THE rich get richer; the poor get poorer. Often the main reason for this is the enormous amount of consumer debt we’re trapped in. So, here’s an audacious Escape Plan…

Imagine NO debt repayments! Last week I taught you the initial steps to eliminate all liabilities from your life. If you haven’t yet read that column, you may access it here:

Here’s our scenario:

Adam is 32-years-old and earns a net monthly income of RM5,000. After working out a realistic budget, his average monthly expenses are RM4,550. This leaves him with RM450 in excess cash flow each month AFTER he pays RM2,130 for his monthly expenses EXCLUDING regular minimum acceptable loan repayments, AND RM2,420 for those debt repayments (RM2,130 + RM2,420) = RM4,550).

Our accelerated debt repayment game plan utilises the “Small to Big” or “Debt Snowball” strategy. It requires Adam to list ALL his debts - from smallest to largest.


Here’s what that list looks like, including a description of each liability and Adam’s CURRENT monthly repayment. (FYI, Adam’s girlfriend Eve has lent him RM500, on which nothing has yet been repaid; Adam’s Uncle Moses lent him RM12,400 two years ago, which Adam is repaying at the rate of RM100 a month; and Adam’s mortgage is a flexi loan with a useful redraw facility):


1. RM500 - Eve 0

2. RM1,000. - MasterCard2 50

3. RM2,000 - Visa 100

4. RM4,000 - MasterCard1 200

5. RM10,000 - Uncle Moses 100

6. RM40,000 - Car loan 770

7. RM230,500 - Mortgage 1,200

TOTAL 2,420

Of Adam’s RM450 monthly cash flow surplus, he opts to set aside RM250 into a savings account to build his reserve, cushion or Emergency Buffer Fund (EBF) for life’s unforeseen shocks; Adam wisely chooses to utilise the remaining RM200 in excess monthly cash flow toward his smallest loan, FIRST.

This is his “Small to Big” debt eradication strategy:

1. Adam’s top priority is to stay in good standing with all his creditors. Therefore, all his minimum repayments will be made on time or early.

2. Adam then starts repaying Eve RM200 a month! He does so for two months, reducing his debt to her to RM100.

3. In month 3, Adam uses half his excess payment of RM200 to finish repaying Eve. They celebrate this small but vital victory with a modest meal within his new budget.

4. Adam takes the unutilised RM100 in month 3 and adds it to his second smallest loan, his MasterCard2.

5. It’s tough to say if Adam is able to totally stop making fresh charges on his three credit cards. If he can’t, then the repayment period will be prolonged. Either way, in Month 4, Adam uses his full excess of RM200 and adds it to MasterCard2’s RM50 previous minimum payment.

6. In about four months, the new repayments of RM250 on the MasterCard2 account will wipe out the entire balance IF Adam does not charge new purchases on it.

7. Singular sacrifice is needed to make the snowballing repayments as effective as possible. If Adam exhibits such steel in his character, he will then repay RM350 a month on his Visa balance until that disappears.

8. He will then repay RM550 a month on his MasterCard1.

9. Eventually, when Adam has repaid all his outstanding credit card balances, he will either destroy the cards or use them ONLY for convenience and never again allow any balances to build up.

10. After that, he will repay Uncle Moses RM650 a month.

11. Once that fifth largest debt is fully repaid, as in Malaysia it is generally unacceptable to partially pay down a car loan but it is possible to make early full settlement, I recommend Adam continues paying his normal RM770 car instalments but adds the extra RM650 to his existing RM1,200 mortgage payment.

As the RM1,850 repayments into his flexi mortgage account build up, Adam will track the reducing amount owed on his car and the rising amount of excess redraw margin he builds within his mortgage account.

12. When Adam has more money available to redraw from his mortgage that is owed on his car, he can withdraw the total amount owed on his car for full early settlement. He will get a small interest rebate, which he will use to buy Eve a present!

13. With the monthly RM770 car payment out of the way, Adam now adds that and his excess cash flow of RM650 to attack his mortgage with a massive bumped up monthly payment of RM2,620 (= RM770 + RM650 + RM1,200). That will allow him to pay off his mortgage early, too!

Adam might even decide the joyful prospect of wiping out ALL his debts is worth using his EPF Account 2 funds for a mortgage reducing (or, ideally, eliminating) lump sum repayment.

Use Adam's illustrative example to model your own “Small to Large” debt snowball strategy to eliminate all your financial debts.

In Dave Ramsey’s book The Total MONEY Makeover, he writes: “The Debt Snowball is very possibly the most important step in your Total Money Makeover... By paying off your debt, you make a statement about your stance on the issue of debt.”

I wish YOU a happy, prosperous future devoid and bereft of... debt repayments.

© 2020 Rajen Devadason

Rajen Devadason, CFP, is a Licensed Financial Planner, professional speaker and author. Read his free articles at; he may be connected with on LinkedIn at, or via [email protected] You may follow him on Twitter @RajenDevadason.