Written by Guest Author: J. Scott

It seems like getting out of debt is a hot topic for 2010. News sites seem to be highlighting folks that have worked hard to become debt free. I have had many emails from people asking me the best way to eliminate their debts and how to stay debt free, but there is no simple answer. Becoming debt free is a process and requires much self control and knowledge. The best way to achieve these goals is to educate yourself about the subject and practice what you have learned. Starting an emergency fund and using the debt snowball method to pay off your debts are great places to start your journey. I will give a short description of both below.

1) Emergency fund: We all fall into bad times where we have problems paying our bills, this maybe the reason you are in debt in the first place. With an emergency fund you will be able to still pay your bills on time, when you do fall into these slumps. The goal is to save up at least 3 months of living expenses, but 6 months is highly recommended. Simply add up all your expenses like rent, food, phone, entertainment and what ever else you spend money on now and multiply your total by 3. Save up that much for when hard times hit and you will be able to maintain the same lifestyle until you get back on your feet.

2) Debt snowball method: If you have multiple outstanding debts you want to pay off, this is one of the best methods out there. You basically list your debts in order of highest interest first. You start paying the minimum on all your debts except the first one on the list. Put all the cash you have saved from paying the minimum and any extra you can come up with each month towards to first bill on the list. After this bill is paid, put all the money you were paying on the first bill towards the next debt on your list and continue the process until you have finished paying off all your debts. The debt snowball method is designed to keep you motivated to pay off your bills and motivation is the key to managing personal finances.

Learn as much as you can about these and you will be well on your way to financial freedom.