10 Crucial Steps To Getting Out of Debt

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The crucial steps for getting out of debt once and for all.

crucial steps to getting out of debt

As of September 2016, American consumers had racked up more than $12.35 trillion dollars in debt.  That results in the average American owing more than $16,00 in credit card debt.

Why so much debt?  While some is the result of medical debt and the need to cover living expenses due to a layoff, the majority is due to financing consumers lifestyles.


Well, there is not really such a thing as “good’ debt.  However, if you have taken out a home loan, that debt is not as bad as the other, more toxic type of debt.  Credit card, personal loans and automobile debts are all those you want to avoid.  The reason is that you continue to make payment items that lose value, such as your vehicles. You may also be making payments on items you no longer have, such as meals and entertainment.

If you feel the burden of debt, you are not alone.  Debt can be soul crushing and make you feel as if you are drowning.

But that is not how it has to be.  When you follow these crucial steps for getting out of debt, you get to regain control of your finances.  And your life.



Before you can start the process of getting out of debt, you have to really understand your own financial picture.  You really need to understand your Net Worth.

Your net worth is the net results of the assets you own less the liabilities you owe.  For example, if your house is worth $200,000, but you own $150,000, then your net worth would be $50,000.

When you do this, you gain clarity and can better understand your true financial well being. It can be the catalyst to jump start your desire to rid yourself of the bad debt once and for all.

Download your FREE Net Worth Form.



If you are in debt, then you have got to stop adding to it.  Right now.  That means putting the credit cards on ice (literally freeze them) or cut them up and get rid of them completely.

Continuing to increase your debt while trying to get out of debt is completely counter productive. In order to truly dig out from underneath that mountain of debt, you just have to stop spending.  Period.

You just can’t afford to add to your debt while trying to pay off your old debt.



Now, it may seem odd to hear someone say to save if you are trying to get out of debt, but it is true.  For many, the reason you have debt is because you did not have the cash on hand to buy things you needed.  For others it is because there was no money available in the case of an emergency.  That has lead to the use of credit to get out of these situations.

To start, do what you can to get at least $1,000 saved.  That way, if an emergency comes up while you are on your debt journey (and it always seems something does), you will have the cash on hand to cover it.  That prevents you from getting further into debt.

Just remember that if you do have to dip into your emergency fund, you need to build it back up again as quickly as possible.

Once you are out of debt, you can then continue to increase the balance of this fund to an even more comfortable level.

Read More: How To Rapidly Build Your Emergency Fund




The key to paying off your debt is to create a plan that works for you. This means that what your friend did to get out of debt may not quite be the right solution for you.

To start, make a list of all of your debts.  Make sure you also include the interest rate as well as the minimum payment.  Make sure you include everything: credit cards, vehicle loans, student loans, medical debt, etc.

There are two ways you can then go about tackling  your debt.  You can either start by paying off the loan with the highest interest rate first or you can work on your debt by paying off the one with the lowest balance.

I recommend that you start with lowest balance.

This is my preferred method as it helps you stay motivated and see progress more rapidly.  You will want to pay as much as you can afford on this debt each month, while continuing to make the minimum payment on the others. Continue to chip away at the smallest balance until it is paid in full.  Then, roll that payment into the payment you will make on the next debt and so forth.

Whichever method works for you, create your plan and stick to it.

Read More:  The Plan That I Followed to Pay Off More Than $37,000 In Debt



This is usually the tough part.  It means you have to take a good long look at your budget and figure out where you can cut back so you have more money for your debt.

For many, the areas to look to include dining out, entertainment, subscriptions, etc.  Do what you can to eliminate any expenses that are not necessary to living.

Anything that you can reduce or eliminate will get you on track to paying off your debt that much quicker.

Read More:  How to Create a Workable Budget



If you’ve already stretched your budget as tightly as it can go, it is time to see where you can find more money.  In fact, your budget may be the reason you are in debt.

To help eradicate your debt, you need more money.  You can do this buy picking up a side job or pick up a side hustle.  You may need to sell items you no longer need.

If you can increase your income, you will definitely be on track to get your debt paid down much quicker.



Each year, we all file our taxes.  For many, it results in a tax refund.  While it would be fun to go and blow it on something fun, that is not smart if you are in debt.

Instead, use any cash windfalls and throw it at your debt.  That includes not only your tax refund, but also any bonuses, gifts, etc.  If you find extra money, it goes towards your debt.

Read More: 50 Creative Ways to Get Out of Debt



Your debt did not accumulate overnight.  So, it is unrealistic to expect it to go away just as quickly.  Paying off your debt is a process that takes time.  It may take months, but for many, it will take years.  In fact, it took my husband and I a little more than two years to pay off more than $37,000 of our own debt.

The length of time will vary for every person.  You can’t compare yourself to someone else.  There are stories where people paid off $100,000 in 9 months, but that is definitely the exception to the rule.

Commit to the change and know it will take time for you to reach your goals.



If you are pushing forward with laser focused intensity, you will be successful in paying off each debt.  However, as you do, take time to celebrate your win.  When you know that you get to do something fun to celebrate each small victory, you can be more successful.

It may mean allowing a dinner out or buying a new pair of shoes.  There is no right or wrong.  Just make sure you don’t go overboard – and always pay for it with cash!



This is the most important lesson of all. You need to understand what lead you down this path to your debt.  Then, make a promise to yourself (and your partner) never to allow it to happen again.

Debt and shopping can be a disease.  It is addictive and it can be easy to find yourself making the same mistakes again.  Talk to your partner and make sure you are accountable to one another.  If you are single, ask a friend to be your accountability partner.

Learn from the mistakes you made and vow never to allow it to happen again.







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