To start getting our of debt, you need to know just how deep in the hole you are.  I use Mint.com to track my personal finances and keep a loose budget.  It also calculates your total assets, liabilities and net worth.  I wanted something more though.  If you know anything about getting out of debt, you're familiar with the "debt snowball" or paying down your debt using the snowball effect.  Every person that writes about getting out of debt will mention this at least once, because it's a powerful tool.

The general idea is you have to make the minimum payments on your debt.  If you order your debts smallest to largest then throw anything extra you can at that first debt and pay it off, you take that same amount and add it to the next.  When that is paid off, you move it to the next and so on.  The outcome is your debts get paid off quicker as time goes on since you always spend the same, just move it up the chain.

A couple of rules or it won't work:

  1. Don't add more debt.  If you add debt, you're defeating the purpose.  You'll need to live on less than what you make.  Free up any extra pennies to put towards the debt.  Find ways to trim your expenses.  You may even need...{gasp}...a budget.
  2. Earn enough to cover your living expenses with enough leftover to pay the minimum amounts.  If you can't, you'll need to get creative.  Get a second job, sell stuff, form a side hustle, whatever.
Assuming you can do those two things, you'll need a way to track and plan the attack.  I went looking for an Excel spreadsheet to do this.  I LOVE Excel spreadsheets. I could make one, but why reinvent the wheel when someone has clearly done this before?  I found one at The Wealth Formula.  It's not complicated, has a nice, easy to understand layout and plenty of room to add in the numerous creditors some of us have.  Leave off the mortgage, that's something to be dealt with later.  Do add car loans, credit cards, personal loans, 401k loans, student loans, etc.  Be as complete as possible.  Once done, figure out how much more than minimum you can do and the sheet will calculate how long it will take. Mine is currently just under 3 years.  To think that in 3 years, we'd only owe on the house if very exciting.  To think about all my wife and I could do with that amount freed up each month!  Travel, save and invest (obviously), buy real estate.  The possibilities are endless.