6 Crucial Steps to Getting Out of Debt

Tuesday, February 21, 2017

When my wife and I got married in 2012 we were a combined $65k in debt.  We weren’t exactly on the same page when it came to personal finances when we first got married. It took us a few months and some serious conversations before we were able to come to a consensus on what we wanted to do with the massive amount of debt that we had. Which brings me to the first and most important step.


Get on the same page as your spouse – Crucial, absolutely necessary. If the two of you are not going in the same direction it will be a constant battle that could have major negative repercussions. My recommendation is to figure this part of it out before you get married.

It’s natural for one of you to be the saver (me) and one of you to be the spender (my wife); opposites attract. The longer I have been married the more I appreciate my wife for being a spender. We would literally be the most boring couple ever if we were both savers. We would never have any fun and would never leave the house (that doesn’t sound too bad). Balance is a great thing. She enjoys spending money, specifically spending it on other people. It brings her joy, which is actually an added bonus for me when she spends her own money on gifts for me. Thanks hun! For those of you that are not married yet you can skip Step 1. Just remember this when/if you decide to get married. Bringing two people together brings on enough challenges and life adjustments alone, excluding personal finances.


Make a stinkin’ budget! No excuses. Is it hard? It can be. Is it monotonous and tedious and time-consuming? Yes. What do you want most? Nothing worthwhile in life is easy and convenient. Relationships take effort, personal finance takes effort. Grow up and deal with it. How will you know where your money is going if you don’t track it? How will you know how much debt you can pay off each month if you are not tracking it?

There are so many resources out there for budgeting. I personally use an Excel spreadsheet and it works great for me. I track all of the money coming in and all of the money going out. DOWN TO THE PENNY! If you were to ask me how much I spent on dog food in March of 2014, I could pull up my handy-dandy spreadsheet and give you an exact figure.

Dave Ramsey has a great free tool called Every Dollar that can even be connected to your bank account (for a small fee) if you would like to essentially have it automate the process for you. Find the budgeting tool that works best for you and utilize it.


Have an emergency fund. At least $1,000. The last thing you want to happen is you have a minor emergency come up and you have spent all of your cash on paying off debt and have to pull out that credit card to pay a bill. If you are wondering how much you should have check out this post where I cover what a fully funded emergency fund looks like.

A $1,000 emergency fund is just a baby emergency fund to get you started. If you are serious about getting out of debt I think $1,000 is enough. If you are just thinking about it and casually paying down debt you may want more of an emergency fund. $1,000 is going to cover the vast majority of emergencies. The longer it takes you to get out of debt the more risk you are taking on and greater are the odds that you will need to utilize that emergency fund.


Make a debt payoff plan.

Snowball Plan

I personally like Dave Ramsey’s debt snowball plan. I used a slight variation of this and it worked for me. If you are not familiar with the debt snowball here is what it is in a nutshell. Payoff your debts from lowest balance to highest balance irregardless of interest rate. The thought process behind this strategy is that paying off debt is more a battle of the mind than it is a physical battle. I think there is a lot of truth to this. Paying off your smallest debt first gives you a quick win and keeps you motivated to pay off the next debt which will be a little larger and thus take more time.

For most of us there is an emotional attachment to money. Most people don’t look at it as simply a tool but actually connect it with their happiness and well-being. I won’t go any further on that topic. I’ll leave that one to the psychologists.

Interest Rate Plan

Some people see paying off debt as strictly a numbers game. They want to pay off the highest interest debt first. Logically, this is the best way to pay off debt and it will ultimately save you the most money on interest and get you there the quickest. I can see the advantage of paying off debt this way. However, the downside to this strategy is the risk that you will lose all enthusiasm and motivation halfway through and give up.

The Hate Plan

Lastly, I came across another alternative to debt payoff which is a bit unconventional but taps in to that emotional side of personal finance. Ty over at getrichquickish.net came up with this method. Essentially, you pay off the debt you HATE the most first. I could see how this would be highly motivating. I despised my student loans and so badly wanted to destroy them. However, for me they happened to be my largest debts so I saved them for the end.

All of these strategies work. The main thing is that you have a plan. This chart below shows all of our debt and the order in which we paid them off. For the most part we saved the student loan debt for the end as they were the largest and just so happened to be some of the lower interest rate loans as well. Our car loan and the credit card I used to pay for part of my wife’s engagement ring (don’t do this) was actually the smallest debts we had but since they both happened to be 0% interest for a while we decided to pay off the other credit card first since it was the highest interest rate and also was the debt we hated the most!


Execute your plan with intensity. How long do you want to stay where you are? The quicker you get moving the quicker you will get out of debt and on with your life. One of the best ways to accelerate your debt payoff plan is side hustles. Work overtime at your job if that is an option. Take on a part-time job on the weekends or get signed up driving with Uber in the evenings. Start a blog like I did! There are hundreds of ways to make extra money. Sell something! How bad do you want this? I took on a second job that brought in a few hundred dollars a month extra. I sold some stuff on Ebay. Think of all of the junk that you probably have stored away in a closet in your house. Turn that stuff that you never use into cash.

Here’s an idea: Go dumpster diving. No joke! Check out Financial Panther’s side hustle reports. He regularly grabs perfectly good stuff out of dumpsters, lists it on Craigslist and sells it for 100% profit. Think that’s beneath you? This guy is a lawyer! This is the kind of intensity that I am talking about.


Cut down your lifestyle. This step goes hand-in-hand with step 5. If you are really serious and want to accelerate your debt payoff plan find ways to cut down your lifestyle.

Friends Factor

Are your friends going to give you a hard time when you decide to stay home as opposed to going out every weekend? Possibly. Again, I ask, what do you want most? Do you want the approval of your friends or do you want to take control of your finances? I promise you, your friends are not going to contribute to your retirement accounts and they are not going to pay down your car loan for you. It’s your decision. If you are spending $500/mo going out to eat that equals $12,000 in two years time. How much faster could you pay down your debt if you threw another $12,000 at it?

Cut Out The Excess

What other extras do you have in your life that are not necessities. When we became serious about reducing our debt, we immediately ended our cable subscription. We chose a Netflix subscription for $10 a month and never looked back. There are so many ways to cut back your lifestyle and save money. Be creative.

Becoming debt free is an awesome feeling. Whatever you have to overcome to get there will be worth it. The number one thing that debt freedom has given us is choices. Choices to spend our money the way we want to. When we started our debt free journey our total monthly minimum payments on all of our debt was close to $1,000! Freeing up this money has allowed us to save more, give more and live a less stressful life.

About our guest blogger:  Ryan is a millennial personal finance expert that blogs at MillennialLegacy.com. Ryan's focus is on helping post-graduate millennials make good personal and financial decisions and leave a lasting legacy.


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