Basics - Free Up Your income

In order to maximize our debt paying potential we need to do a few things:

1) Change your tax rate.  If you are getting an income tax refund every year then you are overpaying on taxes.  While it's nice to get a big check once a year, you are essentially giving the government a loan at 0% interest.  To make matters worse, if you also have debt then are paying someone else interest to borrow at the same time.   

2) Reduce your 401k contribution until your unsecured debts are paid.  Yes I said that right, you must reduce your contribution now to build wealth later.  Why?  Your earnings just don't offset what your paying out.  The only way debt while building wealth ever makes sense is in the case of a very low interest rate on an appreciating asset such as land.  Now I know some of you are gonna argue with me on this stating that because of compounded interest you will never catch up. While that is true if you do it for 10 years, the goal is to be out of debt as soon as possible. So if you are currently contributing 5% and can barely pay your bills. Drop the 5% for 18 months or so and then once out of debt, reinstate the 5% and anything else you can afford on top of that. Most of us will go from 5% to 18% and quickly you will be building wealth much faster than you would have if you kept going on the way you were.  

3) Stop overpaying on all accounts except for one.  Are you paying an extra $20 a month on 3 credit cards?  Or rounding up your house payment each month?  Stop!  Take all of this extra and put it on your debt reduction plan (snowball).

4) Ditch any extra services not needed such as Netflix, Cell Phone insurance, Magazine subscriptions, etc.