This is a big one – paying off all of your debt except your mortgage.  This is huge.  We’re setting the captives free!  No more “…borrower is slave to the lender” (Proverbs 22:7) stuff.  This is by far the hardest and most-intense part of the “baby steps”, but the most powerful!

Dave Ramsey will suggest using his “debt snowball” which is the technique my wife and I used to get out of debt.

The gist of the “debt snowball” is to attack your debts one at a time starting with the smallest balance, regardless of interest rate.  Mathematics would suggest paying off your debt with the highest interest first.  But remember this is a psychological battle you’re fighting. The mental victories you’ll experience by beginning with your smallest debts will have a better chance of keeping you motivated through this process.

So, start by listing out all your debts (except the mortgage) smallest to largest.  Attack the smallest debt while paying only the minimum payments on the rest.  By the way, Dave Ramsey encourages NOT saving for retirement at this point.  This will come in “baby step” 4.  You want all guns slinging’ at this ONE debt!

Once the smallest debt is paid off, the money that would normally have gone to THAT payment can now be rolled into attacking the next-smallest debt.  Each time a debt is paid off, you’ll get more and more ammunition, hence the term “snowball”.  Every time it rolls over, it gets bigger and bigger building more momentum until you’re eventually DEBT FREE!

Here’s a link to get started on your personal “debt snowball”.