Revolving Credit Accounts - YouTube

If you have one and it just doesn't seem to be getting you out of debt

faster like you thought it would.

First though let me explain why it doesn't work for most people.

I will put some numbers on the screen to help.

Let's assume your net monthly income is $10,000

The understanding is that if you put your Income into your revolving credit account

it will reduce your interest costs and it does so that isn't the problem.

Then the idea is to use your credit card for all of your expenses

so that your money stays in your account as long as possible.

If we were to assume you were able to leave the whole $10,000 in for the entire month

and your interest rate was 4% This saves you $33 in interest

And here is why this doesn't work for so many people.

$33 isn't noticeable, you pay off your credit card balance,

the revolving credit account goes back up to it's limit

and you keep repeating this process making no real difference

to reducing your debt faster.

If you have a revolving credit account have a look at your monthly balance

over the last 12 months and there's a high likelihood it hasn't changed.

And if you are thinking of getting one do the sums

$33 a month x 300 (the number of months in a 25yrs mortgage)

that's only $9,900 so simply crediting your income

and thinking it will get you mortgage free years earlier isn't the answer.

For 95% of the population

getting a revolving credit account

working for them only happens once they stop taking the advice a bank gives them.

Today I am going to share with you one of the

several solutions I share with clients I work with

so that they get the results they were looking for.

So here we go.

Step 1: Have your income credited directly into your revolving credit account.

Step 2: Work out the following: I will use some examples to help you

Mortgage payments $3,000

Insurance premiums $650 Savings goal $1,000

Total $4,650

Subtract this from your income $10,000 less $4,650 = $5,350

Now transfer the $5,350 into a separate bank account

and plan your monthly budget with this money.

Repeating this and sticking to your plan over 6 months

as an example would then look like this based on a $20,000 facility.

The reason this method works is you can actively monitor your growing savings balance

and see your reducing loan balance.

Because you now have clarity on the progress you are making you will protect your savings

and only use this money if you really need to

You will actively focus on reducing your debt

because you can also see the impact you are having on the balance every month

by sticking to your plan with the money you set aside to live off each month.

I hope that has been helpful.

I know it makes a huge difference with clients I coach.

And like I said this is just one of the many solutions

that can fix this issue and help you reduce your debt faster

For other helpful tips and ideas keep an eye out for future Money Choose-Day tips

or head to Moneytrainer.co.nz

And if you can't find the answer your looking for

or would like a different solution for you

than the one I shared today feel free to reach out to me and schedule a call