Mint.com Question: As a recent college graduate, I’ve incurred a number of student loans, credit card debt, and a car payment.  After budgeting for my monthly expenses, I’ve found that I have some extra money that I can use to pay off some of my debt.  Where is the best place to start?

My Answer:

I encourage my clients to have no debt because I believe that debt and unconscious spending steal our dreams.

I suggest you begin by taking the extra money you have in your budget and building a $1000 emergency fund so that you have the ability to handle small emergencies.

Once you have your $1000 emergency fund, organize your debts from smallest amount to largest; either on paper or in a spreadsheet.

Take any available money you have and pay down the smallest balance debt.

Once you finish with the first debt take what you were paying on that debt and add it to the minimum payment of the next largest debt – keep that up until you are out of debt.

You’ll find that getting fewer bills in the mail will reduce stress and seeing real progress will keep you motivated.

You are at an ideal time in your life to get out of debt and stay out of debt so that you can work towards living your dreams.

Good Luck,

Matt

This was a great question asked on Mint.com – see my answer and other in the Mint Answers section.

Personal finance coach, Matt Kelly, lives in Durango, CO.  He blogs here at www.debtfreetribe.com and writes a monthly newspaper column called Money Savvy.