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The Complete Guide To Getting Out of Debt

If you’re in debt and you need to get out of it, there’s really only one piece of advice that can be given to you: you need to have a plan.

Even if this may sound overly simple, it’s true. Not having a plan means you more than likely won’t get out of debt, and it also means that chances are good your debt will only get worse.

Fortunately, forming a plan to get rid of your debt is not a difficult thing to do. This article will discuss the basic steps your plan needs to have to get out of debt, tips to follow to help you execute that plan accordingly, and then the top mistakes that you must avoid at all costs in order to get out of debt.

The Basic Steps to Getting Out of Debt

This section will outline and discuss the basic steps that you will need to follow to get out of debt. Some of these steps may seem a little rudimentary, but they are necessary to follow:


First and foremost, you need to make a detailed list of each and every one of your debts as well as write down the information on those debts.

For instance, not only should you write down the type and amount of debt you owe, but you should also write down important data such as the creditor name, the interest rate, the balance you owe, and the minimum payment you owe.

You also need to remember to include loans that are not featured in your credit reports as well.

While making a list of all of your debts is not going to be a fun activity and may even be painful to see, it is necessary in order to fully confront the reality of your situation and get a grasp of what you need to pay back.


High interest rates really add onto the amount of debt you owe. Simply put, the higher your interest rates, the more difficult your debt is to pay off.

This is why, if it is possible, you need to take action to lower your interest rates as much as possible.

If you have a high enough credit score, you may be able to qualify for lower interest rates on your credit cards. Alternatively, you can try transferring your credit card debt to a balance transfer credit card (more information on this later).


As was noted in the introduction, having a plan is by far the most important tip to follow in order to get out of debt.

What does this plan need to consist of? A number of things.

First of all, you need to figure out if you can currently afford to pay the required monthly payments on each of your debts each month. If you discover you are able to, you’re already one step closer to eventually eliminating your debt.

Next, you need to choose which debts you want to focus on paying off first. There are two schools of thought here.

One is to focus on paying off the smallest debts first. This is referred to as the ‘debt snowball’ method. The idea is that you’ll get on a roll paying off debt after debt after debt, starting off with the smaller and easier ones, and that you’ll build up financial as well as psychological momentum to eventually have all of your debt paid off first.

Another strategy is to focus on paying the debt with the highest interest rate first, regardless of what amount you owe. The argument behind this is that by targeting your high interest rate debts first, you’ll avoid paying those higher interest rates later and thus you’ll save more money.

As far as which of these two methods is superior, it really comes down to your situation. Mathematically speaking, chances are good that paying off your highest interest rates will save you more money over the long term. But at the same time, there’s also no denying that targeting your smaller debts first helps you to feel more and more motivated to actually pay off your debts later.

What really matters, however, is that you actually do choose a method to begin with and that you target specific debts to pay off first while making the required minimum monthly payments on all of the others.

Tips For Getting Out of Debt

Now that we know the basic steps you need to follow for getting out of debt, we will cover some basic tips:


This is one of the more overlooked tips when it comes to getting out of debt. But knowing your why really is one of the most important tips to follow to get out of debt, because without knowing why you want or need to get out of debt, you may not feel motivated to actually follow through with the strategy that you plan.

Getting out of debt will require you to make sacrifices, which may not only disappoint yourself but your family as well. This is why knowing your reasons for becoming debt free and associating positive feelings and emotions with that is so important.

Ask yourself how your life will change by getting out of debt. You’ll obviously have much more financial freedom, since far less of your monthly income will have to go to paying things off. This fact alone should give you peace of mind and less stress.

Furthermore, living debt free will dramatically free up what you can do. You can save more money, make more investments, take more vacations, and so on. Visualize how your life will be living debt free, and it will help keep you motivated.


Always try to pay more than the minimum monthly payment, even if it’s only a little bit. For example, if your minimum monthly payment on a credit card balance is $100, paying $110 a month will be better than paying $100.

By making more than the minimum monthly payment even by a small amount, you will reduce the amount you owe in interest and the payoff process will be greatly sped up as well.


This is one of the most common pieces of advice when it comes to getting out of debt, but it’s worth repeating.

Earning extra money, and then using that money to actually pay off your debts rather than for other purposes, is one of the most effective strategies you can follow to pay off your debts as quickly as possible.

It’s also much easier to earn extra money in today’s world than ever before. You can easily secure freelancing jobs online for instance, such as freelance writing jobs, graphic design work, social media management, photo editing or artwork, or really anything else that you’re good at.

Sure, you’ll have to work more, but the dollars you earn every day from those extra jobs will really start to add up, and that’s what will make it worth it.


There will be few worst detriments to your efforts to get out of debt than expensive habits. A $4 coffee a day may sound cheap, but if you get that coffee every day, that’s approximately $120 a month.

What if you made your own coffee at home and then used that $120 to pay off your credit card or other forms of debt, for example?

Make a list of your top five or so expensive habits, and then reduce the amount of money you spend on those habits as much as possible. Use the money left over for paying your debts off.


Like we mentioned previously, you can transfer credit card debt to a balance credit card to reduce the amount of money you will have to pay in interest rates.

Some balance transfer credit cards will have a zero percent interest rate for a certain period of time (such as twelve to eighteen months).

By transferring the debt from one credit card to the other, you can then begin to make monthly payments without having to pay any interest. This is why balance transfer credit cards truly can be your best friend, at least when it comes to credit card debt.

Top Mistakes To Avoid When Getting Out of Debt

There are also a number of critical mistakes that you will want to avoid when getting out of debt as well. These are:


It will be extremely difficult if not downright impossible to have control over your finances without having a budget.

You need to have a basic and yet sensible budget that outlines all of your financial needs from health care to insurance to food to emergency funds (more on this in a bit) to mortgage payments to car payments and of course to your debts.

Forming a budget simply allows you to track your spending and gives you total control of your finances. Failing to form a budget means you’re essentially shooting yourself in the foot before you’ve even begun to pay back your debt.


Trying to pay off multiple debts at once will backfire because it will only extend the amount of time that you have to pay it off, which in turn means you’ll pay more in interest rates.

As was noted previously, follow the method of either paying off your smallest debt first or the debt with the highest interest rate first.

Regardless of which method that you choose, what matters is that you target your debt down specifically so you can eliminate each debt you owe one by one. This will be a far cheaper and more efficient debt reduction method to follow.


Having an emergency fund, and ideally with at least three months of living expenses in it, is a very wise financial move to make. Nearly 60% of Americans are unable to cover unexpected expenses of five hundred dollars or more. For all you know, you could become unemployed tomorrow.

If you don’t yet have an emergency fund, start building one by contributing money to it each month. Just because you’re simultaneously working on paying off your debts is not an excuse to not have an emergency fund. Even if you can only contribute a small amount, such as $25 to $50 a month, that’s definitely better than nothing at all.


Last but not least, you will have to make sacrifices and that means changing your spending habits in order to get rid of debt. Reduce the amount of time you spend eating out, cut back on the coffee, and ask yourself if it’s really necessary to have that TV subscription that you don’t really use.

Adjusting your spending habits to save just a small handful of dollars each day will really add up to help you save money that can be used for your debt reduction efforts.


In conclusion, it’s incredibly easy to remain living in debt. Many people who are in a pile of debt right now choose to do nothing about their situation, but only because they don’t want to confront their current reality.

That being said, getting out of debt will help give you strong peace of mind knowing that you are in a much more secure and stable financial situation, not to mention the immense amount of financial freedom that comes along with it.

But no matter how much or what type of debt you are currently in, what’s most important of all is that you actually develop a plan using the steps and tips that the information in this article has covered while simultaneously avoiding the above mistakes as well.

There’s always a way out when you are in debt, and while becoming debt free won’t happen overnight or even over the course of a week or a month, a debt free life will be in your future by successful application of the strategies covered here today.



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