$19,377.03

Is the amount of debt retired by my friend John over the last 11 months. He just sent me an email to tell me about it, grateful that I helped him put a plan together.

You see, 11 months ago we met and talked about a strategy to reduce his debt.

Here’s what he did:

1. Started an Envelop Budgeting System

First he looked at his income and expenses and decided to put in place an envelope budgeting system so no new debt was created and he knew exactly how much he could put against his debt. Check out Frugal Dad’s article on Envelope Budgeting. When he would have extra money in one of the envelopes, he used it to speed up his debt repayment. As he was doing this he also decided to change his cell phone plan, drop his “landline” telephone service, and look at every other monthly expense to see if it could be reduced or eliminated.

2. Work a Debt-Snowball Method

Next, we carved out extra money that could be put against debt, which would create more monthly money available to destroy debt. This is called the “debt snowball” method. In short as debts are paid down the excess monthly payment is used to add momentum.

3. Exhaust Every Available Option

To accelerate the process we did a couple other things.

We noticed that several of his credit cards had huge interest rates, some as high as 29.99%.  The day after we met he called his creditors and asked for lower interest rates, threatening to transfer balances if they did not agree.

Many of the cards agreed and lowered their rates (the 29.99% became 13.99% overnight!). This might not always happen and can be attributed to a number of factors, but you will never know unless you ask!

We also looked for things he could sell to relieve some of the debt. His truck was something that immediately came to mind for three reasons:

1. His large insurance payments could be significantly reduced.
2. He could free up a lot of cash for paying debt and interest charges by going from a $11,000 truck to a reliable $3,000 car.
3. He reduced his gas cost significantly (not to mention his impact on the environment-which is a whole other discussion on consumers and contributors). In case you’re wondering the maintenance costs of a $3,000 car tend to be small in comparison with the other savings.

His email was a huge encouragement to me. While he’s not quite done, I’m confident that his discipline and hard work will continue to pay off. I’m praying for you John, you are an inspiration to me and other consumers who are working hard each day to look more like contributors.