My wife and I used to own a water softener. We bought it because our water is considered hard by water standards, and we feel this interesting film on our bodies after showers. We gave it up because, for whatever reason, it softened the water close to where it was located in the basement but couldn’t reach the bathrooms, thus rendering it useless.

Once it was gone my wife said “Now we can take that money and apply it to the roof fund.” My response to her was “no, that money will get recycled into paying down more of our Debt.”

What most people don’t think of when trying to assess the differences in saving money rather than paying down debt is that debt is actually more detrimental than saving is positive. Take your average Credit card, where you might have an APR (annual percentage rate) of 15.9% on your outstanding balance, and compare that to a money market account that’s paying 3.5% (if you’re lucky), or your savings account that’s paying you way less than that.

Debt is sneaky in that you see those low monthly payments and figure that’s easy to take care of. Low monthly payments means the debt you owe is getting bigger and growing faster and, ultimately, is going to take you longer to pay off, if you’re lucky enough to ever pay it off.

I truly believe that most people need to set up a process and plan for paying down debt, especially Credit Cards, than in saving money for the future. The future is important but so is the present.

Many years ago, back in the early 90’s, I got into some credit problems myself after losing a job. Once I had new money coming in, which took a while, I learned what I needed to do was take a two-pronged approach to paying off debt. I’d like to share my process with you.

The first thing you have to do is actually write down all the debt that you have. Yes, I’m talking about setting up a budget. This scares many people, but it has to be done because you can’t fix what you don’t know is out there.

I use Excel because it’s easiest for me, but you can use a pad of paper. When you’re ready to list everything, you need to have a column showing what the APR (annual percentage rate) is because it’s an important factor in what you’re going to want to do. I also mean all debt, which includes car payments and mortgage, and any outstanding loans you have.

Once you look at balances and APRs, you have to decide what to pay first, and how. The way I did it was I made slightly bigger payments to both the smallest amount I owed and the account that had the highest APR. When I got the lower balance to a place where I could actually pay it off in one chunk I did that.

You learns that it feels like a victory whenever you pay off the entire balance of an outstanding debt, and that makes you feel empowered and in control of your finances, which increases your dedication to your goal. For all the other debt, continue paying the amount that’s being requested of you for the time being, but try not to add any extra debt to your bills.

When you’ve paid something off in full, you then take that money and roll it into the next lowest debt or next highest APR to try to accelerate paying that one off. Continue this process until you’ve finally gotten yourself to a place where your debt load is manageable.

Notice I didn’t say when your debt is totally done. That’s because almost no one ever totally gets rid of debt, since we all need stuff, including houses and cars, but you have to be willing to stop spending and using credit cards just for the sake of wanting new things.

When I made my budget, I decided I wasn’t going to use any of my credit cards until I got caught up, and I was able to stick with that for the most part. I needed new clothes when I got a new and higher paying job, so I had to break out a retail store one time to purchase them. Other than that, I bit the bullet, paid for everything with cash as much as possible, and eventually cleared up all my outstanding credit card debt, since, at the time, I didn’t have either a car payment or own a house. Of course having the new job helped me pay down my debt much quicker.

Something you can do is cut up your credit cards and send them back to the issuer. I did that for most of my cards, but realized that I needed to keep at least one major card. In today’s world that’s even more important than it was before.

You can’t rent a car without a card. You can’t easily get a plane ticket without a credit card. You pretty much can’t get a hotel room without a credit card, as they want to have something on hand in case you decide to become a rock star overnight and trash the room or do things like order movies.

Once you’ve gained control of your spending, you might even figure out ways to use your credit cards if they build up points or cash, then pay off the entire balance whenever you get the bill. That way, you actually start earning things while still staying out of debt.

Finally, a warning about something that caught me off guard, but that I was able to rectify. We had paid off one of my wife’s credit cards, and the next month she still got a bill for the interest amount that supposedly had generated from the time the bill went out until the time the card was paid off. I had her call the credit card company up, then I got on the phone and ranted until they removed it.

That’s another one of those sneaky, underhanded things these banks and credit card issuers will do to try to get you, and it’ll try to keep you perpetual debt, even if it’s only pennies. The same goes for phone bills, wireless bills, and many times retail store bills. To be smart, you should call them up when you’re ready to pay off a bill entirely and request they send you a letter either proving you’ve canceled the card or acknowledging that there’s no further balance.

Debt is scary and can be paralyzing. Having a plan to attack it puts you back in control of your finances and your life.