i mentioned debt before and how we got our motivation to get it out of our lives. i wanted to share the thought process behind being free of debt as well as some tools that have help us get our finances in order. we are FREE of consumer debt and are tackling education debt now. we used to think we were good with our money, but quickly realized the way we were going about paying things off by paying the minimum or sometimes a little more wasn't helping us get out of it.
Dave Ramsey is a big believer in paying the smallest debt first and paying the minimums on everything else. so when you do your monthly budget and you figure out how much you NEED to spend on the basics, whatever is leftover should be applied to debt. You should pay the minimum on everything except your smallest debt which should get the remainder of everything leftover for the month. this method will help you to see a quick reward of paying off a small debt and once that is gone you take what you were paying towards that combined with what you are paying toward your second smallest debt and put it all toward that. Dave Ramsey goes into more detail on this on his website and has plenty of free tools and information that are worth checking out.
Another tool we utilize is the envelope system. several financial folks recommend this method as a way to have a clearer picture of what you are spending. when we do our monthly budget we use an envelope system for items that can be paid for in cash such as: groceries, entertainment, gas, clothing, etc. for example if we have budgeted to spend $200 a month on groceries, when we go to the store we pull cash from the "Groceries" envelope. when the envelope is empty we don't have any more money left to spend on those items. so instead of just going out and buying things we may or may not need we think about what we are purchasing and if we need it right away or at all. since we have started eating more healthfully, we have noticed we have needed to spend more on food during the month. so when we do our budget we adjust it accordingly, shifting money from other things that are of lower priority.
even though we still have a little ways to go we feel so much lighter knowing we have already accomplished so much. it helps us to really think about what we are spending our money on and what we really need not what we think we need. there are more people who are out there giving financial advice aside from Dave Ramsey, we just trust and respect his advice, which is why we refer to him on here.