Learn How to Get Out of Debt in 11 Steps
Henry David Thoreau once said, “Almost any man knows how to earn money, but one in a million knows how to spend it.” Translation: Most people have not mastered the simple art of frugal living – living within your means. It is commonplace to use credit cards and buy on a whim. Moreover, debt continues to grow and as your paycheck fizzles away, plastic replaces reality. Spending more than you make becomes a habit and your debt becomes a way of life.
Are you in debt? You are not alone. Over 50% of Americans are in debt right along with you. The average American family carries a credit card debt of $8,377 according to CNBC.com.
One solution is to toss up your bills and hope you win the lottery, but your odds are super low. So now is the time to solve your debt dilemma.
Reasons to Pay off Debt:
- peace of mind
- ability to save for an emergency fund
- less stress
- no family fights about money
- own your house and car outright
- fewer bills
- pay less interest
- No Money to Pay My Bills, Help!
- How to Pay Your Bills When You Have No Money
- 25 Ways to Earn Money Fast
- 7 Ways to Create the Absolutely Perfect Budget (for you)
- How to do a Financial Checkup
- 6 Habits of Debt-free People
- How to Overcome Budgeting Challenges
Now, many think paying off debt today is near to impossible. Yet, this type of thinking will bury you further in debt.
However, most financial advisors will tell you, you should have started yesterday. I’m here to tell you, there is no time like today.
I have created a list of 11 steps to help you rise above your debt. “Every journey starts with one small step.” Start somewhere and start small, but just start. Try one tip a week until you are on track. Furthermore, create a budget you can live with, while still paying off debt. Sure, buying all that stuff was fun, but now it is time to take a hard look at where your money is going and how you can make your money work for you, by paying off debt and saving. Let’s begin…
11 Tips for Living Debt Free – Learn How to Get Out of Debt!
#1 Create a budget
Using a budget is the key to living within your means. To learn more about budgeting click here, but in short, it is a must to know how much money you have coming in and how much money you are spending. It is a simple math equation that can help you get rid of your debt and live better. Once you have your number, trim your budget of unneeded items and make sure you have more coming in than going out. Use the extra money to start saving for an emergency and paying down debt.
Click here to try this amazing free tool that analyzes your spending and helps automate savings!
#2 Cut spending
Once your budget is in place, you can begin to cut unnecessary spending. Trim the fat off your budget and cut corners where you can. Make sure you have figured in a workable amount, to begin to pay down debt. Here is a post on how to cut your grocery bill to help you get started. There are many ways to start downsizing your budget.
Yet, another idea is to have a “No Spend” week. To learn more about a “No Spend” week, check out my fellow frugal living blogger’s post over at startsavingtoday.com. (Click here)
Other ideas to cut spending and get out of debt:
- make your own coffee
- eat out less
- meal plan
- cut magazine subscriptions
- cut gym memberships (find frugal workout ideas here)
- follow your store sale cycles and stock up
- eat vegetarian meals two-three times a week
- air dry your clothing
- buy local and seasonal produce
- do your own manicure
Another idea to cut spending is to refinance. Click here to see if you can get a better loan rate and pay less.
#3 Spend less than you bring in
Living within your means is the first step to becoming debt-free. After you work on your budget, write down exactly where your money is going. Then come up with ways to save while budgeting for needed expenses. Finally, cut out areas that are not essential, until you have more money coming in than going out each month.
If you like this post, you will love…
- 7 Common Money Mistakes and How to Fix Them
- Good Old Dave Ramsey! Financial Peace is in Your Reach
- 7 Things You Should Never Buy When You are Broke
- 21 Things to Stop Buying to Save Money
#4 Set aside money to pay off debt
You can start a side hustle until you start to catch up. Taking on an extra job for a while will help you set aside money to pay down debt. Do not, I REPEAT, do not go out and spend your extra money. I know it is tempting and most people have the mindset, “The more money I earn, the more money I can spend.” However, if you earn extra money or a raise, continue with the same living standards and use the extra money to pay off debt. Then save for an emergency fund. After the debt is paid off and you have built your savings, you can work less, but you may need to hustle for a few years.
If you are looking to save for an emergency fund, try CIT bank. You can start an account with as little as $100 and this online bank offers one of the highest interest rates I have found at 2.45%. This bank would be for long-term savings because there is a fee to transfer money, but if you are using it for an emergency fund or savings, you could build up money with the high-interest rate they offer.
#5 Pay more than the minimum on your credit card
If you are only paying the minimum, it will take years to pay off your credit card debt (or any debt for that matter). However, many credit cards offer a service online to calculate how long it will take to pay off the balance using a specified amount of money. Take advantage of this and learn how much and how long it will take to begin paying off your credit card debt.
Many do not realize, if you are only paying the minimum, you may not even put a dent in your bill because the interest is accumulating. Once you decide how much you will need to pay monthly, set aside that amount and use it to pay the balance. It helps to have this money in a separate account. Also, start with paying off your smallest debt first. After you have paid your smallest debt, move to the next smallest debt and continue until all of your debt is paid. Not only will you have more money for the larger bills, but you will also feel accomplishment which will motivate you to keep at it.
#6 Pay your bills on time to avoid late fees
Maybe I should have put this one first, but if you have gotten into the habit of paying your bills late, set up an automatic payment online or at least set up a payment reminder. I caution you to make sure you have money in your account to avoid overdraft fees. Furthermore, I recommend you declutter your house and create an area for bill organization. You can also use a budget organizer such as the Mead Organizer Expense Tracker.
#7 Stop paying bank fees
High banking fees will add up. If you do not know what your bank charges for things like ATM withdrawals, checking accounts, and overdraft fees do some investigating. Next, find ways to cut these fees by switching banks or only using your home ATM.
#8 Eat at Home and Meal plan to save money
Eating out at restaurants often or ordering carry-out can destroy a budget. Yet, meal planning saves time and money. If you plan your food and shop accordingly, you will only spend a certain amount on groceries and you will not have to keep running back to the store. Hence, you will have more time to budget! Here is an example of a meal plan with two weeks worth of dinner meals for under $75. (Click here)
If you are living in a house or renting an apartment you cannot afford, it is time to move to a cheaper alternative. This may be the hardest thing you have to do, but if you are living in a high rent apartment, it will pay to shop around and find something cheaper. Moreover, downsize for a few years until the bills are paid. If you own a home, this will be trickier. You will need to sell and find a house that fits your budget. This seems extreme, but if you cannot afford your house, you do not want to risk losing equity and it is better to cut your losses before you are in over your head and risk foreclosure. Also, consider a cheaper used vehicle with low gas mileage.
#10 Sell unwanted, unneeded or unused items
You can turn your unused items into cash to help you pay down debt. Some sites I recommend are Poshmark, Mercari, and local Facebook groups, but a garage sale will work too. Make sure to deposit the money right away so that it is not used for something else.
How to Declutter and Make Some Cash
#11 Cut up your cards and pay cash
Credit cards require a huge amount of self-discipline. Use a cash envelope system and stop charging in its tracks. Say goodbye to your credit cards and pay cash. An easy way to do this is to set aside money in envelopes designated for each bill or expense. For example, label an envelope “Groceries” and put the allotted amount in that envelope. This actually tricks your brain into spending less.
11 Steps to Get Out of Debt Conclusion:
There you have it, my friends. Remember to create a budget and stick to it. Stop paying late fees and bank fees. Cut grocery spending with meal planning and eat at home. Start selling items you no longer use and get rid of your credit cards, once and for all! These simple steps will help you become debt-free and learn how to live within your means. Work harder now, so later you can relax and enjoy your debt-free life.
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I hope my post helps you live your best life and become debt-free. What are your best ideas for living debt-free? Leave me a comment. I would love to hear from you. Until next time!
Take care – Sarah
Don’t forget your budget template:
- How to Save Money from Your Salary
- Secrets to Saving for an Emergency Fund Now
- 25 Smart Ways to be More Frugal
- 21 Things to Stop Buying to Save More Money
- How to do a Financial Checkup This Year
- 7 Common Money Mistakes and How to Fix Them
- Budget-Friendly Two-Week Meal Plan – Under $75
- Financial Discipline – How to Be More Disciplined With Money
What is your debt situation? Are you trying to get out of debt? Please leave me a comment! I would love to hear from you!