01-Total Money Makeover
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T H E T O TA L M O N E Y M A K E O V E R
gets back up to $1,000 in her emergency fund. If she doesn’t, soon she will have nothing in savings, and when the alternator on the car goes out, she will reopen some credit-card account. The same applies to you. If you use the emergency fund, return to Baby Step One until you have refunded your beginner emergency fund, then move right back to your Debt Snowball, Baby Step Two.
Second Mortgages, Business Debt, and Rental Property Mortgages Because of debt-consolidation loans and other mistakes, many people have a home equity loan or some kind of large second mortgage. What should be done with this loan? Is it put in the Debt Snowball, or just called a mortgage and not dealt with at this step? It will be paid off; it is just a matter of at which step. Generally speaking, if your second mortgage is more than 50 percent of your gross annual income, you should not put it in the Debt Snowball. We will get to it later. If you make $40,000 per year and have a $15,000 second mortgage, you should put it in the Debt Snowball. Let’s just take care of it now. But if you have a $35,000 second mortgage and make $40,000, you will get to it in another step. By the way, you should consider refinancing your first and second mortgages together if you can lower both interest rates. Then put the total on a fifteen-year mortgage, or the remaining years of your current first mortgage, whichever is less (e.g., if you have twelve years remaining on your first mortgage at 9 percent interest, refinance the first and second mortgages together into a new first at 6 percent over twelve years or less). Many small-business owners have debt and want to know how to handle that debt in the Debt Snowball. Most small-business debt is personally guaranteed, which means it is really personal debt. If you have a small-business loan of $15,000 at the bank or have borrowed on your credit cards for business, this is personal debt. Treat small-business debt like any other kind of debt. List it with all your other debts, smallest to largest, in the Debt Snowball. If your business debt is larger than half
IF YOU WILL LIVE LIKE NO ONE ELSE, LATER YOU CAN LIVE LIKE NO ONE ELSE
IF YOU WILL LIVE LIKE NO ONE E YO