How to Get Out of Debt began as a personal journal to hold me accountable for my commitment to get out of debt. Getting out of debt is a high priority for my family, and I like to write about it frequently; partially because I still need to hold myself accountable, and partially because I want to motivate others who are looking to get out of debt.

When the Redbook article on leaving credit cards behind came out, I had no idea the far-reaching impact it would have. People who have seen the article stop me frequently and ask how to get out of debt. So here’s my answer. It’s basic, but sometimes it’s good to get back to the basics, when it comes to our finances.

Make a Commitment to Get Out of Debt

Getting out of debt begins with commitment. If you aren’t committed to getting out of debt, you’ll never leave debt behind. It takes hard work. It’s not fun. You need that underlying commitment to get you through the times when you want to give up. And there will be times you want to give up. That’s the bad news.

The good news is that getting out of debt is worth it. Proverbs 22:7 says “…the borrower becomes the lender’s slave,” and it’s true. When you owe money, you have to make payments to your creditor every month, rather than using that money to help you reach your goals. When you’re out of debt, you can use your money however you like. You can live a better lifestyle on fewer dollars, if none of those dollars are going toward credit card payments.

Part of your commitment to getting out of debt should be to take on no new debt. As long as you are taking on new debt, you’re moving in the wrong direction. Cut up your credit cards, or freeze them, if you’re not ready to get rid of them all together. Do whatever it takes, but do not use your credit cards to pay for things while you’re getting out of debt!

Finally, make your commitment official. Sign an agreement with your spouse. Find an accountability partner. Start a blog and tell the world about your plan. If you make your commitment public, you’re more likely to follow through, because those who know about your commitment will hold you accountable.

Formulate a Plan to Get Out of Debt

Now that you’ve made a commitment to get out of debt, you need a plan. I already mentioned that you shouldn’t take on any new debt. If you’re not going to take on any new debt, you need a plan for emergencies.

Your first priority should be saving an emergency fund. I know that goes against everything you want to do. You want that debt gone. But if you don’t have an emergency fund, what are you going to do when the car breaks down? You’ll have to put the repair on a credit card. So save an emergency fund first. Dave Ramsey suggests having a $1000 emergency fund, but you need to come up with an amount that you are comfortable with. $1,000 doesn’t go very far if you lose your job, so if your job isn’t stable, save more.

At this time, you’ll also want to go over your bills and create a budget. Make sure your income is greater than your outflow. If it’s not, you need to increase your income or cut your expenses until you make a budget that balances. You should be budgeting more than the minimum payment for the bill you want to pay off first. I like to pay the bill with the lowest balance first. Others like to pay the card with the highest interest rate first. Do what works best for you, but make sure you pay more than the minimum.

Make sure you have a system you can use to track your budget. There are many tools that are effective, from pencil and paper, to spreadsheets, to budgeting software. My personal favorite is YNAB, as it’s simple and effective. But you need to use whatever works best for you.

And when you pay off that first credit card, take the amount you were paying toward that card and add it to the amount that you are paying toward the next debt you want to pay off. That’s called the debt snowball, and it works. The key is to continue to pay the same amount toward your debt every month until it’s paid off. Don’t reabsorb the debt payments into your general budget, because that will slow you down. If you use the debt snowball method, you’ll be out of debt much faster.

Get Creative in Saving and Making Money

To make your debt repayment go even faster, you need to increase your income and decrease your expenses. If you need inspiration on how to make more money or cut your expenses, you need only to have a look around the internet. Ideas abound on blogs like this one and others. Here are a few really good posts you might want to check out:

Once you’ve found ways to increase your income and reduce your expenses, take the money you make and save and apply it toward your debt. Many banks allow you to make four payments a month toward your credit cards, so plan on making a payment as soon as you have the money. You’ll be surprised at how quickly those little snowflakes of money reduce your debt.

Stay Motivated to Meet Your Goal

Staying motivated is the most difficult part of the process. You need to remember you didn’t get into debt overnight, and you won’t get out overnight. There are times when it will be hard to stick to your plan. You won’t feel like cooking at home, rather than eating out. And there are times you’ll make bad decisions. Everyone does.

The important thing is to stay motivated and to go back to your goals when you’ve fallen off course. You can make this easier by taking a few steps.

Enlist friends and family to hold you accountable. If you know someone will be asking you how you’re doing, you’re more likely to make good decisions. So ask for help. It’s tempting to keep financial problems a secret. I’ve been there. But since I opened up about my debt story, I’ve received a lot of support, which motivates me to keep going.

Read about getting out of debt. I find that the more I immerse myself in the subject of getting out of debt, the more motivated I am to keep on track. I like to read anything by Dave Ramsey or Mary Hunt. There are tons of books on getting out of debt. Visit your local library and check out a few.

If you don’t like to read, try audiobooks. Or listen to podcasts. I love to listen to Dave Ramsey’s show. Do a search in iTunes and see if anything else appeals to you. There are a lot of free podcasts out there, and if they keep you motivated, listen to them!

My mom likes to post pictures of her goals around the house. If you’re a visual person, that might work for you. Does getting out of debt mean you can afford to buy a house? Post a picture of a house on your wall. Is there a quote or Bible verse that motivates you? Write it on a post-it note, and put it on your bathroom mirror.

The bottom line is, you need to know yourself. What could tempt you into giving up on your commitment to get out of debt? When you know the answer, make a plan to avoid it or deal with it.

I firmly believe that most people who want to get out of debt can do it. As in any situation, there are exceptions. But most of the time, if you are doggedly committed to the goal of getting out of debt, you can eventually achieve that goal.

Photo by SqueakyMarmot.

16 thoughts on “How to Get Out of Debt”

  1. Nice, common sense post! The best way to handle debt is to never go in debt. But, that is not always realistic for many people. It does take having a plan and the discipline to see it through.

    If the debt is too overwhelming to control yourself, you may need outside help. There are some good, reputable debt relief companies.

  2. You put together a nice little plan to dig out of a debit hole. The trick to it is actually implementing the ideas. Getting out of debt is not easy or fast, but slow and steady progress will get you there.

  3. i have to say that i agree with the above. At one point i had over 22 OPEN credit cards-i spent a good 10 years with night tremors due to bad credit and debt. It has taken me almost 7 1/2 years to finally be done with all of my debt. it took several consolidation loans (as i was around $38K) in debt. My husband wanted to kill me and looking back now-i don’t blame him-not sure how he didn’t. But i am now happily sleeping at night, i have one credit card that is “emergency” card-my debts are paid off and after years of listening to my husband and not wanting to give him the satisfaction. I am finally enjoying my salary, i am able to buy myself things with cash and i feel so good being free of debt. My advice to anyone out there-STAY AWAY FROM STORE CARDS-it’s tempting it’s great when you want something but it is the biggest mistake you will ever make. I WILL NEVER DO IT AGAIN. I had my Macy’s card since i was 20 i’m now 41, i gave it up 2 years ago and i am fine. That was just ONE card.

  4. I’m a bit disappointed with the debt snowball. It seems to encourage people to continue to act emotionally instead of learning to act rationally with a mathematics based approach to paying off debt the fastest. Getting out of debt is about learning to think differently about money. The debt snowball (paying off smallest debts first) teaches you to keep thinking about money from an emotional point of view.

  5. I’ve found it very important to be realistic about debt. As you say, we didn’t get into it overnight and we’re not going to get out of it overnight.

    It’s easy to get excited, rip up credit cards, etc. It’s hard to have the discipline to say “no, we can’t afford that” or to send an extra $25 towards debt when the debt is so big and the $25 could buy something you want right now. Micah suggested we look at it as an opportunity to build character by developing the discipline we need.

    I think you’ve done a great job of that, and having your blog to show it helps others keep going. :)

  6. Just pay attention to Dave Ramsey ( he’s the guru. As for me, I’ve NEVER been in debt because I ALWAYS pay cash. I drive a 10-year-old truck with a dented passenger side from an encounter with black ice on a highway in Pennyslvania. I have one credit card with zero percent interest (possible, if your credit is spotless, and mine is because I don’t use credit to live). I bought that truck the last day of the year, last hour the auto store was open, and I paid cash. First and last new vehicle I ever bought, in celebration of my 50th year of life. I use my credit card for all my monthly purchases and I pay it off monthly, too. If you are married, and both are working, live on ONE paycheck and bank the second. Don’t eat out, you never know who is a crazy guy waiting to poison you anyway. Plan ahead for eventualities, like having an hsa. Pay your utility bills 3 months in advance, you won’t lose a lot of interest on that money, and its a safeguard. Don’t have cable tv, in fact, don’t have tv. Stay current in the technology for your chosen career field and you’ll never be without a job, or job offers. I’m 60, keep my resume posted on technology sites, and watch what skills recruiters are asking for. I work project. But unlike every other contractor I know, I’m NEVER without ‘continuity of paycheck’, but I haven’t had to work for financial reasons since I was 42. (Not difficult if you live below your means.) If you lose a job and don’t have emergency funds (I have 15K for emergencies, 1K is laughable), IMMEDIATELY rent out a room in your home, try for a woman in her, err, 60s. ;->

    Life is grand when you work because you ENJOY it, and you have absolutely NO DEBT. You can pay off any 30-year mortgage in SEVEN years if you DOUBLE your payments. Think that is difficult? When I bought my first house in 1970 interest rates on loans were ‘standard’ (in California) at 17-18%. 4-6% you think is ‘high’?? Also, don’t buy more house than you need, aka no 5-6000 sq ft ‘mansions’, after all, you have to keep them CLEAN.

  7. Thanks for sharing. You mentioned $1000 emergency fund is not enough. In your point of view, how much should we allocate for emergency fund and any guideline that we follow to make sure the emergency fund is adequate.

    • That’s really an individual thing. $1000 may very well be a good starter emergency fund if you have a stable job. If not, you’ll want at least a month’s expenses in reserves, if not more. It depends on your risk tolerance, as well as how easy it would be to get another job, if you lost yours.

  8. Instead of showing the picture of cutting the creditcard you could simply write “MOTIVATION” – as TStrump said.

    Don’t get me wrong – I really liked the picture, but it’s all about motivation.

  9. Motivation is the toughest, I think.
    We’re constantly bombarded with images in advertising that say we need things.
    I also wonder how many people practice retail therapy to make themselves happy.

  10. Getting out of debt and towards a model that brings long-term financial health means learning and adhering to basic sound financial guidelines.

    A: Retirement. Every family should put a minimum of 10% of their incomes into retirement, the more reliable being a 401k. But diversify and consider Roth IRA’s, mutual funds, etc etc. Retirement comes first before anything, and when you retire, you should assume you will live from age 60-100. As such, the typical American family needs 1 million dollars worth of retirement by retirement time. Double that if you live on the coasts ( NY, CA). The older you get, the more money you will need to set aside. For example, if you’re 40 and have no retirement saved up, count on putting away 20% of your paycheck.

    B: General savings. You should also save at least 10% of your income in the form of cash. That will assure that if you need a new car, need an emergency nest egg for hard times, or whatever is secure.

    C: Do not buy what you cannot afford. Much of what people buy is due to peer pressure and an antiquated belief system. For example, most couples assume that as soon as they have a baby, they MUST buy a home, and in times of a housing bubble like the one we now have, that means many people ignore the obvious and buy anyway. You should assume that your maximum mortgage on a house is 3 times annual income. So if your family makes a total of $50,000, then the house should not be more than $150,000. If you make $100,000, then $300,000, and so on.

    D: Make due with what you have as long as it is sufficient. Particularly cars. The typical car today will easily last 200,000 miles and make it to the 10-12 year mark. If you take care of them with simple maintenance like changing the oil when recommended and so on, they can last much longer. If it goes, has good safety features- which most cars have since the 90’s- and transports your family dependably, then there’s no reason to buy a new one, and in fact, buying used is still a way to save a significant amount of money.

    E: No credit cards except as a use to build credit. Keep one credit card and occasionally buy something and pay it off to build up good credit. Otherwise… stay away.

  11. This may fall a bit outside the debt part but I wanted to add my two cents on the budget tracking system part. I think some sort of tracker is good whether you are in debt or not. I find many of those on-line programs more trouble than they’re worth. A few years ago I built a simple Excel spreadsheet with 12 monthly columns to track what money comes in, where it goes out over the month, and how much I have left to invest. Its simplistic and works great because I can see everything on one page.

  12. Wonderful summary, and yes, it does work. Since I have been reading this blog and others on the topics of personal finance and frugality, we have made some significant strides in getting out of debt. We’re not there yet, but we are well on our way.

  13. This is a solid post. I think the key is making the plan. You can have intentions of getting out of debt, but if you don’t have a plan of how you’re going to do it and set goals then it’s too ambiguous just to say, “I’m getting out of debt.”

  14. Great post!

    Here are the four ways I have dealt with debt:

    Instituted a cap on new spending- Not easy, but sometimes slowing down allows you to catch up

    Started small- Instead of the highest interest rates, I went to the lowest balances first to achieve quick successes and for more motivation– it also allowed me to employ my next tip

    Doubled down- These days they call this “Snowballing”, when I paid off one balance I took the payment and applied it to the next debt usually doubling up (hence I called it “Doubling Down”) and thereby knocking that targeted debt off faster– I repeated this process tripling, quadrupling, etc.

    Rounded up- I do this all the time, rounding up to the nearest $10 or $50 or $100. For example, if the car payment is $210, I would pay $250


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