The Road to Debt Freedom!

Baby Step #2- The debt snowball from Dave Ramsey's book "The Total Money Makeover" has been my method of reducing the $55,000+ in unsecured debt that has overwhelmed me.

This method, for me, works! I put the lowest balanced debt first and then in increasing order, have been paying them off, one by one.

While paying minimums on all, I put every extra penny into paying off the lowest balance first. Then after the first debt is paid off, I add that payment, to the next lowest balance payment....voila!...the debt snowball.

As I currently stand, I started the debt snowball process in February of 2008. The original balances were as follows:

VISA #1: $325
Nordstrom: $325
Home Depot: $1200
American Express: $2500
VISA #2: $2600
Personal Loan: $4500
Auto Loan: $13,000
Student Loan: 13,450
IRS: $17,350


I am proud to say, that as off this Monday, All of my credit card debt is paid off! Woo Hoo! Zero, Zilch, Nada! No More Credit Card Debt for me!

The debt snowball method works if you are committed to it, focus on your spending habits, and sell everything. With your spending plan, you can "find" money to apply to your debt. You also, can E-bay, Craigslist, and sell stuff to get more money to apply to debt.

I mentioned snowflakes before. Well, what is a snowball made of? Snowflakes, of course. Any small amount of money can be a snowflake that you can apply towards debt. I save change, recycle, work overtime and earn extra income when I can to put towards debt. I even pickup change in the street!

Recently, I debated about an old pick-up truck I had on my ranch. But after watching Dave Ramsey on television, I decided that it had to go too!

However, I still have more debt to pay off. During the last year, I have been able to pay a significant amount towards the larger debts. With regular payments, and putting my tax refund towards IRS debt, I have been able to do the following to the remaining debts:

Current Balances:
IRS: $3900
Personal Loan: $4500
Auto Loan: $6405
Student Loan: $12,900

As you can see, I still have quite a ways to go. But with a significant amount of income free from paying on five credit cards, I am now applying all of those payments along with the current payments to the smallest debt. With this plan, I should be debt free by February 2010!

February 2010 and debt free except the house! I am excited.

So to summarize: $55,250 initial debt.
: $27,705 current balance.
: $27,545 paid.

Half-way there and still Baby Steppin'! Thanks to inspiring blogs like Get Rich Slowly, My Money Memoirs, Money saving Mom, and of course Dave Ramsey!

$55,000 in debt!

When I started my financial turnaround in February of 2008, I personally was over $55,000 in debt, not counting the Mortgage. Some of the debt I had was left over from my divorce of 8 years ago.

But somehow, over time, I rationalized using credit cards, getting a car loan, borrowing money, and paying for college tuition with a student loan.

Before I knew it, I owed the following:

5 Different Credit Cards: $6,950.
Auto Loan: $13,000
IRS: $17,350
Parent Plus Loan: $13,450
Personal Loan: $4500

For a total of $55,250! A huge number that I compiled with stupid spending, dumb borrowing, lack of planning and lack of savings!

By totaling the amount of unsecured debt i carried, I began my journey to financial freedom.

As with Dave Ramsey's plan, I actually started a budget, or as I prefer, a spending plan! I started looking at my spending habits, traced all of my expenses, and gave every dollar a place to ebb and flow!

The next step was to do the most emotional thing I could think of at the time....CUT UP MY CREDIT CARDS! I was so attached to my Nordstrom credit card because I opened that account over twenty years ago! How crazy is that! Being attached to a credit card that cost me 20 something percent in interest to buy expensive clothes! DUH!

So, I brought out the shredder, put all five credit cards on the table and told my new wife that we were on the road to financial freedom. With that, all five credit cards became many plastic shreds!

Next step was my emergency fund, Baby Step #1 from Dave Ramsey. I immediately opened an ING Orange Savings account. ING offered a $25 gift when you opened an online account with them. I had budgeted $200 also to put into savings that first month. After a month of working some overtime and selling some stuff, I was able to get my $1000 EF funded.

Next post, I start Baby Step # 2-The Debt Snowball and the many Snow Flakes!