DP’s Debt Reduction Plan

April 3, 2010

Let me begin this post with a disclaimer. I am not a financial planner. I have absolutely no experience in this arena. The only experience I have is in spending money and using credit cards. Therefore, what I’m about to describe in this blog should not be considered advice nor should it be considered as a solid financial plan. It is only what I plan to do at this moment on April 3, 2010. This plan could change as I fail or learn more about personal finances.

With all that being said, let’s take a look at how the Debt Princess is going to attack this debt!

DP’s Debt Reduction Plan: In five steps (because every good plan should only need 5 steps!)

1. Know Where My Money Is You truly can’t start a journey like this without knowing exactly how much money you owe and to whom. I have a very detailed spreadsheet laid out on my computer that shows me exactly how much I owe, to what company and contact information for the company. I look at it each day to make sure I keep in mind where my focus should be.

2. Build an Emergency Fund of $500. This would have been $1000 if my car was still running to cover repair costs and what not. I have also skipped this step and began to save for a car. I’m currently trying to figure out how to split my income into the two different accounts. But I think for now I’ll do 50/50.

3. Build a Debt Snowball I am following Dave Ramsey’s Plan outlined in for this portion. Actually a lot of what I have learned has come from him. I really like his plan of attack. I am placing my debt in order from smallest to largest and paying all the minimums on each card until I have enough money to pay more. Once the smallest is paid off, I will take the amount I was paying on it and add it to the minimum for the next smallest account and so on. The amount builds and gets larger and larger (like a snowball), allowing you to pay down your debts quicker.

4. Pay on Student Loans After all my consumer debt has been paid off I will move on to this step. My plan is to take half of my debt snowball and put it towards my student loans while also applying any extra “found” money, like gifts or tax refunds to the payments.

5. Build a Financial Empire Obviously that’s easier said than done. But I’ll need to build an adequate emergency fund, start college funds for both of my boys and begin to save for my retirement. The remaining half of my debt snowball will go into these accounts until such time that the student loans are repaid and I can begin to invest my money more aggressively.

My goal is to complete steps 1-3 within five years. Step 4 & 5 will obviously take longer to complete.

It’s a long road but with a plan, I feel like I can accomplish this. The road doesn’t look so bumpy with the plan outlined before me.

Have a great weekend,


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4 Responses to DP’s Debt Reduction Plan

  1. Summer time4summer on April 3, 2010 at 11:15 pm

    The snowball effect sounds awesome. I need to read up on it And educate myself. I love your blogs! Keep them coming!


  2. Anonymous on April 5, 2010 at 1:04 pm

    I'm glad you are thinking about saving for retirement. Most young people don't even consider it. I have a story for you from my own personal experience……

    My mother in law has always been horrible with money. She lived day to day without a care for tomorrow. She bought whatever her little heart desired, never saved for a rainy day, and never thought about what would happen if the unexpected came knocking on her door. Now she is 54, unemployed and unemployable, no savings, no retirement, and diagnosed with MS. She's about to lose her house and cannot afford her meds. Guess who has to pick up the slack? Her children. We will do it because it's our moral obligation to her but it's not fair to us that we have to shoulder her burdens because she was irresponsible with her money. We are busy preparing for OUR futures and now we have to support her also. She says she doesn't want to burden us but it's too late. The burden is already here and we have no choice but to accept it because she would not accept it herself when she was young and able to work.

    I tell you this story so you will have one more reason to be motivated to work hard and pull yourself up. I know you don't want to do that to your children. So I am glad you are thinking of the future. It's never to young to be thinking about retirement. It will be here sooner than we all think and we should be prepared for our children's sake.

    PS. I love Dave Ramsey! He makes so much sense…


  3. Lindsay Blogs on April 9, 2010 at 2:50 pm

    This is a GREAT plan. I may just look into it myself.


  4. gamommy2two on April 9, 2010 at 2:50 pm

    This is a GREAT plan. I may just look into it myself.



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