How to Get Rid of Debt in 25 Steps

Almost all of us have debt. We all want to get rid of that debt. The task of doing so can seem overwhelming, can’t it? However, debt elimination really involves taking a lot of simple steps. Here are 25 basic steps to getting rid of your debt once and for all.

1. Consolidate. If you have credit card debts and loans in several places a good start would be to consolidate them and reduce the interest you are paying. Lower interest means more of your payments will go towards the principle and you’ll be out of debt faster. Using Peer-to-Peer lending is a good option if you have a decent credit score (630+), I recommend using Prosper as they are one of the biggest lenders and you often get better terms.

2. Track spending. You have to know where your money is going if you want to be in control of it.

3. Make a list of all of the debt owed. Include who you owe, what amount you owe, what interest rate you’re paying and what your monthly minimum payment is. Keep a physical copy of this list where you can see it.

4. Create a budget. It’s the only way to be responsible enough with your money to pay off debt.

5. Always spend less than you earn. It’s simple math; it frees up the money you need to pay off your debt.

6. Cut back to one credit card. And use it as little as possible. Accruing more debt is going to hinder your debt elimination plan.

7. Choose one debt and pay it off. Ideally, you’ll pay off the debt with the highest interest rate first. However, you may also choose to pay off the smallest debt. This gives you a sense of accomplishment and provides momentum for sticking with your debt repayment plan.

8. Give up five costly things and use that money to pay off your debt. These don’t have to be high-cost things. If you give up your cigarette habit, your Netflix subscription, your gym membership, your afternoon latte and your cab ride home at night then you’ll have a lot of extra money going to pay down your debt every month.

9. Ask yourself what big expenses you can give up. Can you reduce your mortgage by renting out a room i your house? Can you go from a two-car family down to one car? Use any savings to pay off debt.

10. Talk to your kids about why debt is bad. It will remind you … and they’ll remind you too!

11. Make a list of all of the reasons you want to be debt-free. It will keep you on track.

12. Make long-term and short-term debt payment goals. Goals help you achieve what you want. Make sure that the goals are realistic.

13. Choose a debt elimination buddy. It may be a spouse, a friend or a family member who also has debt payment goals. Meet with this person once a week to discuss your goals and achievements. Keep each other on track.

14. Read books and blogs about debt elimination. This helps you to stay inspired.

15. Give up shopping for fun. Shop only for necessities until your debt is paid off.

16. Delay all purchases by one month. This helps to make sure that you’re only buying what you truly need. If you don’t still need it a month after you wanted it then you never needed it at all.

17. Eat your veggies. Eat fresh in-season produce instead of packaged foods or meats and put the money that you save towards paying off your debt.

18. Refuse to watch or read advertisements. They encourage you to buy things you don’t need!

19. Create fun challenges for saving money. Get your creative self out and challenge her at every turn.

20. Put any extra money towards paying off the debt. Get a bonus at work or a surprise windfall from a relative who passes away? Immediately use it to pay off debt instead of doing anything else with it.

21. Refuse to keep up with the Joneses. Make it a way of life to NOT compare yourself to others financially or based on status symbols.

22. Make a written commitment to yourself to pay off your debt. You don’t want to be wishy-washy about this process.

23. Make a verbal commitment to someone else about this goal. Let a spouse, a child or a good friend know that it’s really important to you to pay off this debt. Telling someone else will help to hold you accountable to sticking with it.

24. Forgive yourself if you make a mistake. Debt plans can be like diets. Some people eat one piece of candy and decide that the diet isn’t working so they quit trying all together. Others admit that they’ve made a mistake and recommit to the diet. Recommit to your debt and don’t beat yourself up if you make a mistake in your repayment plan.

25. Deal with an underlying emotional issues that you have surrounding money. If you don’t, you’ll sabotage your debt elimination plan.

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Comments

  1. says

    A nice, very exhaustive list…I would add trying to eliminate advertisements from your life.

    -Rex

  2. says

    Use the DOLP method in paying off your debt. It makes your money most efficient in the process.

  3. says

    Hey,
    I like 18. I think we should pass this message on to all broadcasting companies. Maybe they’ll eliminate commercials from our favorite show if they think we’ll just switch the channel anyway.lol

    Great post,
    Guy

  4. says

    You have great article. To get out of debt, we have to change our mindset about saving and spending. As long we unnecessarily follow the Joneses, we will get into debt sooner than we can afford.

  5. says

    Getting out of debt is mostly about applying common sense and recognizing that you cannot have outgoings greater than your income. A lot of people stick their heads in the sand and choose to ignore the obvious. But as you have suggested in your list with point 25, very often that is because of emotional upset and an underlying need to feel better by getting something new, needed or otherwise.

    This is a great list of corrective actions, which for people who are in debt they would be wise to follow.

  6. says

    I think this is a great list of things to consider when trying to figure out how to pay down debt. However, I think that as humans we also do much better when we can focus on a small set of things. I would argue for taking this list and looking at the ways that have the worst effect on your financial health. Perhaps you are constantly racking up new debt with your credit cards. Then vow to use cash only until your credit card situation is under control, and freeze your credit cards and leave them in the freezer. Or maybe you have tons of scattered debt. Focus on getting all of your debt consolidated and prioritized.

    There were many things on this list that I hadn’t even considered in the past. Really great.

  7. says

    This is a really good comprehensive article. However, it assumes that the reader has sufficient income to pay the debt in full and he/she just needs a little discipline.

    If the reader has really fallen behind in debt payments and/or the debt is so huge that it will never be paid off, there are other options available:

    -consider entering into a Debt Management Plan with your creditors, facilitated by a reputable credit counseling agency. Under a DMP, additional interest can be stopped and the debt can be paid off over a longer period of time (usually 60 months)

    -if even a DMP isn’t possible, consider filing a Chapter 13 proceeding (in the US) or a Consumer Proposal (in Canada). This is a formal settlement arrangement with your creditors under the American and Canadian bankruptcy acts, respectively in which you settle with your creditors for cents on the dollar. The settlement can be paid over 60 months.

    Hope this helps….

  8. says

    #21 is my favorite…I thinks so many of us are just trying to keep up with our neighbors that we lose financial control. If you spend within your means you will be fine. Just don’t get in the habit of pulling out the credit cards when you want to spend.

  9. PremiumFinance says

    ha those credit cards are dangerous , if you make a budget annd make some sacrifices and track your spending this will make a difference and gain from the benefits

  10. says

    I think this is a great list of things to consider when trying to figure out how to pay down debt. However, I think that as humans we also do much better when we can focus on a small set of things. I would argue for taking this list and looking at the ways that have the worst effect on your financial health. Perhaps you are constantly racking up new debt with your credit cards. Then vow to use cash only until your credit card situation is under control, and freeze your credit cards and leave them in the freezer. Or maybe you have tons of scattered debt. Focus on getting all of your debt consolidated and prioritized.
    +1

  11. says

    #18 and #21 stand out to me. We live in a credit driven culture/economy and often aren’t aware of the outside forces that drive us to consume and tell us (subtlely of course) that borrowing is OK and having the stuff is what really matters.

    A thought on #7 though… debt consolidation is trading one form of debt for another and is often a way to make debt more comfortable for us. In practice it often backfires, enabling us to take on even more debt.

    Tread lightly with this one. The only way to truly eliminate debt is to pay it off with real money.

  12. says

    YES, Always spend less than you make. Assuming your fortunate to be employed currently, that will help eliminate future debt issues.

  13. says

    Great post. Thanks for sharing these guidelines. A lot of people I know could use this advice. Living without a credit card can be tough because we have become so conditioned to having them in our lives. I did some reading and discovered that in the early time period of American history, you were considered a social pariah if you had any form of debt or owed someone. I think that we should refurbish or economic system to do away with a debt-based currency altogether. This would encompass credit cards of course. Thoughts anyone?

    Regards
    Sara Fargoons
    Investors due diligence

  14. Olivia Mak says

    Great complete list, although I feel #1 and #17 are contradictory. Any thoughts on which holds more importance? Also, cutting back on 5 purchases a month and using that money toward paying off debt is genius! They do not have to be large purchases and most of the time, I hardly notice the cut in lifestyle choices. Bringing your lunch and coffee to work even just once a week can save a good amount. Please share more of these helpful tips!

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  1. [...] This week the Financial Highway revealed How to Get Rid of Debt in 25 Steps. [...]

  2. [...] on. As difficult as it may be, the sooner you face the debt, the sooner you’ll be able to take steps to get rid of it. Write down every bill you have and the interest rate to make a plan on how you will start working [...]

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