Getting Out of Debt: Dave Ramsey Style

Is the economy coming back? Is the job market going to grow? Many people have been affected over the last two years with the turn of events and many are changing the way they think about their money and credit cards. My husband and I were these people. With him being laid off in November of 2008 with no prospects in sight, and our first child heading to college, we needed to figure out how we were going to move forward with our financial situation.

Enter, Financial Peace University by Dave Ramsey. We didn't feel like we had any real debt - just the one car loan and our son's first year college Parent Plus Loan. Were we wrong! We quickly realized if we were going to get three kids through college and have any retirement in the next 15 years, we needed to do The Steps. The Seven Steps to Financial freedom. Our journey started on March 7, 2010. Nothing in savings, $39,000 of debt and living pay check to pay check.

Step 1: One thousand dollars in what Dave calls the "Baby Emergency Fund" (BEF). You know Murphy shows up in every household in the form of a car repair, dental emergency or in our case a burned out refrigerator. But we were ready! We were able to bank our $1000 after the first class, because I had received an unexpected consulting check and had stashed it away in my underwear drawer while deciding what to do with it. When Murphey showed up three months later, no whipping out the emergency credit card, we paid cash! It was an emergency and we were ready.

Step 2: Pay off all debt utilizing the Debt Snowball. How do we pay off $39,000? It seemed overwhelming when putting our debt in the debt snowball calculator. At the rate we were currently paying off this debt, we wouldn't be debt free until March 2013.

Well, seeing this information kicked us into high gear! As all DR fans know, we needed to get our spending under control. By knowing what money was coming in each month and by giving each penny a name before the month started, we recorded every receipt within our budget. Most importantly every purchase was paid with CASH! No more credit card, no more zero down/zero percent, no more overspending!

Time to kick the car loan and Citi Bank out of the house! First stop, sell the 2008 Prius. My first new car. Craigslist did the trick and three weeks later we sold the car for $3000 more than what was owed on the loan. ROCKING! Paid off Loan 1 and put the extra towards Citi.

Next: Sell. Sell. Sell. If it wasn't nailed down, it was time to sell! After cleaning the house and my office at work - BINGO. I found a new business. Selling things on Amazon. If it had it's original box or a bar code, every item was checked through Amazon. Anything remaining received  a garage sale price tag. Three successful garage sales in three months. Got that snowball rolling!

On to shaving off $$$ from our monthly bills. Cable, garbage, telephone, car and home insurance...we went the distance in these areas. By calling around to all the competitors as well as making better deals - with no contracts - with our existing providers, we were able to save anywhere from $100 - $900 a year in each of these areas. The most profound impact was shopping around for better and lower car and home insurance.

We were now fully in control of our money, our lives and our future. It seemed like all of the sudden we had not only enough money to live, but extra to put towards the final debt. From July to December 30, 2010 we pounded out that remaining debt!

All $39,000 DONE in nine months!

WE'RE DEBT FREE!