If You Want to Stay in Debt Forever, Don’t Bother Reading this Article

by RC on August 27, 2008

Getting out of debt is not rocket science, but it usually is harder than getting in to debt. In order to get out of debt, whether it is credit card debt, unpaid bills, or any other debt, you need to do 3 basic things:

  • Stop incurring new debt
  • Focus on spending less and making more money-both of which increase the cash you will have to pay off debt
  • Pay off your debt-as quickly as possible

While these 3 points are the basic principles of getting out of debt, the following are 10 simple but effective steps you can follow to get yourself out of debt and on the road to building wealth.

1.) Assess your situation- Add up all of your debts and figure out what the “damage” is. Unless you know the extent of your problem, you are much more likely to simple ignore it, month after month. Whether it is $500, $5000, or $50,000, you need to know how much it is, and to eliminate it you will have to pay it off one dollar at a time. You need to know what your goal is in order to achieve it.

2.) Figure out where your spending problems are- If you have problem areas, you need to identify them. Spending too much on eating out at lunch everyday? Do you have a clothes “habit”? Identifying your problem areas is an important part of debt reduction. You need to know where your money is going.

3.) Stop spending in those problem areas- Cut back on your problem areas first, and you will stop incurring new debt and increase your available cash.

4.) Trim other expenses-Cutting back spending in other areas can help as well. Do you have a gym membership you don’t use? 300 cable channels you never watch? Cutting back in different areas can decrease your regular expenses.

5.) Figure out how to increase cash flow- which you will them apply to your debt reduction payments. Can you work overtime at your regular job? Sell items on eBay? Moonlight on the weekends? Increasing your cash flow can be a tremendous boost to your debt payments.

6.) Follow a proven debt reduction strategy- Whether or not you agree with Dave Ramsey’s math, the debt snowball is a debt reduction strategy that works. If you don’t like his method, follow it but pay off the highest interest card first.

7.) Get everyone onboard- No man is an island, and if you and your significant other are not on the same page when it comes to your finances and debt reduction, it will be many times harder. Communication with your partner is much more pleasant than fighting or arguing about money anyway.

8.) Commit to sticking with your plan- Figure out what your motivation is, your dreams, and what you want out of life. Develop a burning desire to get out of debt to enable yourself to achieve those dreams.

9.) Write down your plan- Coming up with a plan is one thing, but sticking to it is more difficult. By writing down your plan, sharing it with your spouse, and reviewing it on a regular basis, you will increase your chances of success many times over.

10.) Track your progress- Keeping track of your progress allows you to celebrate minor victories, and see when you’re getting off track. An excel chart can be fine, or join the No Credit Needed Network to track your progress and share it with other like-minded individuals.

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{ 8 comments… read them below or add one }

Sandy Naidu August 27, 2008 at 11:34 pm

Finishing off one debt at a time by paying off the lowest one first works. It gives us a good motivational boost.


Scott @ The Passive Dad August 28, 2008 at 12:57 am

Stop spending new money and cutting up the cards is the best advice. Easy to tell friends, but the hardest to implement. Always seems like something can come up, but it should distract people from focusing on long-term cost cutting goals.

Fantastic tips for anyone trying to stay clear of debt or just stop the CC cycle.

I stumbled.


RC August 28, 2008 at 6:06 am

@Sandy- It definitely does work, and motivation can be a very powerful part of it.

@Scott- Thanks Scott! It is hard to implement sometimes, even though the advice itself if fairly simple.


Debt Free Hispanic August 28, 2008 at 10:29 am

yes, the Dave Ramsey program works, i’m living proof of that. Great blog, glad I found it off of Problogger’s Killer Titles.


Matt September 8, 2008 at 8:47 am

I started out on the Debt Snowball approach but found that when attacking a series of larger debts I lose motivation. I am starting to regain the focus and am starting to work a variation of the Dave Ramsey program again though. The main difference is that I am not going to attack the lowest balance but the items that are not in good standing (old student loan problems that I have been dealing with) first.


RC September 8, 2008 at 11:06 pm

@Matt- The great thing about the debt snowball is that you can approach it in the way it is best for you. I talked about this in my article on tweaking the debt snowball:
Good luck!!


My Debt Refinance September 19, 2008 at 2:19 am

In the point 7, I think it would be great if the kids are also included. It will create good money habits for their future too.


Debt Stinks October 3, 2008 at 10:53 am

All true. If we all had the discipline to remember these points, we’d be better off, but easier said than done!


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