A Beginner’s Guide: How to Get Out of Debt

Are you wondering how to get out of debt?

According to this study by NerdWallet, as of 2019 the average household carries a credit card balance of $6,829 in debt each month.

And that’s just credit card debt.

Debt is basically a four letter word these days. Everyone has it and no one wants to talk about it.

“You will always have payments,” is a sentiment so commonly spread these days.

“The famed patriot Patrick Henry proclaimed “Give me liberty … or give me death!” at America’s founding.

These days, the country’s motto has changed to “Forget financial liberty … give me debt!”

–Debt.org

Don’t believe the lie that you will always have debt so there is no point in getting out of it. That is simply not true.

There are a lot of reasons to get out of debt. You will be financially free and not owe any money to anybody! You will be payment free. And guess what you have when you don’t have payments.. money.

Debt keeps you from moving up in the game of life. When you want to buy a house, debt counts against you. It will affect your interest rate or how much you are allowed to borrow.

So get rid of debt.

But how?

I’m glad you asked.

How to Get Out of Debt

Create a Budget

The first step to getting out of debt is to create a zero based budget.

But how?

Write down all of your income at the top of the page. Then, subtract all of your expenses from your income. Put the most important things first. Start with giving and saving. Then come the 4 necessities: housing, food, transportation, and clothing. Keep adding things into the budget until there is no more money. Then stop.

The way to make it zero based is to make sure that number at the bottom equals zero.

Here is a very basic budget based on some recommended percentages.

*your budget may look totally different and that’s okay*

Item	Income	Expense
Paycheck	$5,000
Tithe (10%)		$500
Saving (20%)		$1,000
Housing (30%)		$1,500
Food		$500
Transportation		$300
Clothing		$100
Misc.		$1,100
Total		$0

Instead of the Misc. category, you would fill that in with your personal categories. The goal is to get $0 at the bottom because that means that every dollar is accounted for. If you don’t spend every dollar in all of the categories, that money can go towards paying off debt.

Pay More Than the Minimum

If you are looking to get out of debt quickly, you have to pay more than the minimum payment. And not just when you have $10 left over here and there. I’m talking about being intentional and putting it in your budget.

• Related: Intentional Living | Setting Intentional Goals

In the case with our sample budget, you would replace the Misc. category with Debt Payoff.

Misc. Debt Payoff

$1,100

And then, any money you have left over in your other categories can go towards your payments as well.

Now that we’ve organized our budget, which item do we start with first?

Debt Snowball

There are a few different theories on where to start. The two main are: debt snowball and debt avalanche. The avalanche lists interest rates from highest to lowest while the snowball lists the amounts from smallest to largest. We are going to focus on the debt snowball.

List all your debts from smallest to largest, regardless of interest rate.

Loan	Balance
Student Loan	$1,500
Credit Card	$1,800
Student Loan	$1,900
Medical Bill	$2,800
Credit Card	$3,000
Student Loan	$6,000
Student Loan	$9,000
Auto Loan	$13,000

If you have multiple student loans and credit cards, list them individually instead of grouping them together.

Pay minimum payments on all of them except the smallest. Throw was much as you can at it. Once the smallest is paid off, roll the money you were paying on it into the next smallest.

This starts to build up momentum and those small wins early on feel really good! They help to propel you on your journey moving forward.

I go into full detail in this post: How the Debt Snowball Works in 4 Easy Steps. Check it out!

Work your way through the debt snowball until all the debts are paid. While on this journey, motivation may come and go. That’s totally normal! We know, we’ve been there. Check out our debt free journey.

Make sure you check out this post and save it for later when that time comes: 5 Ways to Stay Motivated on Your Debt Free Journey.

Spend Less

In order to get out of debt faster, you need more money to work with. You can either get this by spending less or earning more. Spending less *may* be the easier option.

First, try these 4 money saving challenges you can start TODAY.

In what areas can you cut or try to be frugal? A great place to start is your food bill. Here are 5 ways to save money on groceries. You won’t have to cut out these things forever, just until you are out of debt!

Then, look at areas of your life and identify anything unnecessary. Do you really need Netflix, Amazon Prime, and Disney +? What about that stop at the coffee shop every morning… Did you know millennials are spending more at coffee shops than they are on retirement?! We’re talking something to the tune of over $2,000 per year.

• Check Your Subscriptions | Money Saving Challenge
• Stop Buying Coffee | Money Saving Challenge

Look at your utility bills and see if you can cut a little bit out here and there. Switch to LED lights on a timer or set the thermostat a few degrees higher/lower.

• 18 Ways to Stay Warm Without Turning up the Heat
• Save Money by Reducing Your Water Usage
• How to Stay Cool Without Air Conditioning

I’ve put together even more ways to save:

• 10 Christmas Side Hustles That Make Money

Remember, these areas where you slash your spending don’t have to last forever! The sooner you get out of debt, the sooner you can add these fun things back in.

“Live like no one else so you can live like no one else.”

–Dave Ramsey

Stay Out of Debt

You’ve worked SO hard to get out of debt. CONGRATULATIONS!!! Check out these budget friendly rewards for becoming debt free.

But, there is getting out, and then there is staying out.

If you simply pay off your debt but don’t stop accruing more, you’ve only treated the symptom, not the problem.

Identify the type of debt and how you got there in the first place.

If you are deeply in credit card debt, it may be time to do a lifestyle check. Are you living above your means? Do you struggle to make ends meet every month and not sure where your money is going?

A quick fix is creating a budget. A lasting fix is a lifestyle change and sticking to that budget. If you don’t have the cash in hand for something, than you can’t afford it. Save up first and then buy it.

What’s Next?

Once you’ve paid off all of your debt, it’s time to save up for an emergency fund! Get started here with: A Beginner’s Guide: Emergency Fund.

Now go forth on your DEBT FREE JOURNEY!

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Let me know in the comments below: are you ready to start getting out of debt?

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