Friday, March 12, 2010

Dumping Debt

This week Jimmy and I celebrated paying off another debt! It was so exciting to realize the relief and freedom that came when that financial burden was lifted. Although we got into debt quickly (due to a long period of unemployment and other issues), we realize that it will be a long process to work our way out. In the two years that we have been living by our financial plans and trying to become debt free, we have paid off 4 different credit accounts! Praise the Lord. Yes, we still have many more to go but we have a plan and we have a God that is good who will help us stick to it.

Money Facts
1 in 20 American families carry more than $8,000 in credit card debt. Read More
1.41 Million Americans declared bankruptcy in 2009 Read More
43% of Americans have less than $10,000 saved for Retirement Read More

Sadly, many people that are in debt have no idea how to get out of it.

How to Get Out of Debt
1. Make a Budget
2. Learn to Live by Your Budget
3. STOP using your Credit Cards and/or Borrowing Money
4. Make a Plan for Paying Back what you Owe

Our Debt Snowball
As I have said before, Jimmy and I follow the skills and tactics we learned from Dave Ramsey’s Financial Peace University. This is where we first learned how to make a real budget that would actually work for us. Plus, Dave gave us some strategies to use to get out of debt. Dave calls this the “Debt Snowball”.

Read Dave Ramsey’s article “Get Out of Debt with the Debt Snowball Plan”

Here are the highlights for all of you that don’t have the time or the gumption to read the full article.

1. Make a List of ALL your Debts from smallest to largest
2. Start with the smallest debt you owe and pay as much as you possibly can every month on this debt while paying the minimum payments on the rest
          a. This will allow you to pay this debt off quickly
          b. It will help you to feel good about the victory of getting it paid off
          c. The feel good feeling will help you to stick with the plan
3. When you have paid off the first debt, add all the money you were sending to the debt you have now paid off to the minimum payment from the next smallest debt and continue as before.
4. Repeat Step 3 until all debts are paid off.

My 2¢
The hardest part of paying off debt is sticking to the plan. You WILL be tempted to use your credit cards (that’s why Dave suggests closing all your credit accounts). You will be tempted to spend the money you free up from paying off the first debt on something other than paying off the second debt. You will have setbacks once in a while. Don’t give up. This is not a task for the faint at heart! It will take a while to have total financial freedom, BUT it is POSSIBLE! Praise the Lord!

Best wishes to all of you who embark on your journey to become debt free. You can do it!

CLICK HERE to read some Get Out of Debt Success Stories

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