Resolve to Be Debt-Free in 2007

Were you to see me in public, you'd have no idea I'm in prison. But that's me: a two-time offender with a track record so poor that it's the shame of my family.

There was no blood. No car chase. No all-points-bulletin. No warrants. No victims, save for me, my wife, my kids, and, if I'm not careful, our retirement.

You see, we once were more than $45,000 in debt, which we paid off within three years. The good times didn't last. Today, we owe more than $60,000 to creditors, not including our primary mortgage and the minivan we use to take the kids to school. Add those in and the total rises to roughly $240,000. That's a lot of red ink.

Stop me if you've heard this before
And we're not alone. Over the summer, the Federal Reserve reported that consumer credit rose by $10.3 billion to $2.19 trillion. By September, that total rose by another $210 billion to $2.4 trillion.

Not that I can point fingers or anything. Here's what we owed in August:

Here's the tally today:

What happened? Taxes. We owed the Feds and the state of Colorado five digits' worth of back taxes as of October. Now that debt and our Amex card obligation have been paid off, thanks to savings and additional borrowing against our home equity line of credit (HELOC).

I'll understand if that sounds crazy. Here's the thing: With retirement savings and income, we're in no danger of defaulting on our mortgage. And we'll save hundreds in interest with the HELOC tax write-off.

Room for further improvement
But I could still do so much more. Witness Foolish poster DeterminedMom, who reported more than $50,000 in revolving debt, a $24,000 car loan, and a massive $535,000 mortgage as of November. (Find the details at our Credit Cards discussion board.)

Her situation appears dire, and yet I admire her deeply. Unlike me, she's crafted a specific budget for debt. And she's reporting progress monthly to a community that demands accountability as it offers support. How remarkably Foolish.

I, on the other hand, have done the opposite. My reporting has been limited to the few missives posted to the site. And our debt payments were the result of extra income more than deliberate planning. How remarkably un-Foolish.

I can learn something from DeterminedMom. So can you. If you're in debt, resolve to create a 2007 debt budget. What's that? It's a budget with debt repayments built in.

Let's say you make $6,000 monthly after taxes and that your minimum obligations equal $4,000. That's $2,000 in so-called disposable income. With a debt budget, you'd use that money to amplify your payments. Let's say $1,500 works best. Spread that $1,500 among your monthly payments and create new minimums, focusing your attack on the most costly debt. That way, you'll not assume that your $2,000 in "disposable income" is disposable. As a result, your balances will decline faster than Mickey Rourke's career.

Follow the money
My prison is entirely of my own making. And I'm just as capable of breaking free. Fortunately, we're living below our means once again, but there's still more I can do. As fellow Fool Stephen Ellis wrote on the boards in June, when I first revealed my blunder, "...[Tim should] post regular updates on the [Credit Cards] board ... Not only will he get good advice and a built-in support group, but it will hold him accountable to his plan on a regular basis." Point taken, Steve. I'll write my first post this week. And thanks, DeterminedMom, for showing a Fool what real commitment looks like.

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Fool contributor Tim Beyers, ranked 845 out of 16,362 in Motley Fool CAPS. He's grateful for the Fools at the Credit Cards discussion board. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. Get a peek at everything he's invested in by checking Tim's Fool profile. The Motley Fool's disclosure policy won't charge you a penny in interest.