How I Got Out Of Debt

It’s been a while since I’ve written about how my wife and I paid off our consumer debt.  I thought new readers (and folks who have been around for years) might benefit from a retelling of our story.

Back in April of 2005, my wife and I decided that it was time to get out of debt.  We had a total of just over $11,500 in consumer debt, consisting of credit card debt and two automobile payments.  It took us a little over 10 months to completely pay off our debts.  Here’s how we did it -

1.  We stopped using our credit cards.  We didn’t cut them up or freeze them – we just stopped using them.

2.  We opened an online savings account and established our mini-emergency fund of $1000.  This was the amount suggested by several of my favorite debt reduction specialists, including one of my favorites, Dave Ramsey.  (Dave rocks!)

3.  We listed our account balances from smallest to largest.  The interest rates on our accounts were all roughly equal, so it didn’t really matter which account we focused on first. So…

4.  We made minimum payments to all of the accounts – and an extra payment to the account at the top of our list.

5.  We paid off our first account.

6.  We used the amount that had been going into the first account and applied it to the payment on our second account.

7.  We paid off our second account.

8.  We used the amount that had been going into the first account and the second account and applied it to the payment on our third account.

9.  We continued this process until all of our debt was gone!

That’s it.  That’s how we got out of debt.  Along the way, we had to dip into our emergency fund (on a couple of occasions, if memory serves) – which slowed our progress.  We also used micro-payments (small, extra payments made throughout the billing cycle) to reduce our balances and interest.  The main thing we did, however, was stay committed.  We had a goal – we focused on that goal – and we reached that goal.

There are dozens of methods for debt reduction – but debt reduction success really comes down to one thing: commitment.

It’s been several years since we worried about consumer debt.  Now, we’re working on our (new as of last February) mortgage.   We’ll use the same commitment to reach this goal.  It will take a little longer, but we’ll make it.

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4 Responses to How I Got Out Of Debt

  1. Pingback: Tweets that mention How I Got Out Of Debt » No Credit Needed - Debt Reduction Rocks – We Are Living Debt Free! -- Topsy.com

  2. Matt says:

    The wonders of the snowball effect – its hard to imagine of you’re staring at the pile of debt but hearing examples of it working is always a nice thing.

  3. Pingback: The Right Approach To Credit Cards | Credit Sesame