If I'd Titled This "Get Out of Debt Fast!!!" You Wouldn't Read It
So, last time we discussed how awful debt is. So today we will discuss how to get out of it.
First, you have to be current with all your bills. Pay your rent, tithe, electric, heat, credit cards, student loans, home mortgage, everything up to the minimum you have to pay. Until you do that, you shouldn't be worried about paying stuff off. If you don't have the money to get current, sell something. If you are renting to own something, and are not even close to owning it, take it back to the store. If you will have to pay more to own it than you would to go to the store and buy it, then you should take it back.
Once you have your bills current, the next step is a bit counter-intuitive. It's not time to start paying off the credit cards, it's time to put money into savings. Save $1,000. This is for emergencies only. Needing a new TV is not an emergency. The emergency is more like, my car broke down and I can't go to work. Basically, this is a safety net. You will have $1,000 saved for a rainy day, so when (not if) the rainy day comes, you have it, and don't have to use your credit card. Every time you use any of this emergency money, build it back up to $1,000 before paying off more debt. But be sure to always be making minimum payments on your credit cards.
After you have the $1,000, start using that extra money you were saving to pay more on your credit cards, student loans, etc. Whatever debt you have, start with the smallest one and pay it off. Then, every time you pay something off, take the money you were paying on that and use it to pay off the next highest thing. Eventually, you'll have no more things to pay on, and you will be out of debt.
The key is to live a lifestyle that you can afford with the money left over after you pay your creditors. The more debt you have, the harder it is to do this. The debt financed a higher lifestyle, and to pay off the debt, you will have to accept a much lower lifestyle. In the end though, you will have no payments and will have more disposable income than you ever dreamed.
You might have to sell your car, but later, you'll be able to pay cash for your cars.
The problem is, most people don't want to get out of debt as much as they want to maintain their lifestyle. But if you are intense and focused on getting out of the debt, you can do it, and freedom awaits you on the other side.
(Thanks to Dave Ramsey for explaining all these principles in his book, the title of which I don't remember)