Debt Free
means "All your expenses are Interest Free and you have more than enough income to cover them."


It will sometimes be necessary to go into debt. (Like buying a house or a car.) Just don't stay in debt.

1.     Use "debit cards" in preference to "credit cards".

1.a.     You can use a "credit card" as if it were a "debit card".

2.     List all expenses.

Include the following information:


Don't forget to include regular monthly payments that don't have interest. Like: rent, insurance, utilities, magazine subscriptions, phone bill, internet bill, TV subscriptions, etc.


Don't forget to include expense estimates like food, gas, clothes, mad money, surprises, savings, etc.


If the sum of all "minimum monthly payments" exceeds "monthly take home pay", then you must decrease expenses.

Reduce luxuries first, then "savings", then things like "mad money" and "surprises", etc.


If you can not reduce expenses to be less than your take home pay, then you must find a way to increase your take home pay.

That means: get a better paying job, or a second job.

3.     Sort this list in descending order of interest rate.

Note that this sort will put things like "mad money" at the bottom of the list, as they have zero interest.


4.     Make minimum payments to all creditors.

"Take home pay" minus "sum of minimum payments" is called "extra money".

Note that things like savings, "mad money" have ALREADY been paid. This "extra money" is take home pay that isn't used up by ANYTHING in your list of known expenses.


5.     ALL "extra money" goes to the creditor at the top of the list

Be sure to write on the check that this extra payment is for the principal, and write your account number.

By putting all of this towards your debt with the highest interest rate, that debt gets paid off as quickly as is feasible. You have reduced your long-term costs the most by eliminating this debt.


6.     Each time a creditor gets paid off, correct the list and resort.

If a creditor changes their interest rate on you, resort the list.

If you add a new creditor, resort the list.

If you buy a house and consolidate some credit cards into the home loan, update and resort the list.



means "Your Interest Income exceeds your expenses."


There are three kinds of income:

You work to earn wages.
You have to maintain property for rent.
is just money working to make you more money.

7.     When all expenses are interest free,

the "extra money" gets split between "investments" and "luxuries". You may choose the ratio of this split. Start 50/50 until you have a reason to split it differently.


"Luxuries" include increasing your estimates for expenses like clothes, food, mad money, savings, etc. Basically anything that increases your standard of living.


If you choose a luxury that incurs debt, (like buying a new house) then go back up to the HOW TO BECOME DEBT FREE section. Do not return to this section until all your expenses are interest free.


"Investments" are anything that will bring its own form of income to your total monthly income.

It could be things like the following:


"Investments" can also include classes, training, certification and such, as an investment in your own earning power.

If an aggressive investment does make a profit for you, you may want to move some of the profit into a less aggressive investment. This reduces your risk if the aggressive investment loses as quickly as it gained.


8.     When your "investment income" exceeds your expenses,

you are wealthy enough to retire if you want to.


Retiring will involve a reduction in your total income, so it may involve a reduction in your standard of living. But since your after-retirement monthly income still exceeds your monthly expenses, there will still be something left over for "luxuries" and "investments".



These are my thoughts, they are not hard and fast, proven correct rules. They require you to think about what you are doing, they are not a panacea. You are free to vary or follow these guidelines as you choose.
The results of your decisions are your own responsibility.