Check out “The Nefarious Hidden Costs of Debt” at The Personal MBA… it’s a great read.

After sitting down (for several hours) yesterday and hammering out a new monthly budget, we were able to allocate a whopping $1,700 a month towards credit card debt! After a few rough calculations on our credit card debt minus total payments plus interest charges, it might actually be possible for us to pay off ALL of our credit card debt by the end of 2009!

It would require getting on a “beans and rice” budget (as Dave Ramsey puts it) and would still require we find a little extra cash somewhere. We currently have $26,800 in credit card debt (which includes a business credit card). Paying $1,700 a month towards the debt would pay over $20,000 on the debt in 2009. With some additional income I expect to receive and by keeping an eye out for an opportunity here and there, I think it’s possible. Tough, but possible.

So I’ve set a goal for myself… pay off all the credit cards by December 31, 2009. I’ve always been up for a challenge, and maybe such an ambitious goal will keep us motivated throughout the year.

It’s so easy to set goals, but I’m hoping having a hard deadline and a very specific goal will help us stay the coarse and stay motivated throughout the year. I’ll be posting updates throughout the year on our progress.

They’ve released a video about saving money that describes how compound interest and investments work, and it’s a great explanation for people who are unfamiliar with investing. Take a look:

Also checkout the other shows… while not related to finances or investing they’re very interesting and there are probably a few explanations that can be useful to you.

Credit Karma

One of my favorite features of Credit Karma is the “Simulate Your Score” tool which allows you to see how changes to your debt reported to the credit beuraus will affect your credit. Think paying off a card will help your credit? Maybe not. If it’s the oldest account you have open, it might even hurt your credit.

There are also other tools such as a home affordability calculator, which shows you how much home you can afford based on your income, down payment and  other debt commitments. It also shows an estimated payment including PMI, property taxes and homeowner’s insurance.

Checkout Credit Karma… it’s completely free (supported by ads and offers from “partners”). If you’re planning on buying a house or car in the near future, it’s a great way to monitor your credit score for free.

Here are some productive ideas for how to use your Christmas bonus:

• Pay off debts
• Build an emergency fund
• Start a child’s college fund
• Pay down on your mortgage
• Contribute to your Roth IRA (up to the max)

Next time you get a bonus or unexpected income, have a plan for how you will use the money. You’ll avoid the “morning after” regrets and put the money to good use!

Maxed Out focuses on banks and financial institutions that lend money to people who are less than credit worthy, knowing they can’t or won’t pay their bills. These credit card companies and banks make the majority of their profits off the late charges, over the limit fees and high interest they charge to people who are behind on their payments.

The documentary uncovers the shady (and possibly illegal) practices of some of the nation’s largest banks, as they prey on the young and the poor. From giving credit cards to college kids with no income, to ruthless collection agencies that use scare tactics to get people to pay on their past due debts before putting food on the table, Maxed Out is a moving film that will have you seriously questioning our casual use of debt in this country.

Maxed Out is a moving and informative documentary that will make you think about the banking industry (and government) is a completely different way.

Retailers rely on impulse purchases (trust me, I own and run online stores).They use all sorts of tactics to get you to purchase today instead of waiting and really thinking about whether it’s a good decision.

One simple decision has saved me hundreds, maybe thousands of dollars…

Never spend more than $100 on a purchase without first doing these three things…

Sleep on It

If it’s something you really need, you’ll still need it tomorrow. If it’s something you really want, you’ll still want it badly in the morning. But you may wake up and realize that it sounded like a much better deal when you were standing in the store than it does now.

Talk to Your Spouse

If you’re married, discuss the purchase with your spouse. My wife and I don’t spend over $100 without first discussing the purchase with each other. If your family household income is less than $50,000 a year, reduce it to $50. If it’s more than $200,000 a year, you can increase it to $200 or more.

If you’re not married, you can talk to a friend, parent or financial advisor. Find someone who will talk to you frankly. Ask them about purchase decisions. Listen to them, they should tell you honestly whether you’re making an impulse purchase or not.

Research the Product Online

This is absolutely required. Search for the item online and compare prices. Read reviews. Look at alternatives. You may be surprised to find out that great deal you saw in a retail store isn’t such a great deal afterall.

I was just in a local office supply store today and saw a Garmin Nuvi GPS on sale. It retailed for $199 and was on sale for $175, a pretty good deal. But when I looked it up on Amazon.com’s mobile site on my iPhone they had it for sale for $150 with free shipping and no sales tax. I would have paid almost $40 more for that impulse purchase had I bought it in the store.

There are two schools of thought when it comes to paying off your debt. One says that you should start with the account with the highest interest rate, then move to the next nighest interest rate and the next until you’ve paid everything off. The other says that you should pay off the smallest balance first, moving to the next smallest, etc. Which is the best?

Which is Better?

Basic 7th grade math says that you should pay off the highest interest rate loans first, moving to the next highest interest rate loans. All things being equal, this method will pay off the balance of all loans fastest, and with the least amount of interest being paid.

But as Dave Ramsey says, if we were <em>that</em> good at math we wouldn’t have credit card debt! The truth is that most people try this method and fail. They start making payments and after a few months, feel like they’re not getting anywhere (I know I’ve been there!)

Then after a few months of not seeing much progress they start to slip a little and eventually give up and go back to their old spending habits. It’s no different from breaking any other habit or addiction… you see it with people trying to quit smoking too.

The key according to some financial advisors (including Dave Ramsey) is to pay off the lowest <strong>balance</strong> first, regardless of interest rate. It’s the reassurance of a quick win, they say, that makes you want to keep persevering. Most people have a credit card, loan or other debt that is under $1000. Paying the debt off quickly gives you the motivation to move to the next, and with that much more money per month, the next smallest is easier to payoff.

As each larger debt gets paid off, it’s easier to tackle the next larger one. After freeing up several hundred dollars in payments to smaller debts, a $5,000 loan might not look that hard to pay off.

Which Should You Choose?

Which method you choose is up to you. You may have the perseverence to pay off the highest interest rate debt first, but history and the success of the credit card industry has proven that wrong for the majority.

I will say that from personal experience, it is definitely more encouraging to pay off several small debts in a row rather than chipping away at larger ones. That said, once you’ve gotten a few smaller debts knocked out, I don’t think there is anything wrong with tackling some of the high interest debts.

Do what you are comfortable with and remember, you can always switch it up if it’s not working for you!

He has a popular radio show and several bestselling books and travels around the country giving speeches and seminars teaching people how to get out of debt.

We just picked up tickets to his Total Money Makeover event in Atlanta September 13. There are also events coming up in Birmingham, Tulsa, Houston, and more. If you can’t make it to a live event, check out his radio show which you can listen to live on the Internet.

One thing we’ve done as a family is set monthly personal spending budgets, and we get our money in cash at the first of the month. $100 for my wife and I, and $25 each for the kids. The money can be used for anything… eating out, buying something, going to the movies, anything.

We started with a very small amount so that we could see how fast we spent. We’ll increase the amount gradually, as we learn how to control our spending and pay off our credit cards.

The first month of the experiment, I remember asking my wife on the 5th how much money she had left for the month. None! As the months have gone by (we’re on month 3 now) we’ve gotten much better at managing our “extra” cash and as a result, we’re more conscious of other purchases and their financial impact as well.

Give it a try, and I guarantee it will make you think about your spending habits more (and hopefully cause you to spend less).