Debt Reduction Basics

I want to thank those of you who have been reading No Credit Needed for years – and welcome new readers.  No Credit Needed is the story of our journey from “being in debt” to “being financially free”.  Over the past six years, we’ve accomplished a great deal – but we still have so much more to do!

At its core, No Credit Needed is, primarily, a “debt reduction blog”.  While I write about a wide array of personal finance topics – my real heart is in encouraging others to get out of debt.

For five years, we lived without debt of any kind – no automobile debt, no credit card debt, no debt at all.  Now, we have a mortgage – which isn’t super-fun, but does allow us to build equity and live in our own home.  So, now we’re “back in the trenches”, looking for ways to reduce our debt and become totally debt free, once again.  (For those new to the site:  We used to live in housing provided by my employer, but we bought out own home in 2010.  Check here for our recent mortgage payoff progress.)

Reducing debt only requires three things – a plan, determination, and money.

For us, the plan is pretty simple:

1.  Live on a budget.

2.  Eliminate unnecessary expenses.

3.  Establish and maintain a cash reserve (emergency fund).

4.  Pay minimum monthly payments, on time.

5.  Pay extra towards principal (to the account with the lowest balance / highest rate, depending on preference), throughout the month.

That’s our simple plan.  Over the years, I’ve written and read dozens of variations, but this is the plan that works.  Pay minimums, attack a specific debt, pay it off, and use the funds that were going to that debt, and apply them to the next debt on your list.  At present, we only have one debt, so every extra penny goes towards paying it off.

Second, the determination must come from within.

For us, the determination to get out of debt comes from a real desire to be “free”.  While we enjoy nice things (and would love to ride around in brand new cars or buy the latest set of golf clubs), we enjoy “freedom” more.  There’s just something awesome about going to bed each night, and waking up with the knowledge that we own our stuff.  That’s why we are so determined to rid ourselves of mortgage debt.  Sure, we could spend the money that is going towards debt reduction – and we could blow it on a thousand different things – but we are determined to be debt free.  Period.

Finally, the money must be both earned and saved.

I’ve been down the “fool and his money are soon parted” path.  I had to break myself from impulse spending – and realize that every dollar I earned cost me something.  Every dollar cost me time, effort, and energy.  And, if the dollars were going to cost me so much, I might as well do a better job of managing them.  Over the years, I found small ways to increase (and diversify) my income – and I’ve learned even bigger ways to decrease (and prioritize) my spending.  Every dollar is important – and every dollar has its purpose.

This is a simple, back-to-basics post.  I hope it serves as a little boost – something to make you think.  Getting out of debt takes time.  It takes work.  It takes commitment.  For us, being debt free (including our house!), will be worth it.