How to Get Out of Debt

Corey —  September 22, 2009

       If you realize that debt is slavery and you’re ready to break free, you’re already well on your way to becoming debt free. Half the battle of paying off debt is finding the motivation to bust through the chains and throw off the weight of debt. You can get out of debt, and this article will give you a plan that will lead to success.


       You must be fully committed to getting out of debt. If you want to get out of debt and stay out of debt, you must focus all your energy on making the changes necessary for success. You can’t keep doing the things you’ve been doing and expect to get out of debt. If so, you wouldn’t be where you are now!

       Before you read the rest of this article, you have to be fully committed to getting out of debt and staying out. You must know why you want out. You must know what your motivation is. You don’t need a grand, complex reason – you just need a reason that you believe in. If you’re really committed to paying off your debt and avoiding it in the future, then you will find success. If not, you might as well quit reading right here.

Establish an Emergency Fund

       Before you try to pay off your debts, you need to have an emergency fund. Any progress you make toward paying off your debts can be completely wiped out once the first emergency hits. Save up at least one month’s worth of your living expenses before focusing on paying off your debts. (But don’t forget to keep making the minimum payment on your debts!) Click here to read about where you should keep your emergency fund.

Set a Goal & Make a Plan

       If you’re ready to do everything necessary to get rid of your debt, great! Now you just need to set a goal. What debts do you want to get rid of? All of them? Everything except your mortgage? Decide right now, and write it down.

       Next, you need a plan. How are you going to pay off your debts? Which debt will you focus on first? What will be your next target? There are multiple ways to approach this. First, you’ll need to know the interest rate, balance, and minimum payment for all of your debts. Then, rank them using one of these three methods:

  1. Highest Interest Rate First – Start your list with the debt that has the highest interest rate. Then put the debt with the second highest interest rate below that. Keep doing this until all your debts are listed. This is the best way to pay off your debts if you’re looking at the numbers only. (You’ll pay the least amount of interest this way.)

  3. Lowest Balance First – Start your list with the debt that has the lowest balance. Then put the debt with the second lowest balance below that. Keep doing this until all your debts are listed. This method feels good psychologically because you’ll get some small wins fast, but it could cost you quite a bit in the amount of interest you’ll end up paying. (Depending on the interest rates of your debts and their balances, this method could cost you much more in interest because you could be paying higher interest rates for a longer period of time.)

  5. Highest Stress Level First – Start your list with the debt that worries or stresses you the most. List the next highest stress debt below that. Keep doing this until all your debts are listed. This could be a good way if you worry a lot about your debts, but it could also cost you a lot in interest payments.

       Regardless of how you list your debts, how you’ll pay them off won’t change. You’ll have to pay the minimum payment on all of them regardless of where they’re listed. Then any extra money you can find will go toward paying the first debt on your list. After that one is paid off, you’ll put that first debt’s minimum payment plus any extra money toward paying off the second debt. You’ll keep repeating this process until you’re debt free!

       If you’re behind on your debts and your creditors are starting to tell you they’ll foreclose or send your debt to a collections agency, you’ll need to come up with a plan for how you’ll deal with the situation. Do not go to a debt management service. They cannot do anything that you can’t do by yourself. They’ll want to charge you fees for their service, and that’s the last thing you need while trying to get out of debt. You can negotiate with your creditors by yourself, but you’ll need to remain calm and be ready to compromise. You’ll have to work with your creditors to come to an agreement that’s good for both of you.

Make a Budget & Stick to It

       To attack your debt most effectively, you’ll need to make a budget and stick to it. You must know where your money is going so you’ll know where you can save and how much extra you have to put toward your debts. Once you’ve set your budget, you’ll need to stick to it or you’ll lose all the progress you’ve made in paying off your debts.

       Your budget does not need to be complicated. You simply need to list your income and your expenses in a way that makes sense to you and covers all your bases. Having this list will help you see where you can save the most money and help you determine how much you can put toward paying off your debts.

       Once you’ve got a budget, you need to find a way to stick to it. You can track your spending in a spreadsheet, make your savings, debt, and essential payments automatic, or use the envelope method (where you put each category’s budgeted amount in an envelope every month and only spend from there). Use whatever method you think will work for you. If it doesn’t work, ask yourself why and figure out what you should do instead.

Trim the Fat & Earn More

       To pay off your debt quickly, you need to find ways to save money and earn more. Look at your budget and figure out ways you can save on the biggest categories. Then focus on ways you save in the smaller categories. Do the easiest things first to get the most out of your time. Use the money you save to pay off your debts.

       Look for ways you can earn more money. Can you work overtime? Can you get a raise? Can you start a side-business? Can you sell some of your Stuff? Any extra money you can earn will help you pay off your debts faster.

Celebrate Your Milestones

       Find simple ways to celebrate your milestones. Treat yourself (or you and your spouse, or your family) to something fun when you eliminate a debt or at certain milestones. You could celebrate when you’ve paid off $500 in debt – then $1,000, $2,500, $5,000, $10,000, and so on. Set some milestones that make sense for you, and then celebrate when you reach them!

Share Your Story

       I’m confident you can and will pay off your debt if you follow this guide. If there’s anything I can do to help you, feel free to share your story here or contact me. If you’ve used these methods to get out of debt, share your story here and encourage others!



Corey is currently pursuing a Master of Arts degree in religion. While he enjoys learning and writing about Christianity, another one of his new passions is writing about personal finances in order to help others make wise decisions with their money.