Being living proof and having paid off so far paid off nearly $20,000 in 18 months. I can say that this technique works. Although I am not completely debt free I plan to be by this time next year. As I am attaching my last and largest debt...the dreaded Student Loan!
How was I able to accomplish this?
First off I saved $1000 into my saving account. The idea to this is that I would only dip into this if I had a true emergency. And your need for that new toy or name brand purse is not an emergency. Get it! Good!
Next is using the debt snow ball
The basic steps in the debt snowball method are as follows:
List all debts in ascending order from smallest balance to largest. However, if two debts are very close in amount owed, then the debt with the higher interest rate would be moved above in the list.
You maybe wondering why shouldn't I pay off the loan with highest interest rate first. I didn't care much for this technique because it felt rewarding to pay off these small credit card bills and to cut up and never to use the card again. Besides not having to juggle another bill at the end of the month was so much better for my overall mental state.
As you are paying off your smallest debt you will want to pay the minimum payment on every debt.
Determine how much extra can be applied towards the smallest debt.
Pay the minimum payment plus the extra amount towards that smallest debt until it is paid off.
Once a debt is paid in full, add the old minimum payment (plus any extra amount available) from the first debt to the minimum payment on the second smallest debt, and apply the new sum to repaying the second smallest debt.
Repeat until all debts are paid in full.
In theory, by the time the final debts are reached, the extra amount paid toward the larger debts will grow quickly, similar to a snowball rolling downhill gathering more snow (thus the name).
Lastly a great way to get started with your debt free journey is by selling off the things you no longer need . Have a garage sale or use Craiglist to sell those things that are no longer bringing happiness in your life.
Good Luck