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It's been a little over six years since my wife (fiance, at the time) and I decided to get really serious about eliminating our credit card debt. Both college graduates in our mid-20s, we were used to the idea of being in debt. We also had the notion that our collective earning power would increase and mitigate the debt problem, so no real lifestyle adjustments were necessary.

However, after seeing a raise or two come through without noticing any significant reduction in our debt levels, it became apparent that we needed to take an objective view of our debt situation and re-evaluate our spending habits.

There's a lot of great advice on this board and elsewhere within our community, but I'll outline what worked for us:

1. Gathering all of the information. Seems almost trivial, but just collecting all of the numbers and getting them into Excel was a great first step. Rather than becoming discouraged about the amount of debt that we had to pay down, it was empowering in a way. We had our eyes on a clear target.

2. Setting a budget (and sticking to it). It was amazing how much money was slipping through the cracks. We didn't know where several hundred dollars per month were going. So, we set a budget, including a bucket for "Discretionary Income" and began tracking it. When we had unexpected income or unexpected expenses, we adjusted our monthly results to remove these items so that we were evaluating our performance in a meaningful way. After the first 6 months, we had revised our budget upwards several times (there always seemed to be something that we'd forgotten to account for), but were still coming out ahead. After 6 months, we started hitting our budget with regularity. In retrospect, I think this was important. Missing your budget might cause you to get frustrated and give up - but that's not the way to go. You need to understand why you went over-budget and then fix the problem. You have to stay in control.

3. Snowballing our debt. We opted to start with the lowest-balance card first, rather than the highest-rate. The differential in rates was not too significant, and we enjoyed the psychological effect of having fewer liabilities.

4. Rewarding ourselves. This was also important, I think. Every time we paid off a card (or hit a milestone on our cards that had really high balances), we celebrated with a nice dinner out.

5. Being patient: Staying with the plan. We crunched all of the numbers, did not plan on any raises or other increases to our income, and formulated a plan for the debt repayment. Looking at our progress each month validated our approach and reinforced our new behavior.

6. Finding sources of inspiration. These are all around us. This board is a great place to find them.

Six years later, we still have a few credit cards but do not carry a balance on them. We also have paid off our student loans, own two (inexpensive!) cars outright, have 6 months of living expenses earning 4.5% in an ING Direct savings account, have opened Roth IRAs, and each contribute 15% to our 401(k) accounts.

Next month, we're going to make the first of what I hope will be many contributions to an after-tax, non-retirement investment portfolio. We'd like to own a beach house someday.

Here's what was critical to our success: we set a budget that provided us with a positive cash flow at our financial low-point (the beginning of our debt repayment plan). As we paid off our liabilities, we didn't change this budget or our spending habits - we just snowballed the extra money at the next card on the list, then at the car payments, then at the student loans, then at the 401(k)s, then at the Emergency Fund, then at the Roth IRAs.

It took over six years, but now that we've handled our liabilities, built our Emergency Fund, and accounted for retirement (both 401(k) and Roth contributions are set up as automatic semi-monthly deductions), we've found that we have a tremendous surplus in monthly income. Part of this is because our earning power did increase, as we thought it might, but a large part of it is based on our commitment to continue living below our means, even after our debts were paid.

There's no quick fix to a debt problem. But a methodical plan involving conservative spending, accurate bookkeeping, and a firm resolve will get you where you want to want to be. It can be done. The feeling when it is done is incredible. Best of luck to all of you.

Fool on!
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