How to Get Out of Debt: The Exact Steps We Took to Pay Off $26,619 in 17 Months
If you’re wondering how to get out of debt, look no further. Using the following get out of debt plan, we paid off over $26,619 in debt in 17 months and raised our net worth by almost $50,000. These debt repayment steps will help you to organize your finances and learn how to get out of debt.
I am a stickler for details and always want to know someone’s exact process. I’m sharing our exact steps that we used to get out of debt and stay there in the hopes that it can help someone else on their journey.
Our Debt Payoff Journey
Our debt payoff journey started almost 2 years ago, after we had our second child. We cash flowed our health care deductible for that year, and we were tired of trying to pour from an empty cup when it came to the struggle with the additional debt we’d been carrying for what seemed like forever.
Here we were, late 30s (me) and early 40s (my husband), and it still felt like we hadn’t hit that turning point in adulthood where you aren’t constantly playing financial catch up.
It was frustrating, and now that we had two kids to take care of, we’d had enough of struggling with getting out of debt.
We sat down and read financial books, blogs, and listened to podcasts. Our debt free journey was not a straight line in the least, but every extra payment helped us to get there eventually. We struggled through job loss and roof damage, fighting the urge to buy more, and saying no to purchases that weren’t an absolute need.
The steps to being debt free weren’t easy, but they all paid off in the end. We’re now debt free and working on fully funding our retirement funds, we have cash for some home improvement, and we’re starting investing.
So if you’re looking for tips on how to get out of debt, look no further. I break down the exact steps we took to get out of debt and stay out of debt!
How to Get Out of Debt
The biggest pieces to getting out of debt are mental. It’s about being dedicated, being able to figure out the difference between needs and want, using some tough love, and last, having a positive mindset.
Once you build up these strengths, you’ll be unstoppable. While you’re working on those, start going through our steps to get out of debt:
We added up all of our debts to see where we were starting.
While difficult, we had to face up to exactly where we were financially. Owning up to our situation was hard.
As much as I hated it, we owed up to the damage we did and decided it was time to accept responsibility for our actions and work on changing them.
Our first step in getting out of debt was to create a spreadsheet with all of our debt. Without knowing an exact amount we needed to pay off, we had no clue what we were aiming for.
We wrote down all the pertinent information on each loan, credit card, and any other debt (like parking tickets) owed. The spreadsheet included information such as:
- Total amount owed
- Monthly payment due
- Interest rate
- Contact information for the company
- Due date
Having a solid starting point took the fear out of our situation. Most of our fear stemmed from the unknown – not knowing exactly how deep we were in debt. Creating our spreadsheet to pay off debt helped us to face the unknown and take the first step in our debt repayment process.
We got mad at our debt.
One thing that Dave Ramsey has 100% right about debt repayment is that you have to get mad at your debt. If you’re not angry with it, you’ll never take it seriously.
The next step in our debt payoff plans was to get mad at our debt. And we sure did. We got mad at it for everything it prevented us from doing, and everything we were missing out on.
Our love for travel had to be put aside. Education contributions for our daughters’ college funds had to be paused. We weren’t putting as much towards retirement as we’d have liked.
It killed me that we were just handing money to several companies whenever we paid interest. That’s money that we could have been using to travel, save for our kids’ futures, or to do the house updates we’d been waiting on.
It took getting mad and becoming clear in our intentions to keep us on the right path to pay off our debt.
We also treated our debt like an emergency. Unless you prioritize it and make it into a big deal, you’ll never full get out from under it and you’ll just end up in the debt cycle over and over again. By making it our family’s priority, we were all on the same page and working towards the same debt free goal.
We admitted our weaknesses.
One of the best ways to get rid of debt is to avoid debt in the first place. My husband and I realized that we couldn’t seem to stem the bleeding when it came to credit cards. So we sucked it up and put our credit cards in the freezer and vowed not to take on any more debt.
It’s impossible to climb a mountain when it keeps growing. So we decided to put the cards away so that we could stop creating extra work for ourselves.
It was a hard habit to break, but it was the only way we were ever going to stop our debts from growing and conquer them.
If you truly cannot avoid taking on additional debt then find ways to save money on your purchases. Whether it’s buying items discounted or used, do everything you can to avoid taking on extra debt you don’t need.
We prioritized our debts.
We looked at our debts and chose to prioritize them by focusing on the smallest debt first. Our family decided to take this route because we needed the psychological boost that came from crossing off those small debts quickly.
We also focused on making sure that any zero percent interest credit cards were paid off one month prior to their introductory rate’s expiration. We wanted to make sure that we would never paid that accrued interest.
While it didn’t take priority for extra payments, they did take priority in making sure we were paying enough on them every month to completely pay them off prior to the introductory period.
You can also choose to prioritize your debt by paying on the highest interest rate first. Some people feel that the savings in interest payments is greater than the psychological boost of knocking out the smallest loans first.
Last, don’t forget to consider the type of loan. If you’ve borrowed from a family member, it can be good to pay them back first, especially to avoid tension or family drama.
There’s no right or wrong way to choose how to prioritize your debts. Just take the time to make a game plan of how you want to tackle them, and stick with it.
We created a budget and game plan.
Creating a budget was our next step so that we knew how much we had each month to put towards debt. We used this exact budget workbook to figure out how to balance our bills with debt repayment.
This budget sheet to pay off debt helped us to see our progress every month. It also helped me to realize that what’s budgeted for one month isn’t going to work for another. That we needed to create a new budget every month, depending upon upcoming events and expenses.
We have failed previously with budgeting because I did a monthly budget once, and thought it should automatically work for each month after. When it didn’t, I got frustrated.
It was only after having this new budget worksheet that I realized that I needed to do things differently.
Create a budget for your family and give yourself time to get it ironed out right. Remember that it’s a living document that will change and adjust as your family’s needs do.
We printed out charts to visually mark our progress.
Now that we had a debt amount, budget and game plan, we created a debt payoff schedule. We were able to predict how soon we could pay off our debt by creating the schedule.
In order to keep ourselves motivated, we used a pay down debt worksheet. By having a printed visual to hang up and color in, it worked as a daily reminder of our goals and helped us stay on track. (Feel free to print out some motivational quotes on finances as well!)
Here’s a free pay off debt printable worksheet that I created that you can download to use to track your progress as well:
We created a mini emergency fund.
Something always comes up that you forget or can’t budget for. Until you can work on creating sinking funds, an mini emergency fund is important.
First we built up a mini emergency fund of $1,000 first before we started to tackle our debt. We made sure it was enough to cover a chunk of our family medical deductible or small car repairs or a couple of new tires. I didn’t want to tie up more than that when we were paying so much in interest.
After we paid off our debt we started to save our full emergency fund, which is 3 – 6 months of our expenses.
We also started creating Dave Ramsey sinking funds for unavoidable items that we knew would irregularly pop up in our budget occasionally. It was better to have that extra cash instead of creating more debt by putting it on a credit card.
We cut the budget where we could.
One of the best ways to get out of debt is to either make more money or cut your expenses. Preferably, it’d be quickest to do both.
First, we started by cutting our budget. Anything unnecessary was cut. We got rid of cable, switched to StraightTalk for our cell phones, and made a lot of other cuts to trim our budget down as much as possible.
Start by working on trimming one bill a week so you don’t get overwhelmed. Also, use services like Trim to help you trim your expenses while saving you time and the extra work. You can read about how we were able to save $240 in about 5 minutes of work with Trim here.
Also review your insurance coverage, health care deductibles, and even daycare expenses. We were able to negotiate our daycare costs so that we saved $25 a month. While it’s not much, it’s better than nothing.
We also used the Grocery Budget Makeover to help us to trim our grocery costs and eat at home more to save money. When we did eat out, we found cheap places to eat and used several tips and tricks to help cut the cost.
You can read more about 13 expenses that we cut in order to save over $700 a month here, or 12 ways to save money on a tight budget.
We picked up extra jobs.
The other half of the getting out of debt quick equation is to make more money. It’s the perfect time to reassess your earnings and see where you can step it up.
Luckily, I am a website designer during the day, so I was able to pick up freelance jobs to help earn additional income. Look at ways to pick up freelance in your current industry first. It’s the easiest and quickest way to score a side gig and make extra money without too much of a learning curve.
Also, don’t forget to look for opportunities to pick up extra shifts, holiday hours, extra work, or ask for a raise. You already work there, so it makes sense to start there when looking for extra income.
There are tons of ways to make extra income to eliminate your debts. You can start by reviewing these ways to pick up extra work without too much hassle:
- The Ultimate List of Best Side Hustles that Aren’t MLMs
- How to Make Money Fast: Finding the Perfect Side Hustle
- The Best Passive Income Ideas to Boost Your Income
- Side Hustle Resources
We learned to say no, even if we didn’t want to.
One of the hardest ways to get out of debt was to turn down plans with friends or family or pass on opportunities to purchase items we really wanted.
It sucked and felt so awkward to talk to our family out about situation and how it affected our ability to give presents at Christmas. While we felt like we didn’t have much to give, they didn’t care. What really mattered to them was that we were together and and got to spend the holidays at their house.
It really does show that what matters is you, not the gifts you give. If you choose to follow this route, talk to them ahead of time about what the expectations are for the holidays and gift giving. Chances are you could even be providing them with a much needed financial break as well.
Or, if you choose to skip this step, make sure to plan ahead and start budgeting for the holidays months ahead, so you’re not scrambling to put gifts on your credit card. You know it’s coming so there’s really no excuse for not planning ahead for it.
Also learn how to triple stack your savings when you make purchases by doing a little research. It’s worth the time and effort to be able to save a lot on those Christmas presents!
We put every extra penny towards our debt.
Getting out of debt quick isn’t easy, so we put everything we had into it. Every extra tax refund, bonus, raise or extra cash that came our way went to our debt.
We even took some savings we had set aside for specific events and put it towards our debt. Even though it was a difficult decision to make, it helped us to realize just how serious we were to get out of debt quickly and for the last time.
We celebrated each win, no matter how small.
Every extra payment we made, every small debt we paid off were milestones worth celebrating. That doesn’t mean we went out to a crazy expensive dinner and movie every time we hit a milestone, but we found small ways to celebrate our financial accomplishments.
We did things like buying a bottle of wine or renting a movie we really wanted to see. Once we started to see progress on our debt repayment, it was hard to put money towards anything other than our debt. So we compromised by remembering to celebrate, but doing so in a way that didn’t sidetrack us from our goals.
We didn’t let setbacks stop us.
Setbacks are going to happen no matter what. No journey is ever a straight line. No matter how hard that is to hear, it was important to take everything one step at a time and deal with whatever comes up.
My husband lost his job four months into our debt repayment journey. Talk about crap timing. But we didn’t let it stop us though – he filed for unemployment, we busted our butts to temporarily cut costs even more.
We found ways to not only make ends meet, but to thrive as well.
We also had roof damage from a bad storm later that summer. Rather than feeling sorry for ourselves, we just accepted it and got several estimates. We used our emergency fund and rather than get upset or frustrated, we used it as motivation to find new ways to pull in extra cash by selling stuff around the house and having yard sales.
Remember that any setbacks are temporary and don’t seal your financial fate. Big wig financial gurus like Dave Ramsey and Suze Orman have figuratively hit rock bottom when it came to finances – and look at them now! Remember that a setback is as good or bad as your perspective.
My husband losing his job turned out to be the best thing ever. He was miserable and hated his work. Getting laid off freed him up to find something he’s truly passionate about and he’s naturally excelling at his new workplace because he enjoys being there.
We surrounded ourselves with like-minded people to support and motivate us.
Learning how to get out of debt meant finding resources that gave us new and fresh ideas on how to approach our debt repayment. I love the support and friendship I’ve found in Facebook groups and with other personal finance bloggers. It’s so nice to have someone to bounce financial ideas off of and to discuss tactics with.
Most people don’t “get” the debt free mentality and why you’d want to live that lifestyle. That’s their loss. Ignore the side-eye from them, keep doing your thing, and work on finding your tribe.
I also find that it’s important to fill your social media feeds with like minded people as well as a reminder. It’s a great way to remember your goals and where you want to be.
Make sure to follow bloggers, read personal finance books, and listen to podcasts on personal finance to keep your fire for debt repayment burning at full force. Don’t forget these financial freedom quotes to help keep you inspired if things get tough.
Learning how to get out of debt isn’t hard but it’s important to be consistent. Just like building muscle, it’s about those daily steps you take that really matter. Break it up into smaller pieces to focus on so that it’s not overwhelming.
Just like no one becomes Arnold Schwarzenegger overnight, no one becomes debt free in a week. Keep focusing on these small steps and you’ll be debt free sooner than you realize.
Have you started your debt free journey? If not, why not? What’s holding you back? Let me know in the comments below!
A forty-ish web designer/developer by day, a budget & financial fanatic by night. I’m a mom, wife, avid reader, and DIY enthusiast who’s tracking our journey to debt freedom. Read More