in cash (5 points)
- I have elected to not carry health insurance (10 points)
- I have elected to not carry vehicle insurance (10 points)
- I have elected to not carry homeowners or renters insurance (10 points)
- I worry or lose sleep over my financial situation (5 points)
- My wages are being garnished or assigned (10 points)
- I skip credit card payments in order to pay for food, shelter or utilities (10 points)
- I am behind in paying for housing, vehicle or utilities (10 points)
- I am occasionally late in paying bills or sometimes incur late fees (5 points)
- Family relationships are strained as a result of money problems (5 points)
- I borrow or transfer money in order to pay bills (5 points)
- 40% or more of take-home pay goes to pay off debt (10 points)
- I do not have at least 3 months living expenses held in savings (10 points)
- I have given thought to filing for bankruptcy (10 points)
- I have thought about starting a debt consolidation plan (5 points)
- I use or have used "cash advance" or "payday loan" services (5 points)
- I use a home equity line of credit to pay credit card debt or other bills (5 points)
- My debts are increasing while my income is the same or decreasing (5 points)
- I am in the process of or near foreclosure or property repossession (10 points)
- A money-spending plan or budget is something I do not use (5 points)
- My credit cards are at or near the spending limits (10 points)
- I don't balance my checkbook each month (5 points)

Total your YES" POINTS to determine your Point Range indicated below.

POINT RANGE:
- 0-15 Congratulations! You appear to be doing a good job of controlling your debt and managing your finances. Being debt free can eventually lead to personal financial freedom.

- 20-35 You may be headed down the proper financial path but a review by a qualified financial planner might be a good idea.

- 40-65 Your financial condition may be a concern. A financial assessment by a licensed financial planner is recommended.

- 70-95 Your financial condition could be serious. Debt counseling help is something you should seriously consider.

- 100-185 Your financial condition may be critical. Debt counseling help is essential.

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