I mentioned a couple of posts ago that we’re on track to be debt free (yippee!!!) by the end of this year. A bartblog reader sent me an email, and I thought I’d answer the question for everybody:
“I read on your blog that you will have all of our debt paid off by the end of the year. How did you do that? Did you use a program? I would love to find out.”
We follow the Dave Ramsey plan. We started by reading his book “The Total Money Makeover,” and have been following his “Baby Steps” and listening to his radio program whenever we can. I subscribe to a podcast of the first hour of his show every day and listen on my ipod when I’m driving (get the free mp3 of Dave’s show here). The first thing is, you need to agree with each other that you won’t ever borrow money again, and to budget every penny every month before you spend it. That’s a hard thing to do! Then, you (temporarily) stop investing in 401 K, etc, and then make only minimum payments on everything. You save up a $1000 emergency fund in a savings account and then start the “Debt Snowball.” You pay as much as you can on your smallest debt and minimums on everything else until that smallest debt is paid off. Then you add the minimum payment of your next smallest debt to the biggest amount you can pay and attack your second smallest debt, and so on… If you have more than $1000 put away (not including 401K, etc) then use all but 1000 on your first debt.
We’ve made a list of all our debts smallest to largest and keep it taped to our kitchen cupboard door, and cross off each one we pay off. That way we can celebrate a little for each small win.
The biggest thing is learning to change your behavior with money. It means making every budgeting decision together and sticking to the budget, or agreeing how you’ll change it. And get rid of all those stupid credit cards and recognize the difference between what you need and want. You have to stop spending more than you make!!! If you dump your debt, then you’ll be able to have plenty of money to spend and give! Good luck!!!
(We’re sending our copy of Dave’s book to this reader–you can join the waiting list to get it next, or just go to the library and check it out, or buy one–if it’s in your budget!…)