You have, no doubt, seen an old fashion steam locomotive starting off down the track, either with your own eyes or on TV or in film. A cloud of steam billows out as the machine hisses loudly, the engine’s large rear wheels spinning, fighting for traction. At first it does not move. Then there is a halting, jolting movement forward very slowly. It chugs laboriously as it tries to build momentum. There is a whole lot of work going on to produce very little movement. Slowly, it is moving, then steam pressure builds, then it is moving a tad bit faster, then steam is released, then steam builds again, then it is moving a tiny bit faster still, as coal or wood is thrown into the furnace to make it hotter to build even more steam pressure. There is a relentless rhythm that soon develops and accelerates. Eventually the momentum is so powerful that the head on collisions that have occurred in our history are legendary due to the scale of the destruction because of the power generated by the colliding engines.
Charles S. Givens said that, in the world of personal finance, you have to do 10 units of work to produce 1 unit of result in the beginning. Then, later after momentum builds as a result of doing the right things, the wise things, you reach a point where 1 unit of effort produces 10 units of result. You cannot skip to the end of the process, but have to work through the “10 units of work for 1 unit of result” phase first before you can have the “1 unit of work for 10 units of result”. Reality will not allow for any cheating. There are a great many financial processes that function this way, one of these being the Debt Destruction Engine.
I describe the “extra fuel” version of this debt-destroying locomotive in previous posts in this blog. Its motion and effectiveness operate just like an old time steam driven engine, slowly at first, then building momentum, getting faster bit by bit, then becoming amazingly fast and producing great power. You start this engine by paying an extra amount on the smallest bill, which is like shoveling wood or coal in to stoke the boiler, each month until it is paid off. After the smallest bill is paid off, you add the “extra fuel” plus the amount you were paying on the smallest bill to the second smallest bill each month until it is paid off. After the second smallest bill is paid off, you add the same “extra fuel” and the amount you were paying on the smallest bill plus the amount you were paying on the second smallest bill to the third smallest bill each month until it is paid off. You do this same thing with each new target bill until the engine gets to the momentum stage where it is ripping and tearing through the bills like a locomotive blazing down the track at 100 miles an hour. It can take ¾ of the total time the engine runs to destroy the first ¼ of the debt and then take the last ¼ of the total time the locomotive runs to obliterate the last ¾ of the debt. What if you could run a Debt Destruction Engine without adding any “extra fuel” at all? Would such a thing seem possible?
Debt can indeed be destroyed without adding “extra fuel” to the debt destruction engine. Debt has a powerful residual inertia that can be focused against itself. This form of the debt destruction engine operates even faster than its extra fuel cousin as it annihilates debt with its own inherent momentum. We are going to look at the same 8 accounts that were used in the Ted and Wilma example in previous posts in this blog. There are 4 credit card accounts, 2 store revolving accounts, and 2 finance company accounts.
Type 1 Debt includes credit cards, finance company accounts, store revolving accounts.
Type 2 Debt includes credit cards, finance company accounts, store revolving accounts, vehicle loan(s).
Type 3 Debt includes credit cards, finance company accounts, store revolving accounts, vehicle loan(s), and mortgage.
Inherent Momentum Version of the Debt Destruction Engine
Type 1 (Inherent Momentum) takes 11/2 to 31/2 years.
Type 2 (Inherent Momentum) takes 21/2 to 41/2 years.
Type 3 (Inherent Momentum) takes 41/2 to 91/2 years.
On 2 of these 8 accounts, the finance company accounts, the required payment stays exactly the same throughout the life of each loan. You agree to this when you sign each contract. On 6 of these 8 accounts, the 4 credit cards and the 2 store revolving accounts, the required minimum payment on each is determined by the amount of the present balance owed on each account. As the balance declines over time, the required payment on each account also gets a tiny bit smaller. So, on 2 of the accounts, each payment is exactly the same throughout the life of the loan, but on 6 of the accounts, the payment required on each account declines slowly over time as long as there are no new purchases. It is this fact, the declining required payment on each of the non-finance company accounts, which gives inherent momentum its debt-destroying power.
In the first month, you just pay the required minimum payment on each of the 8 accounts. The total of all the required payments is $1300. In the first month, you pay just the required minimum payment on each account which comes to a total of $1300. To operate the inherent momentum version of the debt destruction engine, you continue to pay the same “block payment” of $1,300 every month until the 8 accounts are destroyed.
In the second month, the total of all the required payments is $1,285. The required payment on the 2 finance company accounts is exactly the same as in the previous month, but the required payment on each of the 4 credit card accounts and on each of the 2 store revolving accounts is an itsy bitsy bit smaller. Being that $1300 – $1285 = $15, you add this $15 to the target bill, which is Bill 1. So in this second month, you pay just the required minimum payment on each of Bills 2 through 8. On Bill 1, you pay the required payment on Bill 1 plus the $15 also applied to Bill 1.
In the third month, the total of all the required payments is $1,277. When you figure this, you get $1,300 – $1,277 = $23. You pay the required payments on Bills 2 through 8. On Bill 1, you pay the required payment plus $23. You continue to pay the same $1,300 in this manner until all of the debt is destroyed. As long as there are no new purchases on these accounts, the total of all the required payments will constantly and relentlessly diminish.
By the twelfth month, the total amount owed on all remaining accounts is $1,050. $1300 – $1050 = $250. On all of the bills other than the target bill, you pay just the required minimum payment. On the target bill, you pay the required payment plus $250. You can see that inherent movement works slower than “extra fuel” in the beginning, but catches up quickly and passes “extra fuel” and destroys debt even more quickly than the extra fuel version of the debt destruction engine.
You continue to apply the total “block amount” of $1,300. You subtract the total of all the required payments from this block amount and apply the difference to the target bill every month. You can destroy your debt without any “extra fuel.” Your debt will implode on itself with the power of its own inherent momentum. This version of the debt destruction engine works especially well for those with a lot of credit card and store revolving account debt.
There is another variation of the debt destruction engine that moves even faster called “inherent momentum with extra fuel”. You simply add “extra fuel” to the block payment at the beginning. If the total of all the required payments on the 8 accounts came to $1300 and you added $50, then you would start with a block payment of $1350.
In the first month, you would pay the required minimum payment on each of Bills 2 through 8. On the target bill, which is Bill 1 in the beginning, you would pay the required minimum payment plus the $50 of “extra fuel”.
In the second month, the total of all the required payments is $1276. The beginning “block payment” of $1350 minus the $1276 = $74. In this second month, you would pay just the required minimum payment on each of Bills 2 through 8. On Bill 1, you would pay the required payment plus an additional $74.
In the third month, the total of all the required payments is $1254. The beginning “block payment” of $1350 minus the $1254 = $96. In this third month, you would pay just the required minimum payment on each of Bills 2 through 8. On Bill 1, you would pay the required payment plus an additional $96. You are simply adding an extra amount in the beginning to the “block payment” and this causes the debt destruction engine to annihilate debt even faster.
When you find extra money by doing all of the things I explain in other posts in this blog such as changing your withholding to give yourself a raise, cutting out the “weenie tax”, finding “LEX Cash”, cutting out “fluff”, and employing “temporary extreme measures”; you can use most or all of these funds to build up your emergency fund and/or to invest directly for your future.
You can destroy your debt without adding anything at all to what you pay on your bills. You can obliterate your bills with inherent momentum. You can apply the extra money you find hiding in your life to other purposes. The keys to victory here are to faithfully operate your locomotive every month and to AVOID TAKING ON ANY NEW DEBT.
Inherent Momentum with Extra Fuel Version of the Debt Destruction Engine
Type 1 Debt includes credit cards, finance company accounts, store revolving accounts.
Type 2 Debt includes credit cards, finance company accounts, store revolving accounts, vehicle loan(s).
Type 3 Debt includes credit cards, finance company accounts, store revolving accounts, vehicle loan(s), and mortgage.
Behold the power of inherent momentum!
Type 1 (Inherent Momentum with Extra Fuel) takes 1 year to 3 years.
Type 2 (Inherent Momentum with Extra Fuel) takes 2 years to 4 years.
Type 3 (Inherent Momentum with Extra Fuel) takes 4 years to 9 years.
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