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!

Beginnings

We started this financial journey in February of 2008. My wife and I were sick and tired of living paycheck to paycheck! All of our income was going out to bills.

We make a good income, but were not making ends meet! It became obvious that our handling of money was out of control. I didn't even know how much money was going where and what we could afford. We thought were living the "American Dream"...but we were in debt up to our ears!

Not to say that all Americans are in serious debt, however, some of the friends, co-workers and family that we share life with, are mostly living beyond their means.

So, we decided to stop the madness, and get a handle on our finances.

First, we searched the internet for financial information. Through Google, I came upon "Get Rich Slowly", a blog about a man and his wife's journey to become financially responsible and debt free. After reading about J.D. and his situation, I could completely relate to what he went through. I too was deep in debt and without any idea of how to get out of this financial mess.

GRS has a story of how he became free of over $35,000 in debt. By using a "Debt Snowball", starting a budget and changing their lifestyle, J.D. completed what we wanted to do...become debt free!

So, we followed this plan, and found more information through his website. In particular, we found Dave Ramsey. I checked out his book "The Total Money Makeover" at the library(my first library card in years!). I read the whole book in one day and I was "All In"!

From that point on, we had a road map on becoming debt free!

In the next post, I will outline how we started back in February of 2008 on our "Baby Steps". Our goal: Pay off over $55,000 in debt!

We're not there yet, but we are heading in the right direction for sure!