Your Money_ The Missing Manual Part 5

The Basics of Debt Reduction.

Many people look for magic bullets to get them out of debt: They play the lottery hoping for a big payout, or they listen to the snake-oil salesmen on TV who promise instant solutions. The truth is, there aren't any instant solutions. There are, however, some time-tested, proven techniques.

Real debt elimination involves three main steps: Stop acc.u.mulating new debt, establish an emergency fund, and destroy existing debt. In the next three sections, you'll learn about each step in turn.

TipBeing in debt because of student loans or a medical emergency is different from being in debt because you spend too much. If spending isn't your problem, you can skip to the section on establis.h.i.+ng an emergency fund (Establish an Emergency Fund). For advice on paying off student loans, check out http://tinyurl.com/st-loans; and you can find an article about medical debt from Smart Money at http://tinyurl.com/doc-debt.

Stop Acc.u.mulating Debt.

If your debt is out of control, it's because you have a negative cash flow-you're spending more than you earn. The first step on the path to debt-free living is to reverse this cash flow. For most people, that means it's time to stop using credit; credit makes it way too easy to spend more than you have.

n.o.body needs credit cards. Don't try to make excuses for why you have to keep them: You don't need them as a safety net, for convenience, or for cash-back bonuses-you can get by without them. (Turn to Your Credit Report Your Credit Report to read about someone who lives without credit cards.) If you've had problems with credit cards, the worst thing you can do is hold on to them. It's like an alcoholic keeping a couple beers in the fridge in case he gets thirsty. When your debts are gone and your finances are under control, then you can get a credit card; in the meantime, make do with a debit card. to read about someone who lives without credit cards.) If you've had problems with credit cards, the worst thing you can do is hold on to them. It's like an alcoholic keeping a couple beers in the fridge in case he gets thirsty. When your debts are gone and your finances are under control, then you can get a credit card; in the meantime, make do with a debit card.

It can be tough to quit credit cold turkey; I know from first-hand experience that it's easy to find reasons to whip out the plastic. If you're really struggling with credit-card debt, your best move is to remove the temptation completely: Destroy your credit cards. Don't put them in a desk drawer, and don't freeze them in a block of ice; you're better off shredding them, burning them, or cutting them into tiny pieces with scissors.

After you destroy your cards, halt any recurring charges. If you have a gym members.h.i.+p, cancel it. If you automatically renew your World of Warcraft World of Warcraft account every month, cancel it. Cancel anything that automatically charges your credit card. The point is to completely stop using credit. account every month, cancel it. Cancel anything that automatically charges your credit card. The point is to completely stop using credit.

Once you've done this, you'll need to decide whether you're going to close your credit card accounts or leave them open. If you try to cancel a card that has a balance on it, the issuer may want to jack up your rates or do other evil things. Plus, it'll ding your credit score (see How and When to Cancel a Card How and When to Cancel a Card). But so what? If you have trouble with credit card debt, you've got to remove the temptation; if you don't close your account, you can still use it to shop online even if you've destroyed the card. Besides, when you call to close your account, some card issuers will let you lock in a lower rate by putting you on a payment plan.

If you simply have to leave your account open, then ask for a better deal. Find an offer online to use as a bargaining chip. When you call, say something like this: "Hi. I was just browsing online at CardRatings.com and I see they have a card from [Other Bank] that has an APR of just 10%. I'm paying 18% APR on the card I have with you. I'd rather not switch, but 8% is a lot. Is there anything you can do to help me out?"

Your bank may not agree to match the terms, but then again it might. You'll have better luck if you've been a long-time customer, paid on time, and used the card regularly. Be friendly but insistent, and don't make any threats you're not prepared to follow through on.

Establish an Emergency Fund.

The next step is to sock away some savings. Use that positive cash flow you're building to set aside a little self insurance, money you keep on hand in case of emergencies. This helps you cut costs because it's cheaper than paying an insurance company to handle unexpected catastrophes. (See General Insurance Tips General Insurance Tips for more about self insurance.) for more about self insurance.) It may seem counter-intuitive to try to save up a little bit of money while you're still in debt, but if you don't save before you begin paying down debt, you'll struggle to cope with unexpected expenses.

TipWhatever you do, don't use a credit card to pay for emergencies; a credit card is not an emergency fund. Instead, destroy your credit cards and save for emergencies.

How much should you save? Ideally, $1,000 is a good amount to start with. (If your expenses are low, you might be able to get by with $500.) Keep this money liquid, but not immediately accessible. In other words, make it easy to get to-but not too easy. Don't keep your emergency fund in your main checking account, for example; consider opening a separate account at a new bank. (Chapter7 has tons of info about bank accounts.) has tons of info about bank accounts.) Don't tie your emergency fund to a debit card; that just makes it easier to sabotage your efforts by using the debit card to pay for non-essentials. This money is for emergencies only, not for beer, clothes, or a new iPhone. It's for when your furnace croaks or you break your arm or you lose your job.

A good option is to open a high-interest savings account at an online bank like ING Direct or HSBC Direct. (For a list of online banks, check out http://tinyurl.com/savingACT or flip to or flip to Online banks Online banks.) That way, when an emergency arises, you can transfer the money to your regular checking account. It'll be there when you need it, but you won't be tempted to spend it rashly.

Frequently Asked Question: Is There Such a Thing As Good Debt?Some experts, like Dave Ramsey, argue that there's no such thing as a good debt. But most financial gurus agree that certain debts make sense.As a general rule, you shouldn't borrow money to buy things that are likely to decrease in value. That means you shouldn't buy your new plasma TV on credit-next week, it'll be worth less than you paid for it. Nor should you go into debt to buy food, clothes, or computers.But many experts say that it's okay to take on reasonable debt to pay for a handful of things that are likely to increase in value. This good debt includes an affordable mortgage on your home, student loans to pay for education, and loans to start a new business.Car loans are borderline: They generally carry low interest rates, but as you well know, cars lose value the moment you drive them off the lot.Even when you take on these kinds of "good" debts, be smart. Don't borrow more than you can afford. Shop around for the best interest rate (see Chapter7 Chapter7 for more on this). And remember: The best debt is debt that's paid off. for more on this). And remember: The best debt is debt that's paid off.

Destroy Existing Debt.

After you've stopped using credit and created an emergency fund, then go after your existing debt. Attack it with vigor-throw whatever you can at it. The best way to do this is to use a technique called the debt s...o...b..ll, which lets you build and maintain debt-destroying momentum. Here's the basic method: - Make a list of your debts in the order you want to destroy them. (You'll learn a couple of good ways to prioritize debts in a moment.) - Set aside a certain amount of money to pay toward debts each month ($500, say).

- Make the minimum payment on all debts except the first one on your list.

- Throw every other penny at the first debt on the list.

But here's the key to making the debt s...o...b..ll work: After you've destroyed your first debt, you'll find you've freed up a bit of cash; because one of your debts is gone, you have one less monthly payment. You could take this money and use it for something else, but you're going to do something smarter: keep paying the same total amount-$500, in our example-toward debt every month.

Clear as mud? Let's look at a couple of examples that prioritize debt reduction in different ways.

Destroying high-interest debt first.

Conventional wisdom says that you should pay off debt from the highest interest rate to the lowest interest rate. Let's say our friend Joe Spendsalot (Cash Flow Basics) is dating a woman named Karen Kashout. Karen is a typical twenty-something who wakes one morning to realize that she's in debt, and she decides to do something about it. She's burdened with the following liabilities: - $20,000 student loan at 5% interest - $8,000 credit card balance at 12% - $2,000 computer loan at 10% - $3,000 car loan at 4% Technically, the quickest way for Karen to conquer her debt is to pay off the balances with the higher interest rates first, so she'd tackle them in this order: - $8,000 credit card balance at 12% - $2,000 computer loan at 10% - $20,000 college loan at 5% - $3,000 car loan at 4% Using the debt s...o...b..ll method described above, Karen would pay the minimums on the bottom three debts and throw all the money she could at her credit card balance. Once she destroys that debt, she'd pay the minimums on the bottom two debts and throw all of her money at the computer loan, and so on.

Mathematically, the high-interest payoff plan does indeed make the most sense. That's because paying interest works against you in the same way that earning interest works for you (see The Power of Compounding The Power of Compounding), so paying off your highest interest debt first is technically the best use of your money-if you follow this plan, you'll pay less in the long run. But this plan works only if you have the discipline to stick to it, and even if you know it's the right thing to do, that's no guarantee it'll work for you.

I struggled with debt for a decade (see the box on The Basics of Debt Reduction The Basics of Debt Reduction). I made several attempts to pay off my debt using this highest-to-lowest interest method, and each time I failed. My highest interest rate debt was also my debt with the highest balance, so I felt like I was paying and paying but the balance never dropped. I'd get discouraged and give up on ever paying off my debt.

That's not to say you shouldn't try this method: If it works for you, use it! But if you struggle, consider the next method, which is the one that helped me succeed.

TipIt might help you to have a visual representation of your debt-paying progress. Try this: Take a piece of graph paper and block off squares to represent your debt. (You might use one square for every $100, say.) When you make a payment, mark off a square-and give yourself a pat on the back. (If you're a geek, build yourself an Excel spreadsheet that does something similar.) These little progress reports are cheesy, but they can keep you on track.

Destroying low-balance debt first.

If you've tried following the highest-interest-rate-first advice and still struggle with debt, there's another way. In his book, The Total Money Makeover, Dave Ramsey advocates an approach to the debt s...o...b..ll that tackles accounts with low balances first. (Ramsey didn't invent this method, but he's popularized it over the past decade.) With this version of the debt s...o...b..ll, you ignore interest rates when determining the order in which you'll pay off your debts. All you look at is how much you owe, organizing the debts from smallest balance to largest balance.

Our friend Karen Kashout, for example, would arrange her debts like this: - $2,000 computer loan at 10% - $3,000 car loan at 4% - $8,000 credit card balance at 12% - $20,000 college loan at 5% After she lists her debts from smallest to largest, she'd make the minimum payment on all of them except the smallest: the computer loan. She'd throw every dollar she can at the computer loan until it's gone, and then move on to her next smallest debt, the car loan.

This method may not be as quick as paying your high-interest debt first, but it provides tremendous psychological reinforcement. You get some quick wins-checking creditors off your list-that encourage you to keep at it. Dave Ramsey calls this "behavior modification over math," and he's right: The most important thing when paying off your debts is to, well, pay off your debts; the order in which you do so is irrelevant.

Critics of this approach argue that the math doesn't make sense, and they're right: If you use this method, you will pay more interest than if you had the discipline to pay off your debts based on interest rate. But humans are complex psychological creatures, not adding machines. We usually know what we ought to do, but that doesn't mean we always do it. If we were adding machines and always made the best choices, we wouldn't get into debt in the first place!

Other approaches.

You can use the debt s...o...b..ll to get out of debt in other ways. For instance, you might decide to first target the debts that give you the biggest headaches. Do you have a loan from your sister and her husband? Do you hate the fact that you borrowed money to buy a new computer? Whichever debt bugs you most, pay it off first.

TipTo learn more about the debt s...o...b..ll and the various ways to use it, download this free spreadsheet from Vertex 42: http://tinyurl.com/v42-debt. (You can see a video demo of the spreadsheet at http://tinyurl.com/v42-video.) Regardless of which order you use to destroy your debt, put as much money as possible toward this goal. Apply raises and windfalls (like tax refunds) directly to your bills. Sure, you'd rather spend that birthday check from grandma on a night out with your friends, but it'll do you more good if you use it to pay off that last night on the town. You'll have plenty of time to spend future windfalls; for now, use the money to get debt off your back.

And if someone tells you that you you're being stupid if you don't follow a debt-repayment plan that minimizes interest payments, just ignore him. The ultimate goal is to get your debts paid off. Know yourself and choose whichever method makes the most sense for you and your financial situation.

TipFor the lowdown on the pros and cons of using home-equity loans to pay off credit card debt, head to this book's Missing CD page at www.missingmanuals.com.

Other Tips and Tricks.

You can do lots of other things to improve your situation while you're working on the three main steps of debt elimination. But all the debt-reduction tips you'll find are based on one simple fact: To pay off debt, save money, or acc.u.mulate wealth, you have to spend less than you earn-in other words, financial success comes from having a positive cash flow.

It's not always easy to find ways to earn more money, but almost everyone can find ways to curb their spending. Developing frugal habits is a great first step toward being debt-free. Some people think that frugal living is equivalent to being "cheap," but that's not the case. Frugality and thrift used to be core values in our society, but we lost touch with these ideals during the age of easy credit. Thrift can be a fun way to stretch your hard-earned dollars. (The next chapter discusses ways to be frugal.) While you learn to spend less, do what you can to increase your income. Try selling some of the Stuff you bought when you got into debt. This can be painful, but ask yourself: Do you really use that weight bench? Is your DVD collection really doing you any good? Use eBay.com and Craigslist.org or the Amazon Marketplace to get some cash for the things you own. Consider taking an extra job or working longer hours. (For more on boosting your income, see Chapter6 Chapter6.) Finally, go to your public library and borrow a book on debt reduction. After you finish it, borrow another book about money. The more you learn about smart money management, the easier it'll be to make the right choices.

The most important thing is to start now. Not tomorrow, not next week-start tackling your debt now. Have patience and don't get discouraged if your efforts seem small and insignificant at first. Trust me: Most of us started paying off our debts the same way. In time, your efforts will bear fruit. If you're willing to persevere, you'll have your debt paid off sooner than you think.

TipConquering debt is like playing baseball: Go out there and do your best every single day. If you make an error, don't give up-make the play next time. If you strike out, shake it off and step up to the plate for your next at-bat.Your Money And Your Life: The Paradox of ChoiceIn The Paradox of Choice (Harper, 2005), Barry Schwartz describes his research on two groups of people that he calls Maximizers and Satisficers: - Maximizers only accept the best. Every time they make a purchase (or do anything else), they need to be sure they've made the best possible decision.

- Satisficers are willing to settle for "good enough." These people still have expectations and standards, but they're willing to settle for something other than the absolute best in order to save time, money, or effort.

Maximizers believe that Satisficers are comfortable with mediocrity, but that's not necessarily true. Satisficers are just as interested in quality as Maximizers-but they recognize that sometimes the extra effort required to move from "good" to "best" isn't worth it.What does this have to do with your money? Tons. Don't get hung up on looking for the "best" way to manage your finances. Find methods that work for you and your lifestyle, methods that you'll actually use.Who cares if the debt s...o...b..ll isn't the best way to pay down debt? Who cares if you don't find the best interest rate for your savings account? Who cares if you don't own the best mutual fund? You've found some good ones, right? Just pick one and get in the game.The perfect is the enemy of the good. When you spend so much time looking for the "best" choice that you never actually do anything, you're sabotaging yourself. No matter what you're trying to accomplish, simply starting the process plays a larger role in your success than any other factor.

Curbing Compulsive Spending.

Many people get into debt because of compulsive spending. They can't keep from buying more-even when that means spending money they don't have. "Overspenders...have confused and confusing relations.h.i.+ps with money," write psychologists Brad and Ted Klontz in Mind Over Money (Broadway, 2009). "On one hand, they're convinced that money and the things it can buy will make them happy; yet they're often broke because they can't control their spending."

A spending addiction is a scary, dangerous thing. Like other addictions, it makes victims feel out of control. (The Illinois Inst.i.tute for Addiction Recovery has a list of money habits that indicate a problem with compulsive shopping or spending: http://tinyurl.com/shoppingsigns.) In Mind Over Money, the authors note, "Overspending can become a vicious cycle. Overspenders experience an irresistible impulse to spend; they lose control over their spending, and then, to ease the anxiety over having lost control, they continue to buy."

People who've never suffered from compulsive spending can't understand the problem, and you may have a hard time explaining it to them. They don't know what it's like to see something and feel the urge to buy it now. They don't know the lure of the shopping "rush"-and the subsequent nausea from the guilt of having spent money they don't have.

Here are some steps-based on my own experience and that of many Get Rich Slowly readers-that you can use to curb compulsive spending: - Cut up your credit cards. Don't make excuses to keep them-if you have a problem with compulsive spending, destroy your credit cards now. Don't jot the numbers down someplace "just in case"; that makes it too easy to go to your desk drawer, pull out the numbers, and place an order online. Get rid of your credit cards completely.

- Carry only cash. Don't use your checkbook or a debit card. Inconvenient? Absolutely, but that's the point. If you're a compulsive spender, your goal is to break the habit. To do this, you've got to make sacrifices. Spending cash will help remind you that when you buy something you're actually spending money. Plastic (and to some degree checks) make this connection fuzzy.TipWhen you're tempted to buy something on credit, stop and ask yourself, "Would I pay cash for this?" If the answer is "no," then why in the world would you pay more for it by using a credit card, which is also going to charge you interest and fees?

- Track every penny you spend. You may not even be aware of how much you're spending. Lunch every day at McDonald's-how much could that possibly cost? Picking up a few magazines on the way home from work-what harm is there in that? Once you begin to track your spending, patterns become clear. When you see these patterns, you can act on them. (For more on how to track your spending, see Tracking Your Spending Tracking Your Spending.) - Play mind games. For some people, money isn't an emotional issue. They're able to make logical choices and not be tempted to do otherwise. For most of us, though, it doesn't work that way. If you're in this majority, it can be useful to play tricks on yourself. You might train yourself to use the 30-day rule (see Where to Find Help Where to Find Help), for instance. I've found that I can often keep myself from spending by simply adding the Stuff I want to my wish list at Amazon.com; I come back weeks later and can't remember why I wanted it in the first place. Here are some questions to ask yourself when you're tempted to buy: http://tinyurl.com/GRS-tempted.

- Avoid temptation. The best way to keep from spending money is to avoid situations that tempt you to spend. If your weakness is music, stay out of record stores and de-activate your iTunes account. If you tend to overspend at big department stores, stay away from the mall. Avoid the places where you normally spend.

- Ask for help. It's tough to beat an addiction alone. Seek support from your friends, family, and spouse-and don't get angry when they call you on your missteps.

- Consider professional help. There's no shame in seeking therapy for help with problems that seem bigger than you. You have to look inward to overcome any form of addiction; a therapist is like a trained guide who can help you to find the way.

The good news is that you can break free from emotional spending. The bad news is that it's going to take work and it won't happen overnight. You'll make mistakes and backslide, but when you do, don't give up and don't beat yourself up over it. You're human, after all. Stay focused on your long-term goals, and resolve to do better next time.

Where to Find Help.

The sad truth is that not everyone can dig out of debt alone. For some, life just deals too many blows, or they can't seem to control their spending, or they don't earn enough money to make headway on their payments.

Your Money And Your Life: The 30-Day RuleThere's no shame in using mind games to keep from buying things you don't need. In fact, these little tricks (or "money hacks", as some call them) can be a fun way to use psychology in your favor. For example, the 30-day rule is a simple way to control impulse spending. Here's how it works: 1. Whenever you feel the urge to splurge-whether it's for new shoes, a new video game, or a new car-force yourself to stop. If you're already holding the item, put it down. Now leave the store.

2. When you get home, take a piece of paper and write down the name of the item, the store where you found it, the price you were going to pay, and the date.

3. Post this note someplace obvious: on a calendar, the fridge, or a bulletin board.

4. For the next 30 days, think about the item and whether you really want it, but don't buy it-not yet.

5. If, at the end of a month, you still have the urge, then consider purchasing it (but don't pay with credit).

That's all there is to it. It's simple, but surprisingly effective.The 30-day rule works because you aren't actually denying yourself-you're simply delaying gratification. This process also teaches you to think through your purchases and breaks the cycle of instant gratification that can lead to compulsive spending.This rule has another advantage: It gives you a chance to research the item you want to purchase. You may find that there's a better product out there, or that you can get it for a better price at another store!

If you feel like you've tried everything but you still need help, don't turn to the debt-settlement companies that advertise on TV and radio. They don't have your best interests at heart-they're in it to make money. (For more on the problems with debt-settlement companies, check out this article at MSN Money: http://tinyurl.com/msn-debtsettlement.) If you need help with debt, turn to reputable sources. First, go to your public library and borrow two books: How to Get Out of Debt, Stay Out of Debt & Live Prosperously by Jerrold Mundis (Bantam, 2003) and The Total Money Makeover by Dave Ramsey.

TipIn his book, Mundis recommends one simple action to start you on the path to debt-free living: "Just for today, one day, do not incur any new debt. Not one." Make-and keep-this promise to yourself, just for today. (And then make and keep the same promise tomorrow.) This chapter has already covered many of the key lessons from these books, but they go into a lot greater detail than we can here. If you're struggling, take the time to read these books and apply their lessons. If you still need help, the next few sections discuss a few different places you can turn.

Debtors Anonymous.

Debtors Anonymous (DA) is a twelve-step program for people struggling with debt and compulsive spending. DA started in 1968 when a group of Alcoholics Anonymous members noticed that, for them, debting (spending money they didn't have) was an addiction just like alcoholism.

Debtors Anonymous believes that many people get into trouble with debt because they don't really pay attention to their spending. They spend without thinking about the consequences. To fight this habit, DA encourages members to track their spending (as described on Tracking Your Spending Tracking Your Spending) and develop some sort of budget. (Many DA members use the envelope method explained on Envelope Budgeting Envelope Budgeting.) The Jerrold Mundis book recommended above is based on DA's principles.

To learn more about DA, go to www.debtorsanonymous.org or call 1-800-421-2383. or call 1-800-421-2383.

TipBeing hounded by debt collectors? Know your rights! The Federal Trade Commission has a handy guide to the Fair Debt Collection Practices Act at http://tinyurl.com/FTCcollections. Don't let creditors push you around.

Consumer credit counseling.

The National Foundation for Credit Counseling (NFCC) is a network of nonprofit credit counseling agencies that help people take control of their finances and get out of debt. When you contact an NFCC agency, they'll work with you to create a debt management plan (DMP).

With a DMP, you pay off your debts by making monthly payments to the credit agency you're working with; they then send these funds to your creditors. Some creditors may be willing to reduce interest rates or waive fees if you're using a DMP. In a lot of cases, if you show a good faith effort to work with them, they'll work with you.

NoteA debt management plan can ding your credit score (see Your Credit Score Your Credit Score), but it's not a permanent penalty. Since you shouldn't be taking out new lines of credit if you're in this situation anyway, that's a small price to pay to break free from the chains of debt, don't you think?

One added benefit of working with a credit-counseling agency is that they'll act as the go-between for you and your creditors. If you're being hounded by debt collectors, the agency will take the calls for you-how cool is that?

Credit counseling isn't always free, but some agencies do offer their services for low (or no) fees. For more information, contact the National Foundation for Credit Counseling at 1-800-388-22727 or www.nfcc.org, and check out the box below for tips on selecting a counselor.

Your Money And Your Life: What to Ask a Credit CounselorEach year, the U.S. government publishes the Consumer Action Handbook Consumer Action Handbook (CAH)-available online at (CAH)-available online at http://consumeraction.gov-which recommends asking the following questions when searching for a credit counselor: - What services do you offer? Look for an agency that offers counseling and cla.s.ses, not just a debt management plan (Debtors Anonymous).

- Do you provide free information? Reputable organizations should have free info to help you get started.

- What are your fees? These should be low. The 2009 CAH says that a typical setup fee is $10; if you're asked to pay a lot more than that, you might want to try somewhere else.

- How will the debt management plan work? Will it include all your debts? Will you get regular progress reports?

- Is it possible to get creditors to lower or eliminate interest and fees? If the counselor says yes, you'll need to follow up with your creditors to verify.

- What happens if I can't afford to pay? Go elsewhere if the agency won't help you unless you can pay.

- Can you help me avoid future problems? Learning to avoid debt in the future is at least as important as drafting a debt management plan.

- Are your counselors accredited or certified? Be wary if the firm isn't affiliated with the National Foundation for Credit Counseling or the a.s.sociation of Independent Consumer Credit Counseling Agencies.

Finally, the CAH notes that you should be sure you get a contract: "All verbal promises should be in writing before you pay any money."

Financial Peace University.

There's been a lot of Dave Ramsey in this chapter, and there's a reason for that: Ramsey is the guru of debt reduction. His advice has helped hundreds of thousands of people-including me-to stop spending and start living debt free.

Ramsey's company, The Lampo Group, offers a 13-week course called Financial Peace University (FPU) that provides hands-on training in debt reduction and money management. FPU takes 2 hours per week and costs about a hundred bucks for the entire course. The cla.s.ses teach you how to save, budget, invest, and-of course-pay off debt.

One thing to know about Financial Peace University: Ramsey is a devoted Christian, so his program incorporates Biblical principles and the cla.s.ses are usually held at churches. For many people, this isn't an issue, but it might bug you. If you're a non-Christian considering FPU, you may have to just deal with the religious language. Or you can use the cla.s.s finder at http://tinyurl.com/FPUfinder to see if any credit unions or nonprofits in your area are offering the course. There's also an online version of the cla.s.s available: to see if any credit unions or nonprofits in your area are offering the course. There's also an online version of the cla.s.s available: http://tinyurl.com/FPUonline.

You can learn more about Financial Peace University at www.daveramsey.com/fpu/. For a first-hand account from somebody who completed FPU, check out http://tinyurl.com/FPUsteps.

Start Now.

It's not getting out of debt that's important-it's the freedom that being debt-free can bring you. When you're chained to the shackles of credit card payments and student loans, your choices are limited. You feel trapped in your crummy job because you can't afford to quit.

Debt can feel so overwhelming that you think you'll never escape, but the good news is you can. It'll take hard work, but you can do it. Although debt repayment can seem daunting at first, it won't take forever.

The most important thing is to start now. Waiting to get out of debt is a fool's game-it doesn't help anything. Begin with baby steps if you need to, but do something. For starters, turn the page to Chapter5 Chapter5, where you'll learn ways to cut your spending.