Here’s the truth, it is a lot easier and way more fun to get into debt than it is to get out of it. Truthfully, isn’t it more fun to go and finance a Mercedes Benz S-Class than it is to spend the next 5 years paying over $1500 per month paying for it. Spending tomorrow’s money today is never a good idea.

Without further adieu I will quickly detail to you a method that I have personally used to eliminate debt. I learned it from John Cummuta and Dave Ramsey. Ramsey has his own variation what’s called a Debt Roll Down (DRD). But I’ll use Cummuta’s version. The main principle of this is to attack debt in levels.

Here’s an example of how it works. Meet Debt Girl, she is only 22 years old but she has amassed quite a few bills in her short life:

Debt Girl luckily still lives at home with her parents and she doesn’t have to pay rent. She works a job that pays her about $2,000 per month. There is about $1230.96 worth of monthly debt here plus, Debt Girl LOVES to go out because she’s young. All-in-all she could afford to pay $200 extra per month to her bills if she became a better spender. She’s maxed out every card and she still shops, goes on trips meeting up with old friends. Debt Girl now realizes that she wants to get a handle on her money situation.

There are a gang of theories surrounding how a person should pay this off. Should I pay off the loan with the most interest first? Or should I do the one with the longest term? The problem with theory is that it makes people not take any action. Here is the action that Debt Girl would take if I was giving her advice:

I’d start low and work high (Ramsey says you should start high and work low.) What this means is that I’d tell Debt Girl to tackle the Macy’s card first and then move on up. So, she’d pay ALL of the minimums on her bills and then the extra that she could afford to pay, tack that on to Macy’s. So let’s say that DG decides to add $100.00 per month to that $24 payment. First let’s examine how long it would take to rid the debt with a minimum payment: It would end up taking her 68 months to pay off a $800 debt and she’d also pay $327.76 in interest at this rate. SUCKS! BUT, if she paid $124 monthly then she’d actually pay the debt off in 7 months instead of 5.6 years with only $36.69 in interest. That’s a savings of $291.07 of interest.

Now, DG doesn’t say “Now I can spend $124 per month on partying!” Nope. She focuses on the MasterCard and knocking it down. That’s what Money Fighters do after all. If she paid the minimum $93.00 balance it would take her roughly 20 years to pay off and she’d pay $5,532 in interest. Imagine putting that away in an index fund. Yeah, credit cards KILL people. Anyway, Debt Girl adds the $124.00 to the $93 minimum payment that she killed the Macy’s debt with and what’s the verdict? Instead of paying THOUSANDS of bucks in interest she’d only pay $587.13 and she’d knock that debt out in 17 months versus 20 years.

With this method, Debt Girl (or you) could pay your debt down in less than 5-10 years. Here’s the scary part though, with these figures, DG would have been a slave to THAT debt (this doesn’t include future purchases or her even getting a home loan) for 58.6 years. Now HOW IN THE HECK can you get rich when you’ll be paying for debts for the next 58 years. That’s a murder rap! Which is what I’ll get if my Money Fighters live like this. Okay I kid but please don’t do this to yourself.

I have compared credit card debt (and debt in general) to STD’s in my Money Is Sex column that I write. Debt is comparable because it puts you in a compromising position due to doing something that, while pleasurable at the moment, can make you pay for a lifetime. NEITHER of these are laughing matters and I think that both are as serious as each other.

Gaining wealth is a lifestyle change. Debt is a lifestyle change too. The same way that safe sex can keep you from disease and unwanted kids, debt freedom can allow you to take trips and live the type of life you dream of. That’s what we’re fighting for.

The difference between Cummuta vs. Ramsey method

The big difference is that John Cummuta advises people to start with the lowest debt and work your way up, rolling the minimum payments into the next debt. Dave Ramsey says start with the largest debt, work your way down and kill debt faster.

While I do agree with most methodologies, I favor Cummuta’s because it helps people see progress faster at debt relief. It’s hard to stay motivated and if your biggest debt is your mortgage and you have credit cards that, if paid, could ease a lot of burden then it’d make more sense to spend then next 2 years paying that off than 15 years trying to pay off a house note and do the minimums on consumer debt.

It’s your choice though, just don’t bank on the lottery or that inheritance from that unknown relative to put you in financial position. It may never come.

READ PART I HERE!