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Frugalistas Frugalistas

Getting Out of Debt

By Wendy10Robinson on Jul. 28, 2014 at 12:00 AM

Talking about money and especially talking about debt is one of the last great conversational taboos. Most Americans have some debt and many of us wish we had less. So, what is average and how can you bring your own number down?

According to recent Federal Reserve statistics, the average American household has just over $200,000 in debt: $15,191 in credit cards, $33, 607 in student loans and $154, 365 in mortgage debt. In total, Americans owe $854.2 billion (yes, billion with a "b") in credit card debt and less than 25% of us have the suggested six month emergency fund in savings.

I used to be part of that 75% lacking in savings, only I was in far worse shape than most Americans. At the ripe old age of 24 I had accumulated $30,000 in student loans, $15,000 in a car loan and a whopping $25,000 in credit card debt. I was making about $30,000 a year and had nothing in savings. It was stressful and scary.

When I hit my financial bottom (when I started having to cash those oh-so-tempting blank checks the evil geniuses at Citicard used to send me) I knew I'd be poor forever if I didn't get a handle on my debt. While there are a lot of debt reduction plans out there, I decided to do a debt snowball (loosely based on a Dave Ramsey plan).

A debt snowball is pretty simple. You figure out all your debt (how much do you owe, who do you owe it to, what are your minimum payments, etc.) and then start by aggressively paying down the debt with the smallest balance while paying only the minimum on the other debts. Once you've paid off the smallest one (and enjoyed the feeling of real satisfaction that comes with see a debt disappear), you roll the amount you were paying on that debt into the minimum payment on the next debt and start aggressively paying down that one. One by one the debts disappear.

I was debt free, with the exception of student loans (I started grad school during this time), but the time I was 27. A few things helped get me there: getting a second job, building up a small emergency fund so emergencies didn't send me running for my credit card, and practicing radical fiscal honesty with myself by forcing myself to do monthly money check ups, which I'll talk about next week.

Becoming credit card debt free is honestly still one of my biggest accomplishments and has improved my quality of life so much that I can get kind of evanfelical about it. The debt snowball really works!

Have you ever done a debt snowball? Do you have any other tips for getting out of debt?

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Replies (1-10):
  • michiganmom116
  • by Rhonda on Jul. 28, 2014 at 6:26 AM
  • I've used the snowball tactic.  It works as long as you don't have emergencies or kids, and have a good enough income to meet more than the basics.

  • Quote Reply
  • lady_katie
  • by Member on Jul. 28, 2014 at 9:39 AM
  • Trying to snowball our student loan debt, but we have so many expenses that take priority over it that we're not getting anywhere. At the very least, we're staying in that mindset so we don't go further into debt. It's slowly trickling down with the minimum payments, so it stands to reason that one day we will be in a better place to tackle it more aggressively.
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  • Leelee1008
  • by Member on Jul. 28, 2014 at 10:14 AM
  • I am really not to bad in debt, I owe a few little things.. We have been down on luck and money for a while now, and hopefully things will keep going good for us so we can start working on paying these few things off.

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  • LaniBee
  • by on Jul. 28, 2014 at 11:12 AM
  • We consolidated all of our debt into one fixed payment over a fixed period of time. Today, we are completely debt free.

  • Quote Reply
  • kellynh
  • by on Jul. 28, 2014 at 11:41 AM
  • That's awesome!! Congrats!

    Quoting LaniBee:

    We consolidated all of our debt into one fixed payment over a fixed period of time. Today, we are completely debt free.

  • Quote Reply
  • kellynh
  • by on Jul. 28, 2014 at 11:42 AM
  • I hope things get better for you!

    Quoting Leelee1008:

    I am really not to bad in debt, I owe a few little things.. We have been down on luck and money for a while now, and hopefully things will keep going good for us so we can start working on paying these few things off.

  • Quote Reply
  • virginiamama71
  • by Member on Jul. 28, 2014 at 2:33 PM
  •  congratulations

    Quoting LaniBee:

    We consolidated all of our debt into one fixed payment over a fixed period of time. Today, we are completely debt free.

     

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