Reduce debt, reduce stress

Question: My husband and I have quite of a bit of debt, and we have just had our first child. In addition to a mortgage, we have old credit card debt (we don't use any credit anymore) that totals about $15,000 and student loans ($30,000). How in the world will we ever get out of debt? We make our minimum payments each month and we pay all of our bills on time and have good credit, but this amount of debt just seems insurmountable. Plus, we haven't started saving for retirement, and we really are just making ends meet. I am a teacher and he is a waiter, and our combined yearly income was about 82,000 last year. Any ideas? Thanks! Emily, Minneapolis, MN

Answer. It's very easy to give advice on how to get out of debt and very hard to accomplish the job in reality. It can be done. Lots of people have done it, including me. So can you. The technique that I like is called a debt roll-up.

It's an approach that gathers momentum with time. In your case, the basic idea is to pay the minimum of your student loans, mortgage, and all but one of your credit cards. Pull out the credit card with the highest rate.

Now, go through your budget and see where you can scrounge up extra cash. Target the savings at the highest rate credit card. Eventually that debt is gone. You then go after the next highest rate credit card, paying the minimum on the rest. You follow this technique until the $15,000 balances.

I would then get aggressive about the student loans. A favorite book of mine for getting out of debt is Reduce Debt, Reduce Stress by Gerri Detweiler, Nancy Castelman and Marc Eisenson. Check it out.

As for retirement savings, as a teacher I hope you have a retirement savings plan at work. Your husband could also set up an IRA. He may not be able to put in much, especially since you're focusing on getting out of debt. Still, in my experience once it's set up you'll put in some money into it and you can always ramp up contributions as your household balance sheet improves.

About the author

Chris Farrell is the economics editor of Marketplace Money.

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