How to Be Debt Free - Dave Ramsey's Plan

Usually being debt free is on the list of resolutions. Here's a summary of the steps from the Total Money Makeover Plan by Dave Ramsey.

Difficulty: Moderate

Instructions

Things You'll Need:

• Gazelle intensity
• Willingness to get out and stay out of debt
• Agree that all debt is bad

1. Create a "baby" emergency fund of $1000. This will help keep you from creating new debt. Later on you will have a fully funded emergency fund.

2. The debt snowball --
   
   Once you have the $1000, pay of your debts (not including the mortgage) in order from smallest to largest balance. Pay the minimums on all debt except the smallest one and put as much money toward the smallest one as possible. Continue in this manner until you are debt free (not including the mortgage).

3. While you are paying off debt, if you have to use your emergency fund, stop the snowball until you get your thousand dollars back. Also, stop all retirement contributions.

4. When you are debt free, it is time to fully fund your emergency fund. This is where you save 3-6 months of living expenses.

5. After establishing your emergency fund, this is when you begin to save for kids college (if you have kids).

6. The next step is to pay off your mortgage.

7. The last step is to amass a bunch of money and give a bunch of it away.

Tips & Warnings

• Follow the steps in the order you see. They are in that way for a reason.
• For more information, check out the resource section.
• People will make fun of you, but that means you're on the right track!

Resources

• Writing Consultant and Tutor
• Small Biz Go To Girl
• Dave Ramsey

[maryellen1001]

on 2/5/2009 Great overview of Dave Ramsey's approach to becoming debt free!