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Step 1

Use a spreadsheet to track your debt payments and the effects on the amount you owe! What if you don’t want to spend money to buy a spreadsheet? Consider the spreadsheet program in Open Office Calc or use Google Spreadsheets.

This step is my base, without this step I wouldn’t have been as motivated! I took it a step further and made a what if page to calculate how changes in the amount I paid would affect the life of the debt and the total interest that banks would receive.

Step 2

For this step, I created financial milestones! Once we crossed these financial milestones (really mortgage milestones, but the idea is similar), we would reward the crossing of the milestone by going out to eat at a decent, but not too expensive restaurant.

Note, we chose to make the milestones significant. So we set our milestone at 20% intervals of the amount owed. So if our debt was $100,000, we would celebrate at 80,000; 60,000; 40,000; 20,000 and obviously at zero!

Step 3

At this step, you’ve paid off your debt and how you have all of this extra money rolling in because your debt obligations are gone… so what do you do? Well, in my case I decided to use the extra money to buy stocks that provide a dividend. Then my idea is to use the dividend to eventually pay for those fun expenses (like lunch, eating out, vacation, etc) while at the same time pumping my extra earned income into solid dividend stocks and other new investments. That dividend could then serve double duty and cover hard expenses (food, utility, taxes and other non-fun expenses) in times of tightening.

What about retirement, 529s and other important expenses?

Do it all, or at least that is what I did. During my repayment plan for my cars and house, I continued to fund my 401k and 529 plans for my kids. I was even able to put a little bit in my Roth IRA. It was tough, and instead of paying my mortgage off in 5 years, it took my a bit over 10 years to pay everything off.

I believe that a balance approach towards finances is the best approach.

The key is to make the best of your situation, and enjoy life!

Here wishing the best for your finances,

MR