How To Get Out Of Debt: 8 Simple Steps For The Always Broke

| March 28, 2018 | 0 Comments

Debt sucks. There is no better way to say it. It just plain sucks. But there is hope. You too can claw your way out of debt and make a better life for yourself.

Debt is a never-ending death spiral that once entered can suck you down further and further into the abyss. Very little help is offered to get you out.

Why is there no help?

Banks and credit card companies make lots of money off of your debt, so it is in their own interest to keep you floundering in debt. In essence, your paycheck now just goes to the bank/credit card instead of coming home to support your life.

So now, we understand that you are not going to get any help in getting out of debt. It’s got to come from within. Let’s dive into your debt transformation and what it takes for you to find yourself in the black once again.

1. Understand What Got Us Here In The First Place

First off we need to look within to see what got us into debt in the first place.

What habits have we made that got us here?

To answer this, we need to take a long honest look at ourselves and think about what we do for fun, what we spend our money on, and what our values are.

On a regular basis, where are we going and hanging out? Is every place we go costing money or are some of them free?

What purchases do we make on a regular basis that got us to this point? Do we even know or does it just seem to build upon itself in a never-ending death spiral?

I know, I know, there a lot of questions here and no answers. That is kind of the point. We will find the answers shortly.

It is hard to look inside and think about what is wrong with ourselves or to admit that we made mistakes in our past that are still biting us in the ass. However, in answering all of these questions we will learn about ourselves and hopefully be able to move forward.

After we learn about ourselves, we can move forward with fixing the issues. The rest of the steps below will help us to continue learning about what got us here and how we are going to get out of this mess.

Taking this first step and admitting that we have a problem is the most difficult.

2. Figure Out Just How Much Debt We Have

We have looked inside ourselves and pondered on what got us into this situation, but do we really know what our situation is?

We must put pen to paper and tally up all of our debt. No debt is too small. Even if we plan to not pay it back (we should pay back everything), we need to include it here.

So where are all of those debts?

We need to go to all of the websites, collect all the debt notices, and any other info on the debts we have and look into them to understand what they are and the terms. Aggregating all the info together will help us to later form a plan.

Possible debts that we might have:

  • Credit cards, possibly multiple maxed out cards
  • Car loans
  • Student loans
  • Home equity loans
  • Loan sharks
  • Loans from friends and family (these are important even if they said they don’t want the money back)

Along with recording all the loan amounts we have, we need to record interest rates, required minimum payments, and other applicable loan terms.

Once we have all of the debts recorded in one place we can sum it up and see how much we owe, the distribution of interest rates we are dealing with, and the sum of minimum payments (our lowest possible payment each month). Don’t worry right now about the amounts, we will work on that later.

For now, we need to congratulate ourselves for finally getting a full picture of where we stand. It is the first step in progress. We cannot move forward if we do not know where we stand.

3. Track Your Income And Expenses

Without knowledge of where our money is coming from and going to how are we supposed to really understand our debt?

Tracking our income and expenses is a great exercise for everyone. For it to be a good tool to get us out of debt, though, we need to be hyper-vigilant. We must track everything down to the penny. No rounding,  no shortcutting. Real honest tracking of all of our income and expenses. No expense is too small to be left off. That $1 soda every day adds up over the course of the month.

It may seem like nit-picking to say we have to track every penny. Pennies aren’t worth anything anymore. Hell, a dollar really isn’t worth much anymore. But that’s not the point. We are building habits.

With the habit of tracking every penny, we will begin to really understand our money habits and get a true picture of who we are. Without it, it is pure conjecture. We must have data (the income and expenses we are recording) to prove that we are on the right path. Without the data, we may continue in the debt death spiral.

To get out of the death spiral we must take drastic action. The first drastic action is to track everything so we know what is happening and we can begin to plan the exit.

Tools For Tracking

To help us with tracking there are many tools available to us. Below are a few of my favorites:

  • Personal Capital
  • GnuCash
  • Ledger / H-Ledger (for advanced users)
  • Spreadsheets
  • Pen and Paper

All of these are free tools that can help us to record and organize our income and expenses. Personal Capital and are both free online tools that link with you online accounts and auto-pull our credit card and bank transactions in and categorize them.

The other programs and methods are manual and require us to enter all our income and expenses. The benefit of doing everything manually, especially at first it that we will become intimately familiar with everything entering and exiting our accounts.

It cannot be understated how important this step is. It proves crucial to losing weight, winning competitions, and crushing debt.

4. Change Your Spending Habits

Now that we are tracking our cash flow, we can truly analyze our spending habits and see if any of them are what is causing us to stay inside the debt death spiral.

First, let’s categorize and sum up our income and expenses for each month to see where our money is going.

Are we spending all of our money on food, housing, utilities, and insurance? What about shopping expenses?

Depending on where our money is going our attack plan will be different, but remember this one thing:

No matter what we are paying for something, there is always a cheaper alternative.

The easiest one to cut is shopping expenses. If we see these high, we can simply stop buying so many things. Better yet, we can go cold turkey and just stop buying stuff. It is mostly frivolous stuff anyways. If we truly look back at all the things we buy, how much do we actually use? The answer, very little. It’s mostly garbage and a huge money suck, so cut the fat.

If we see that our housing expense is super high, maybe it is time to look at moving to a smaller, cheaper home. I know, moving is a hassle, but if it is what can get us out of debt, it is worth it.

We need to keep repeating to ourselves in this step, there is always a cheaper alternative. But we must not forget, this need not be permanent. We are sacrificing today to get out of debt, so that we may live free from the burden in the future.

Debt is an emergency! We must take swift, decisive action against it.

5. Decide How Much You Can Afford To Pay Off

So far we have detailed our debt, tracked our income and expenses, and cut some of the fat, so now its time to slay that debt! All the steps leading up to this have been preparing us to pay off our debt.

Now that we see our income and expenses all together we need to look at it very analytically. Let’s do a little bit of math:

Income – Expenses – Savings – Debt Payment = 0

Let’s rewrite this in a better form to isolate our debt repayment.

Debt Payments = Income – Expenses  – Savings

It is absolutely crucial above to notice the savings included. We want to pay our future selves. While we are aggressively paying off debt, we also want to save a little bit to set ourselves up for future success and make sure we do not have to go back into debt if something happens.

The amount we can afford to pay each month cannot be stated anymore simply than the above equation. But we can work to increase income and decrease expenses.

6. Put Together A Debt Plan

Now we have all the information to start making a plan of attack to slay our debt. We know all of our debts and their properties, we know our cash flow and we know how much we can afford to pay each month.

Let’s put together a debt plan.

We need to sum up all of the minimum payments on all of our debts to make sure our planned debt payment from the previous step is greater than or equal to the minimum payment. If it is not, then we may need some outside help. the debt death spiral has us trapped. Time to take drastic action to reduce our expenses or increase our income.

However, if our planned debt payment is larger than the sum of minimum payments then we are set. We then order our payments in terms of interest rate and pay any amount in excess of the minimum payments to the highest interest rate loan.

After the highest interest rate loan is paid off, we work our way down the list to the next highest. And so on, and so forth, until all debts are repaid.

The plan is simple because a simple plan is one that can be followed. Anything complicated becomes thrown to the wayside. We can also calculate the time it will take to repay all of our loans by using calculators to help, but let’s just move forward with payment.

7. Start Making Payments

Now we are done planning and it is all action. It is time for us to start making payments on those accursed loans and begin digging ourselves out of debt.

The more debt that is crushed the freer we will feel. We don’t necessarily feel the weight of the loans while we are under them, but when we take a breath of fresh air from atop the conquered debt mountain, we will understand.

We just need to make sure we continue to make those payments, no matter what happens. If we get a bonus or we get a tax refund at the end of the year, we can take that to pay down the debt even faster. The more progress we make, the more motivating it will be to keep going.

A journey of a thousand miles starts with a single step. ~Laozi (604-531BC)

So let’s get started.

8. Don’t Create More Debt

The last point we need to understand is that on this journey, there will be opportunities all over the place to lead us astray. We must resist these opportunities and stay on the straight and narrow path out of debt. We must continue making payments and we must not create more debt.

If we create more debt, then we probably are not yet committed to getting out of debt. When we are deep enough in debt and it is hurting us enough our commitment will strengthen enough to get us out of debt.

No matter how dire our circumstance, no matter how bad we feel we have it, we always have the power to pay back our debts and live a life of freedom.


If you follow these 8 steps you will be well on your way to crushing the debt death spiral and being on the straight-and-narrow path to financial freedom.

Debt is an emergency and we must treat it as such. If we do not, we fall prey to the tendency to always push it off. Instead of paying $30,000 for that student loan or that credit card debt, we could pay $50,000+ for the same loan simply because of compound interest.

I would like to end this post with a quote I heard on one of my favorite TV Shows, The Flash. It is actually from one of the bad guys that has a moral conflict and eventually joins the good guys.

  1. Make the plan.
  2. Execute the plan.
  3. Expect the plan to go off the rails.
  4. Throw away the plan.

~Leonard Snart (The Flash)

Following the 8 simple steps above will get you ready and on your way to slaying your debt. Life will happen that may get in the way and may require you to rethink the plan. It’s okay to throw it away, but move forward with formulating a new plan and you can get back on track. Always keep the goal in mind and you will succeed despite stumbling along the way.

Note: This article originally appeared at Atypical Life.


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Category: Personal Finance

About the Author ()

Why Atypical Life? The question really is, why live a typical life when you can live an atypical life? All of us grow up “knowing” what is expected of our path in life. Go to school, get a job, get married, have kids, work your whole life, hopefully retire, then die. Oh, and pay your taxes! This is a typical boring life where you are constrained from your full potential your entire life. We are striving for an atypical life, one where we are free to live where we want and free to do what we deem most important. These principles differ for everybody, but I truly believe we all desire to be free. We all want the atypical life of freedom.

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