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Debt-Free Living

Today is a Day Worth Celebrating!

Did you guys realize that today is National Credit Card Reduction Day?

Who even knew this was a thing? I know I didn’t. But I love the idea. As you guys know, I’m passionate about helping people work their way out of debt and build a plan for their money.

This is a proven plan that works and has the power to change your life!

The average family with credit card debt has nearly $17,000 in balances, according to NerdWallet’s 2016 American Household Credit Card Debt Study. That’s crazy! The good news is that way of life doesn’t have to be normal!

So how do you make a plan to get rid of that credit card debt? First off, I want you to do just that—eliminate the debt! The thought of reducing your debt is awesome, but let’s go ahead and go all the way, right?

Here’s how to do it.

The first thing you need to do is build a small $1,000 emergency fund. This fund is designed to catch all of life’s emergencies—like repairing a flat tire, an unexpected doctor’s visit, and things like that.

Having that fund set up (in just a traditional savings account) allows you to stay focused on paying off debt when emergencies pop up—and they will.

After you have your emergency fund, I want you to start working on the debt snowball. This is where your credit card debt will come into the picture.

If you have multiple debts, the debt snowball is an awesome way to knock them out one at a time. List out your debts, one by one, from smallest to largest. This list should include your student loans, credit cards, car payments and so on. Don’t worry about interest rates when it comes to the order you pay off the debts.

Now, put as much money as you can toward the smallest debt while paying the minimum on the others. Once the smallest one is paid off, take all of the money you put toward it each month and add that to the minimum payment on the next smallest debt. Keep at this until you work your way through all of your debts.

The debt snowball allows you to get a couple of quick wins and gain momentum as you begin to pay off debt. Paying off the smallest debts first might not seem that important, but those early wins help you stay positive and motivated to knock out all your debt.

Remember, build a small emergency fund first. Then, go crazy paying off debt—including those credit cards—with the debt snowball. This is a proven plan that works and has the power to change your life!

EveryDollar helps millions of people just like you take control of their money to achieve their money goals. Pay off debt and save big this year with EveryDollar.

Where are you in your debt-free journey? Let me know in the comments!


  • Allie

    What if it’s student loan debt and my loan is in default? Should I still focus on the smallest debt?

  • While I totally understand the idea of setting up an emergency fund, and using the ‘debt snowball,’ I am curious what to do when you have so many debts, and many people coming to you for payments, that you don’t have enough money to go. Your dad (Dave Ramsey) says to make a line, and pay those who are above the line. While this makes sense, I wonder exactly how one is supposed to do this. nnnI know lots of people, like myself, who never had an education about money and finance, so we are learning it as we go. Could you direct us to a “STEP BY STEP” method for how to get the ’emergency fund’ set up, initiating the ‘debt snowball’ and making the line of who gets money and who doesn’t? nnnThanks

    • There isn’t only way to get your baby emergency fund set up as it depends on your current situation. Some ideas that seem common are to sell stuff, stop eating out, carpool to work and activities and ditch cable. nnYou know how much you owe and to whom so you decide who gets paid first. Our suggestion is to pay off the smallest one first so you can roll that payment into the others but you have to have a budget and a plan first. Here is a great article on what deb collectors can and can’t do. nnHope this helps!

    • Dave Wiley

      Our first step (after cutting up our credit cards) was writing down our monthly income and ALL expenses – a budget – so you can see where your money is going. This part was an eye opener and may be for you also. With this data in hand you can reign in and control spending which will magically free up funds for baby step one. Shazam!!

  • JAA

    I remember reading to pay off tax debt first. We have a balance from 2013 because estimated taxes for self employment were not paid; we have a payment plan with IRS. It is not our smallest debt. We will also owe IRS this year for 2014. We haven’t had our taxes done yet, but maybe have enough liquid assets to pay the current, 2014 bill. Moving forward, there is no longer anyone self employed, so that stumbling block is removed. nIf we can pay the current tax bill, do we then do a traditional snowball with the payment plan amount as one of the debts, or pay the old 2013 bill first? If we can’t pay the current tax debt, then what?

  • Jonathan D. Jordan

    Rachel, I am on Baby Step#2 and just payed off my smallest debt…I am so excited!!! Now on to the next one….God Bless you!!!

  • Rebecca


    My husband and I just found your website and have completed Baby Step #1 $1,000 in the bank. We are now working on Baby Step #2 paying off debt: we owe $58,000. $8,000 for our car and $50,000 from my college loan.

    I need $25,000 to finish my college degree. Should I just forget about finishing my degree and just focus on paying off what I already owe? Then when we have payed off all out debt consider going back to college? I know financial aid and my part time job will help me pay off some of the newer loan.

    I trust your insight.

    Thank you,

  • Traci Petersen

    I’m wondering if there is any sort of adjustment to the seven baby steps if my husband is working a job that is not regular. He thinks we need to have a larger emergency fund before we start the debt snowball, but I can’t find anything that refers to that. Please advise.

  • Courtney

    Hi Rachel!
    My husband and I have completely Baby Step 1 and are charging through Baby Step 2 with the debt of a car payment and student loans. My question for you concerns the smallest debt. Do you mean overall or in chunks? Our student loan debt is around $25,000 each, but it’s broken up into semester chunks: 5,000, then 1,400, then 7,000, etc. Technically, the total net car loan (8,000) is lower than the net student loan, however each chunk is smaller than the car loan. Which lowest debt should we attack first?

    Thank you for your videos & advice!

  • Love, Rosie

    Baby Step #2! We’ll be paying off three debts this year! (One more was paid off December 31st, 2016). We’ll only have one more debt to pay off in 2018! Whoo-hoo!

  • Llutz

    There debts were paid off between last year and January of this year. Now we are on #4 and that will be done by March. Two more and we are debt free!!!!

    • Llutz

      Three, not there! Goodness!

  • Gabriella Roselli

    I’d love to hear your advice. I’m getting married in September, graduating law school in May with about 40k in federal loans. I have no credit card debt. My fiance is a physical therapist ith credit card, and school loan debt. I have already started paying down the interest on my loans, have a budget and a plan to plan down my loans as quickly as possible. Should I continue to make my payments separate from my fiance until September? Or should we work on paying down some of his credit card loans since those are the smaller debts? I want to insure that we are in the best position when we get married to start aggressively tackling his loans

    • sharon white

      Your fiance pay his credit card debt off himself before the wedding or give him six after the wedding.

      After I gotten married to my husband. He had credit card debt (1). I used his money to pay down that debt. It took 6 months. Before I gotten married to him. I only had my student loans. I had no credit card debt, no car loan and $3000.00 in savings. Again, this was when were we first gotten married.

  • Lisa Pfeffer

    Cut up 3 credit cards in front of the 13 yr old and she started to cry. When asked what was wrong she sai she “Loved Credit Cards” . Needless to say it was a great teaching moment.

  • acosio

    Do I continue paying the minimum on my other cards even when the minimum goes down? For example, I’m paying as much as I can on credit card 1 and the minimum payment for credit card 2 goes down from $45 to $25 (just an example). How much should I pay on credit card 2 until credit card 1 is paid, the minimum even if it goes down?