Dave Ramsey's Five Steps to getting out of Debt

1. Quit Borrowing more money.

I know this one is a "duh" but seriously it needs to be done. And more than that, you and your spouse need to commit to never again borrowing money. You can't borrow your way out of debt. My husband and I have tried it several times and every time it ended up costing us more money.

Here's an example:

When we first got married my Father in-law gave my husband a broken down Cadillac that needed $3000 worth of repairs. So we borrowed $5000 to get the car fixed. I remember when my husband came to pick me up from work, we were so excited! So of course, we had to go out and eat in order to celebrate and of course we used some of the $5000 to go out to eat. We even used some of it to pay our rent that month.

Last year after starting Dave Ramsey's plan (and committing to not borrowing any more money) our transmission went out. Once again the cost was $3000, but this time we didn't borrow money to fix it. We did some pretty radical things to save up money, but when we finally had the money to go fix the car, we didn't want to pay $3000 for it! Heck, it's our money, and $3000 is a lot of money to our family, so we shopped around. We ended up getting a better transmission plus lower labor cost for $1800. Saving our family $1200. That's the power of cash... and commitment.

2.) You must save money.

Don't skip baby step one ($1000 emergency fund)! It is really important! I know some of you have some good examples of why not to skip step one! In order to break the cycle of debt we have to start relying on ourselves to fix our problems. That means having a baby emergency fund.

Also save money for things that are coming up. Look ahead. If your tires are going bald, start a new tire fund and start saving for it. Right now we're looking at Summer semester and thinking, gee that's going to cost us more than we're budgeting for. So we temporarily have to slow down with paying off our debt, and pile a little more cash up for that.

Don't forget to save for Christmas too.

3.) Prayer really works

I'd just like to add that changing your thought patterns really works too. Get your mind (and your family's thought process) to change to, "Get out of debt," "Get out of debt," Get out of debt." You will find tons of ways to cut back. And when you get that surprise $20, or that surprise bonus, you won't be as tempted to blow it, you'll just put it towards debt.

4.) Sell something

Dave often compares getting out of debt to losing weight. Selling something is like dropping a surprise 5 pounds just by cutting out the jelly beans. So look around your home and see if there is anything you can get rid of and put it up for sale.

5.) Take a part-time job or overtime (temporarily.)

You can truly do anything if it's for a short amount of time. And I'd like to add, that you can do anything if you know how long it's going to take. So set a goal on this. Say for example: I am going to work a part time job for 3 months, and that will pay off $2000 of our debt. Or whatever your example is. It sucks, but then while you're going through it you can think, okay only 10 weeks left, we're now half way through, this isn't forever. And you can also see your debt being reduced.

Then of course, pay off all debt except the mortgage using the debt snowball.

The debt snowball is paying off your debt smallest to largest regardless of interest rate. Why?

Well remember when we were comparing debt to losing weight. That's why. Very few of us can keep sacrificing if we're not seeing results. So paying off that $100 balance on a 0% credit card is seeing results. You're more likely to keep at it if you know it's working.

Keep it short too. If you are going to sacrifice, you might as well put forth your full amount of effort so it takes a shorter amount of time. You can do this! It takes time, it's hard, and sometimes it down right sucks. But if you follow the steps you will get there.

Hope this helps, thanks for reading.
Feel free to add your thoughts.