Kelly,

I think your writing is very clear and you did a great job explaining this for everyone to understand.  I used this method to pay down my debt and it really works.  Recently, on my blog I also talked about making your debt repayments automatic.  It is basically like "pay yourself first" but it is "pay your debt first" and make it automatic. 

Great article and congrats for getting out of debt.  I got out of $26,000 of debt and it feels so good.  Now, I save and save and save!  I have freedom that I didn't have before.

Best wishes,

Janie

Great advice, Kelly!  Credit card debt is a huge problem for many people, and is an especially common problem for young people that are just starting out.

My husband and I are actually adament about using our credit card for anything and everything...but that's only because we pay it off every month and get great perks with it (free hotel visits and great purchase security).  There are definitely good and bad aspects of using credit...and our motto is just to spend what we can afford to spend.

Debt Snowball!  Dave Ramsey is a great read for anyone in debt and wanting out

Kelly,

This is great!  I hope that your Kelly's Korner readers find this.  Early in our marriage my husband and I decided to live debt free and it was the best decision that we ever made.  We now only have our mortgage (with only 40% to go) and we are only 26!  We did it by doing the things you mentioned, we still don't have cable and limit our cell phone use, (we only have a $30/month shared plan)!  I really believe that debt is bondage, and its scary that its so intrinsic in our culture.

Thanks for you words and your help!  Please keep it up.

Stori

Ps.  We also used the Dave Ramsey "Total Money Makeover" to guide us.

Great advice!

Could you offer a savings plan for vacation planning???

My hubby and I would like to go to Hawaii to celebrate our 10 year wedding anniversary next fall and leave 3 kiddos behind with grandparents.  How can we best carve that $$$ out of our budget and enter our trip debt free???

Thanks -

Kelly from Montana 

 I agree, debt is not evil.  Most people cannot afford to buy the two most expensive things they own (house and car) without going into debt.  The problem starts with borrowing to buy everything else you own using debt.  Our economy is mainly driven by consumers spending money they do not have.  The federal government must reduce its debt and set the example for Americans to follow.

     There's an excel template for 'snowballing' your debt. I about to try this. It makes a lot of sense and has you pay of your highest rates/highest balances first. Then as kelly explaining, after you pay one off use that payment towards the next debt.

http://www.vertex42.com/Calculators/debt-reduction-calculator.html

Kelly's advice is spot on!  I used this exact same method and I know it works. Paying off the smallest debt first has two advantages over paying the largest debt first.         1. The smaller debts can be paid off quicker and this boost your credit rating quicker.  2. It provides a psychological relief that starts sooner and it builds as each debt is paid off.  The key here is to stick with plan and do not stray!  You will be tempted as you feel a little financial wiggle room in your budget.  The benefits are worth the wait.  My family became debt-free,  When the last bill was paid off, the money we were using to pay off debts became the savings for our first home.  We got financial freedom, a huge built-in raise in income and the home our dreams.  What  a huge pyschological boost!

Kudos to AJ. So many people, including the financial wizard Dave Ramsey, seem to treat credit cards as though they are evil. Use them to the point you can afford and pay them off MONTHLY. Then reap the rewards that brings for FREE. A good credit score is not a sign that you are not financially independent but rather that you are financially savy. And it's tough to have a good FICO score without revolving credit on your account. Even if you don't think you need it you do. Things like your auto insurance premiums are based off your credit score. So like it or not, this country runs on FICO.

Even though some feel it's ok to use credit cards if they are paid off on a timely basis, keep in mind, studies have shown that if you use a credit/debit card to purchase something, you are likely to spend 12 - 18% more than if you were using only cash.  That % saved is well worth more than any "reward" you could earn from some credit card company.  I am leaving debt in the dust (paying it off right now) and refuse to use credit cards for anything!!  Debit only if necessary...it's cumbersome to carry cash but well worth the sacrifice.

It's great to see some sound financial advise here.  Our family has been snowballing our debt for the last 2 years and will soon pay off our car.  After that, all we have left is the house.  It's a great feeling.

My only advice towards Kelly would be to not use your credit card as a crutch for emergencies.  You can't plan when an emergency will happen, but you can be prepared for one.  Save up 3-6 months of your monthly expenses in an interest earning, easily accessible savings account.  Doing so will allow you to pay for those emergencies in cash without getting caught back in the debt cycle by charging it to your credit card.

I think that people need to learn within their means.  Government is way over their head in debt it's true, but so are we.  We need to be the ones to set an example as to how to live responsibly.  Hopefully, then, we'll have more financially wise individuals running our government.

Scott: we personally follow the Dave Ramsey plan and it has worked for us so far.  People often think that they can handle paying off their credit cards each month.  I know for myself there's a temptation not to just because I know that I can pay it off the next month at the expense of paying some interest on top of it.  I believe that's the reason why credit cards can be bad for people as they say they're going to use them a certain way, but don't follow through.  So I say just eliminate the temptation and pay in cash.

I have some friends  who started out their marriage in agreement that they would live only on the husbands income, and save the wifes. They paid for everything without going into debt. When the kids came along after about four years, she was able to stay home with them, because they had everything they needed, and money in savings for emergencies. When the kids got older, she worked part time and saved again. They bought their dream home worth about 350K, and only financed about 125K. I wish I had thought of that idea when I got married. You'd be amazed at how fast your money grows without debt. I hope this helps young couples.

Vicki