𝐇𝐨𝐰 𝐭𝐨 𝐆𝐞𝐭 𝐎𝐮𝐭 𝐨𝐟 𝐃𝐞𝐛𝐭 𝐢𝐧 𝟐𝟎𝟐𝟑

6 Steps to Getting Out of Debt

Are you finally sick and tired of the mountain of debt that you owe on? Have you had it enough that you’re ready to make a change? Here are the only six steps you need to get out of debt in 2023!

#1 – Stop Adding to the Debt

The first step to paying off debt is to stop adding to the debt. Attempting to pay off $20,000 but you’re adding $500 to it every month is madness! Commit to paying cash for everything going forward. If you can’t pay cash for it, don’t get it.

#2 – Write a Budget So You are Spending Less than You Make

How much less depends on how quickly you are looking to get out of debt. Are you trying to pay off $20,000 in two years? That’s $555 you need to have free from your budget. Pay off your debt in two years? That’s $833. You have to decide how aggressive you are going to be. This requires knowing how much you make and how much you owe.

If you need pointers on creating a budget be sure to check out Success by 1,000 Wins podcast episode #6, How to Create a Budget.

#3 – List Out Your Debts

Credit cards, personal loans, student loans, car loans. List them out. List their totals. Know everything you have to pay off. Know every person, every creditor that you owe money to. You should know the individual amounts and the total of all of the amounts together. This is collecting the facts.

#4 – Save an Emergency Fund

When my wife and I got out of debt 4 years ago, prior to beginning that journey we saved a $1,000 emergency fund. This was our own, personally funded insurance plan for any emergencies that would pop up and derail our efforts. Car repairs, new tires, unexpected trips to the emergency room. Nothing would slow down our progress because emergencies would be funded by, you guessed it, the emergency fund! And the amount of times we used the emergency fund in the two years it took to pay off debt? I can count on one hand. And if we used some of the money, next month we would fill it back up again. It’s amazing how emergencies tend to disappear when you fill up an envelope or a savings account with $1,000.

If you need tips for putting together a quick $1,000 emergency fund, be sure to check out Success by 1,000 Wins podcast episode 7 Part 1 and Part 2, Over 30 Ideas for Generating an Income

#5 – Choose a Method for Paying Off the Debt

My wife and I used Ramsey Solutions, the debt snowball where we paid off the smallest debt first, then the next one, then the next one. Each time adding the payment from the previous debt to the next largest debt. Eventually all of those payments totaled up act as a powerful tool for paying down your largest debt.

Another, more popular method, that I don’t agree with is to focus on paying the debt with the highest interest rate. Although the math behind it makes sense, I agree with the Ramsey method for the reason that I believe spending and saving is more about habit than math. It’s an easier, more motivational, more powerful method to pay off a little debt and move on to the next one, rather than taking a LONG time to pay down a larger debt with a higher interest.

…spending and saving is more about habit than math. It’s easier, more motivational, more powerful a method to pay off a little debt and move on to the next one…

You choose but regardless I believe the most important thing is that you and your spouse choose one and STICK TO IT! Commit to it. Tell yourselves, this is the plan we are choosing to go by. Don’t hop from plan to plan. Don’t get derailed and off track on a plan. Stick to one plan!

#6 – Don’t make enough? Go get a job! Go to work!

This one hurts to hear, but some of you will ask the question. “What if I owe more than I make? Two options my friend, either you make cuts or you make more money. There isn’t a magical formula or some magical pot of gold that can be pulled out. Math is math. You either stop spending as much or you make more money. Stop trying to find secret money. Stop scrolling Youtube for magical ways to pay off your debt.

Again, see Episode #7 Part 1 and Part 2, $1,000 Emergency Fund in 30 Days (30 Ideas for Creating an Income) for ideas for adding to your current income.

Final Words of Encouragement

Whatever your plan is, momentum will speed it up. When you see that you can pay $1,000 on debt each month it magically becomes $1,200. Three months later it becomes $1,400. Magically you start to change your mindset from necessity to wants. A $50,000 SUV isn’t a necessity. “But, I need a safe vehicle to drive my two kids to school in!” Oh please! A $15,000 vehicle does the same you know. Millions of people drive their kids to and from school every day, 180 days a year in $10,000 cars. Yearly vacations, not a necessity. You may discover on this journey that you can skip a $5,000 vacation one summer as a sacrifice to pay $5,000 more toward your debt. I want to send you off with encouragement that whatever you THINK you can do, whatever timeframe the math shows you it can be done, I PROMISE you, it’ll be faster.

If you liked this you may also enjoy or find useful Over 80 Ways to Save an Emergency Fund

Photo Credit: Photo by Anthony Tran on Unsplash

ABOUT THE AUTHOR

Michael Kopans is here to share ideas for helping 1 million people reach a million dollar net worth by using money principles he’s learned over the years. Let’s talk money, budgets, becoming debt free, financial wisdom, financial principles that work.

money, budget, marriage, biblical wisdom