Debt Reduction

This is how Mimi and I are reducing our debt to nothing. I'll keep our progress here.

First a Little Background

After receiving a gift card for iTunes, I decided to find a good business book. There were no real technology books I wanted in audiobook form. I searched for about an hour. This being my first iTunes purchase and my first audiobook, I wanted to make sure I got my money's worth while still getting a good book.

I noticed most audiobooks were abridged and I did not want to have part of a book. After much searching I found several books that were unabridged, but most sounded boring when listening to the preview.

Finally I decided on one that was abridged, but still the speaker had a good voice that kept my interest. That speaker was Dave Ramsey, and the audiobook was called The Total Money Makeover.

As it turns out this book was not a business related book, but rather a book about personal debt reduction and changing our habits.

This book spoke volumes to me. I highly, highly recommend it. While Mimi and I have spent the past 8 months using some of the principles outlined in this book, we were going about it in the wrong way. We had a scatter gun approach to paying extra on our debts, with the majority going to extra principal on the house note.

We are taking the steps outlined in the Book, the Baby Steps as Dave calls them.

The Baby Steps
Available at Dave's Baby Steps

  1. Save $1000 in an emergency fund.
  2. Pay off all debt in a snowball (smallest debt to highest)
  3. Save 6 months of expenses
  4. Pay 15% towards retirement (IRA, etc)
  5. College Funds (for us 3 kids worth)
  6. Pay off our Mortgage
  7. Build our wealth (ours focused on retirement)

Our Progress

We have finished our first step of having an Emergency Fund and have paid all but 2 credit cards off now.

We have budgeted out every step and sticking to this plan with intensity, we will be at step 7 in four years.

The great part of this is how much in control we feel doing it. We are budgeting out what we are spending at the beginning of the month, so we know exactly what we are spending on paper long before we actually spend it.