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With whatever money is left at the end of the budget, we need to begin paying off these debts! Payments rob us of our most powerful wealth building tool, our income. There are two different approaches to becoming debt free. The first is to list all debts from the highest interest rate to the lowest, attack the highest interest rate and pay minimums on all the rest. The other way is to list all your debts from smallest to largest and attack the smallest first and make minimum payments only on all the others. The first may mathematically seem better but from my experience, the second approach actually works better from a behavioral standpoint. You get constant reinforcement as you knock out debts early and often. Either way, you need to cut your lifestyle and get angry. Have a garage sale and get a second job. Get intense and soon you will be free!
Once you are debt free (except for a house) make sure you are putting away 15%-20% of your income in a tax sheltered retirement fund. Also if you have kids, try to save for their college education.
Both you and your spouse need to get together and make a budget that you each agree about and buy into. Start taking these steps and you can become wealthy on a modest income. It will be tough and you will fail the first couple of months. It takes practice to get good at budgeting but don鈥檛 give up! Make sacrifices today that will pay hundredfold in only a few short years from now. This is your life, go and make the most of it!
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