As Emeril says.... "Bam!"

Bam!

Took Dave's advice and we were able to make a huge payment on the debt!

When we read The Total Money Makeover Dave recommended that if you are in debt, take your savings (except for a $1000 baby emergency fund and your 401K) and use that to put down on your debt.

Makes sense right?

Let's say you have $5000 in debt you are paying interest on, but you have $5000 in savings. It's makes more sense to take your savings and pay down your debt, instead of paying that credit card or loan interest every month.

So after much thought (and stress) we exercised some options and were able to pay off quite a bit of debt.

Still have $40k in debt left, but at least the amount is getting lower right?

Next on the chopping block?

Getting rid of one of the car loans....

$58,000 paid off in one year?

Well, we needed a GOAL date to pay off this debt.

We started keeping track at the end of March.

I want to have this debt gone and done with by April 1st, 2008.

That is 8 1/2 months away!!!!!!!

We've been getting intense around here about cutting our spending, reducing/cutting bills and paying down the debt.

And I'm doing my bit by trying to bring in a little extra money from home. Yeah, it would be nice to bring in thousands of $$ extra every month, but I just don't have the time to make it a full time thing. My husband works full time, and unless I get a babysitter, I'm not going to be able to work full time also.

But I'm happy with a few hundred dollars or more extra each month I can make by working part-time during my little one's naps.

Cut Your Spending - Part II

One of the parts to getting out debt that I personally think is the hardest is cutting your spending, ie "changing your lifestyle and habits."

We know what we need to do to get out of debt, and are willing to do it. But changing our spending habits and the way we think about money has taken discipline, creativity and sacrifice.

It's almost like being on a diet.

Here's an example of how my thinking has changed. Instead of swinging by Starbucks and getting my Grande Vanilla No Fat Latte and a slice of coffee cake and spending $7-$8 I think beforehand, "What is more important? That coffee or paying off our debt? And can I still get my caffeine fix without spending $7?" I might go home and make myself a cup of coffee for pennies, or instead of springing for the latte and coffee cake just get a small coffee with cream and sugar.

Ummm...so how is this like a diet?

Well, when you are a on diet you either cut back on or cut out completely things that are causing you to gain weight or preventing you from losing weight. My biggest temptation is sweet things. So on a diet I would cut out desserts, or try to find low calorie alternatives to get my sweet fix. For example, instead of eating rich brownies or a New York Cheesecake for dessert, I might have some fresh strawberries or make a pan of brownies using the No-Fudge Fat Free Brownie mix.

On our debt diet we are using cheap/free alternatives to things we would like to do. Or cutting certain expenses out altogether.

Step Two to Reducing Your Debt - Cut Your Spending

The second step in reducing your debt is cut down on the amount of money you spend.

Take another look at the list of monthly bills you wrote down.

What can you cut out?

When my husband and I sat down and took a good, hard look at our bills we were able to cut some things out.

Pest Control $75
Lawn Service $52
Netflix $21
Total= $148 a month savings

Then we looked at what we could reduce. I called our cable internet and TV provider and got a discount. Other options include calling your car insurance provider to see what options are available for lowering your rates, such as raising your deductible.

Cable/TV $10
Monthly phone bill (switched providers)$10
Total= $20 a month savings

Just by dropping some services and making a few phone calls we were able to save $168 a month.

Next, look at the things you have to pay; such as food, electric/gas, water, and gas. How can you conserve in those areas? Shopping at places like SuperTarget for food, making a mealplan, using coupons and shopping sales are all ways to reduce your monthly food bill. Bring your lunch to work and eating out less is another way. Turn off lights when not in use.

There are some great tips on Sharing My Two Cents on how to use coupons and rebates and other ways to cut down the amount you spend on groceries, cleaning supplies and health and beauty items.

Take The First Step to Get Out of Debt...

by making a budget.

Get out a piece of paper and write down all of your bills for each month. Food, gas, TV, internet, mortgage/rent, electric/gas, phone, water, credit cards and loans etc...

Now, add them up. What is the dollar amount you need to pay all your bills each month?

Write down what your take home pay (after taxes) pay is. Is that number higher or lower than the amount you need for your bills? The goal is to have the amount you spend on your bills much lower than the amount you earn each month. The more money you have leftover, the more you'll have for paying off and credit cards and loans.

This may seem like a simple task, but the hard part for many is not spending more than you budget for. The reason many people are in debt is because they spend MORE than they make. Make a budget and stick to it.

More details on making and keeping a budget will come later.

How Are We Going To Get Out of Debt?

My husband and I have been slowly working on paying our debt off. But it always felt like we were just spinning our wheels and not getting anywhere. On a message board I visit I noticed that there were people that kept asking about Dave Ramsey. Everyone keep recommending his book The Total Money Makeover: A Proven Plan for Financial Fitness I didn't want to spend the money on a book that could turn out be just a lot of hype. So I requested a copy from my local library. There was a long wait list for the book! Once I got it I couldn't put it down, and even dh read some.

So, if you want to get out of debt, but aren't sure where to start I'd get a copy of "The Total Money Makeover" by Dave Ramsey. I would make that your starting point.

So we read the book, and then started our second step. Making a budget. I'll cover that in my next post.

Ever see the commercial....

Where the guy is mowing his lawn on a riding lawn mower, cleaning his pool, driving in his new car etc... but then says he's up to his eyeballs in debt?

It's a sad representation of many Americans today. But I love that commercial. Why? Because it's a great reminder for me and my family that we do not want to live like that.

We have debt. We have a credit card and car loans. But you think "Everyone has a car loan!" Nope. There are many families that don't, they pay for their cars with cash.

We want to be one of those that pay for their cars with cash, and can retire comfortably when the time comes.

What about you?