2. list what i earn

3. stop using credit cards

4. pay bills on time

5. pick one debt and add a bit more money to it

6. lower interest rates on credit cards if possible

7. change phone service

8. get basic cable or none (haven’t decided none yet)

9. make a grocery list and compare costs between brands

10. put off buying ______ (fill in the blank)

11. list basic needs each week

12. get a drawer or a little account to put 5 or 10 or 15 dollars a week into

13. declutter the house

14. budget for play money (just a bit)

1. CALL your credit card company if you will not be able to make your minimum monthly payment. They can type notes in your file and give you an extension as long as you can tell them when you will be making the payment. Pay as much as you can as a token payment if you can.

2. BE REALLY NICE to the person you speak to. These staff are abused all day. If you are nice, they will offer you lots of options that will not affect your credit reference rating. If you are rude, chances are they will not.

3. TEAR UP any offers of a credit limit increase that come in the mail. If you can’t bring yourself to tear it up – give it to a friend or spouse to tear up for you! (I say this because I know that some people feel their heart break a little bit to pass up an offer of money).

4. CANCEL ANY DIRECT DEBITS or yearly donations that you may have forgotten about. It’s well and good to be charitable, but only when you have your own money to give – not a credit card company’s (that will bleed you dry if possible). This used to come up so much. Go through your last year if statements – many are available online nowadays.

5. SWITCH to a card with a lower interest rate if available (sometimes the banks don’t tell you when they release them so just have a look on their website occasionally) or even a card with an interest free or repayment-free period for transferring to them – and pay what you would have paid if there was interest attached to make a dent in that debt.

6. PAY MORE more than your minimum monthly payment whenever possible and DO NOT SPEND on your card unless you can pay it back in full by the end of the billing period.

7. IF YOU MISS your monthly repayment for more than three months (time period probably varies per company), your account will be cancelled. This is recorded on your credit reference rating. After this, debt collections agents may be sent and bankruptcy proceedings may begin – which you have to pay for.

So don’t ignore it!!

So here’s how the budget worked:

Rent $x bucks/month
Food $y bucks/month
Gas $z bucks/month
Emergency Savings fund (if you have enough)

That was pretty much it. Maybe $10 for a movie or something.
The rest was the standard credit card stacking scheme:

Pay whatever you can afford to the card with the highest rate
Pay minimum on everything else

When you pay off the card with the highest rate, drop that monthly payment down to the next highest rate and continue the scheme. Yes, it will take years, and yes it will most likely suck (as it did for me). But you will learn something.

You’ll learn that you will NEVER want to live that way again so you’ll only pay for stuff with cash (or rewards cards backed with cash in the bank so you don’t pay interest).

After I paid everything off (including my wedding & 2 new cars), I’ve resolved never to get into debt again except for the house purchase (although I’m going to try for a huge down payment if not all cash buy on that).

Now that I’ve paid everything off (just about a couple of years ago), we are debt free and save about 1200 per month into my 401K and 2500 per month into cash savings. I only trade stocks in my IRA accounts (another way to save on taxes). This is all on one income (my wife is a student at UC Berkeley) and living in the bay area. We’ve saved enough to take a month in Europe (we will use zero percent credit cards to finance the trip with the cash to pay off the cards sitting in the bank earning interest until they come due–the interest will pay for 10% of the trip alone!). Also we are couchsurfing in some spots in Europe meaning we will have a place to sleep for free about 1/2 of the time. A real money saver and a great way to really meet new people in new places.

Here are my money tips (what I call “things a 20 year old should know from a 30 year old).

Itchin’ to buy a house?
Car payments negatively impact your credit score way more than credit cards since car payments tend to be a fixed amount that is rather large (like $300 per month). If you want to buy a house soon, pay off your car! (Also, don’t buy a car until AFTER you sign the papers on the house).

NEVER lease a car…I know what they say about deducting business use from your taxes and all that jazz, but the problem is you will pay a monthly payment to lease a car forever. If you want to truly get out of debt (and I consider anything with a major monthly payment a debt), then the best thing to do is get yourself a quality car that saves gas (I drive an Acura RSX Type-S that I bought new in 2002…it gets about 33mpg and hauls enough arse for my needs). Now that the car is paid off, all I pay insurance, maintenance and gas…no unsightly car payment to worry about. I plan on having this car for at least 300K miles. I stick to the book as far as maintenance goes and I haven’t had a problem yet in 55K miles.

Save early.
You’re heard it before, but if you’re in your early 20s, build a cash hoard. Trust me. I’ve built mine so late in life since I paid everything off and it’s not the best position to be in.

Live easy.
You don’t need to much to get by. If your friends keep wanting you to go out and blow wads of cash partying every weekend (or more often), then you’ll have a lot of fun, but your life will suck when you have to pay it all back.

Buy things you can afford.
Don’t buy a house with zero down payment or with an interest only loan or worse, a negative amortization loan. These are stupid loans that are designed for one thing: to make the mortgage folks money. You’ll be stuck with a big gorilla on your back that will suck some major balls and lead you to financial ruin (aka most of the nut jobs going into foreclosure nowadays). Don’t buy a car that costs more than 1/5 your yearly salary. Don’t make a lot of cash? Buy a used car. Make 100K? Get a 20K car (like a nice Honda). Make 200K, then you get a Lexus. See? Easy.

Don’t buy too much stuff.
Need a new jacket/jeans/shirt? What’s wrong with the old one? If you don’t answer with “it got stolen” then guess what? You don’t need a new one. If it’s torn, just sew it up. Need a new video game? Rent it. Need a new DVD? Go to the library and borrow it. Want to watch it over and over again? Go borrow it again and again. Need some books? Library has those too. Need new tools? Some libraries and community centers have those too. Or borrow some from your friends. Unless you need tools for work (like everyday) then just borrow it. Get baby stuff as hand me downs. My wife has found great bassinets, strollers, and all sorts of stuff for free. Just clean them up and they’re ready to go. Need furniture or appliances? Check out garage sales, craigslist, etc. Grow veggies. It’s hard work (aka exercise) and you learn stuff. Plus you have awesome, fresh, organic veggies at your fingertips.

Don’t buy gym memberships
Take fitness classes at community colleges. It’s cheaper, more fun, you meet people, AND you get your exercise in. Plus you learn stuff (like tennis or volleyball or badminton, etc).

Conserve stuff you have
Wash plastic baggies. Yep we do that cause we’re both cheap and we don’t like to throw crap into the ground to be covered up and figured out later. Recycling, reusing, and all that hippie crap is not only good for the environment, but it’s good for your pocket book. For example, did you know that old food scraps are good for fertilizer? I didn’t until my Chinese mother in law came and we started collecting chicken fat, soured milk, etc into containers in the yard. Wait till they get really stinky then pour into your tomatoes and other plants…works great. Reuse scrap paper until it’s totally covered then recycle it. Clean your closets and find everything useful. If you are going to use it soon (a month or two) then keep, if not, sell it or give it away so others won’t have to buy stuff either.

Anyway, that’s my rant for now. I’ve lived by these principles for some time now and I can say that it’s nice to finally have a nest egg (albeit a bit smaller than I’d like, but working on it) and not have any car payments or credit cards to pay.

The very best way to get out of debt is not to get into debt I know easy said than done. But the first principle is CASH IS KING that is if you use cash for all day to day peurchases you will never go into debt except for two areas Home,Automobile

1. Make a budget — include every monthly bill and budget by paycheck. Budget for fuel and groceries too. After these are paid, set aside a certain amount that you are willing to live on between checks. If you run short, you can take it easy for a week or two.

Side note — do not be scared to slide your expenses between checks to better balance your cash flow. Just don’t keep sliding them to the future!

2. Pay bills and required expenses FIRST. Set up electronic payments to your debt and utilities the day before you get paid, so you know what you have left, and remember your ‘allowance’ from step 1.

3. When you have extra cash (like an 3rd paycheck in a month if you are paid bi-weekly,) set aside your ‘allowance’ and pick a small treat to reward yourself for staying on your budget. Use the non-budgeted amount to pay off debt — either smallest card / loan or highest interest first.

4. IF you decide to use debt to make a leisure / nonessential purchase, be willing to set aside a portion of your allowance to repay the debt within a short, predetermined time period. Don’t make the next purchase until you have paid this one off.

5. Until you are free of debts other than mortgage and maybe new-car payment, no savings account will pay as much interest as an investment in debt repayment. A credit card can serve as an emergency fund until you are prepared to actually commit cash flow to this account.

–I know I’m going to hear it on the last one, but consider this: someone I know has 17 credit cards with a total balance in the $20k’s — along with a savings account in the neighborhood of $10k. Does this make sense to ANYONE?