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INTRODUCTION
When you become an adult, suddenly, you realize you have to figure out your money and how to handle debt. When I graduated from school, I remember staying awake at night, feeling the crushing burden of my debt shackled to me. You may not have the same visceral reaction, but debt can negatively affect your finances over time. Even though debt can feel overwhelming, with the right plan, you can overcome it and open doors to a brighter financial future. I became debt-free and have remanded so for several years, even while planning my wedding with some key money habits. Here are 12 helpful steps to get out of debt no matter where you are on your financial journey.
ENVISION YOUR DEBT-FREE LIFE
Before you dive into the numbers, take a moment to imagine your life without debt. At first, I just wanted to feel less worried about money. Then, I gradually started thinking about what my life would be like being debt-free. I could travel to Europe, build wealth, and afford a wedding without debt. These visions of what life could be motivated me to eliminate my soul-crushing debt.
What would you do with the money you currently spend on debt payments? What is your big, motivating “why” for getting debt-free? Maybe you’d take a dream vacation, invest in your future, have a wedding in Paris, or start a family without financial stress. Visualizing the freedom that comes with being debt-free can be incredibly motivating. It’s not just about the money—it’s about giving yourself choices. Make money support you so that you can build wealth and create the future you hope for. Let this vision be your driving force as you begin your debt-free journey.
FACE YOUR DEBT AND CALCULATE YOUR NET WORTH
It’s tempting to avoid the reality of your debt, but facing it head-on is the first step to conquering it. Facing the reality of my debt was unpleasant, but I had to confront it to create a plan. Work through the emotions that you feel about your debt and spending. All your feelings about debt are valid; the most important thing is not to avoid your debt but to create a plan that works for you. Journal, learn about money, work with a financial therapist, remember your motivating “why” or get an accountability partner. You can do this. Get whatever support you need, and don't let your fear or procrastination stop you on your journey toward financial freedom.
To face your debt, you must collect all your debt information, including balances, interest rates, and minimum payments for every loan or credit card you have. Make a list or spreadsheet to get a complete picture of what you owe. Budgeting apps like YNAB can also help you track your debt payments.
Once you have your numbers, calculate your net worth. Your net worth is your assets (what you own) minus your liabilities (what you owe). Your net worth gives you a snapshot of your financial health. Seeing the numbers might be daunting, especially if they are large negative numbers. However, knowing your net worth is critical in understanding where you are and where you need to go financially. I use a budgeting app called Simplifi to help track my net worth, but several budgeting apps will do so, too. Once you know your net worth, you can track it regularly as you pay off debt and feel motivated as the number grows and you build wealth.
TRACK YOUR SPENDING AND CREATE A BUDGET
Making a plan for your money and sticking to it is the only way out of debt. I had to become very intentional with my money to get out of debt, and I couldn't do it without a budget. Start by tracking your spending for just one month. You can use a budget app like YNAB or Simplifi to track your expenses, bills, debts, etc. After you track your spending, you can then create a plan that helps you effectively direct money where you want it to go and enables you to pay off your debt.
You must control your spending and make mindful choices to avoid adding to your debt. Consider using cash or a debit card instead of relying on credit cards. Learn your spending triggers or situations that arise where you are more tempted to spend money, like when you shop online late at night out of boredom. Start allocating a specific portion of your income towards debt repayment before addressing other expenses. Review your budget consistently and make adjustments as needed to stay on track. If you’re struggling to navigate your debt, don’t hesitate to seek professional advice—whether through a certified financial planner or financial coach—to create a personalized plan tailored to your financial situation.
AVOID MORE DEBT BY CREATING MONEY RULES
One of the most complex parts of paying off debt is avoiding the temptation to take on more debt. Establish and stick to personal money rules. For example, ditch credit cards if they tempt you to overspend or put them on ice by freezing them in a block of water. This forces you to think twice before using them. Other valuable rules include a “24-hour waiting period” for any non-essential purchases. Money rules give you time to evaluate whether it’s something you need or a temporary impulse. These small rules can drastically reduce your chances of slipping back into debt while you work on paying off what you owe.
SET A DATE FOR WHEN YOU WANT TO BE DEBT-FREE
One of the most critical parts of getting out of debt is setting a specific timeframe for when you want to be debt-free. When I developed my plan, I gave myself 7 years to pay it off. Why 7 years? Because I knew my career and life milestones, I knew I would have some career decisions to make in 7 years, and I didn't want debt to be a factor.
Decide when you want to be completely free of debt. Is it in three weeks, six months, or even ten years? Break it down into monthly or bi-weekly goals, depending on how often you get paid. For example, if you want to pay off $10,000 of debt in two years, you must pay roughly $417 monthly. Creating a specific, time-bound goal helps you stay on track and makes the finish line feel more tangible. Adjust as needed, but always keep your timeline in sight.
CREATE A DEBT PAYOFF STRATEGY THAT SUPPORTS YOU
Debt payoff strategies aren’t one-size-fits-all. How you pay off debt will depend on the type of debt you have, your interest rate, and your comfort. Two popular debt payoff strategies are the “snowball” and the “avalanche” method for paying off debt. Let’s examine these strategies in more detail.
Snowball Method
The snowball method focuses on paying off your smallest debts first, regardless of interest rates. This method is excellent for maintaining motivation, as clearing smaller balances quickly provides a sense of accomplishment. The psychological boost of seeing your debts, like school loans, vanish one by one can be incredibly encouraging, especially if you’re feeling overwhelmed by the amount you owe. This method is popular with Dave Ramsey’s money program and what I used to repay my school loans. The snowball method helps you stick to your repayment plan by building confidence and gaining traction early on.
Avalanche Method
When tackling debt, you can consider paying off high-interest debt first with a strategy known as the avalanche method. High-interest debt is any debt with an interest rate higher than the average for mortgages and student loans, typically 7-8% and above. The avalanche method targets the debts with the most interest. This payoff approach can help you save money in the long run by reducing the total interest paid over time.
You can save hundreds or thousands of dollars in interest payments by prioritizing high-interest debts, such as credit card balances. Saving on interest payments allows more payments to go directly toward reducing the principal balance. While it may take longer to see individual debts disappear, this strategy offers the most significant financial benefit if you have a lot of credit card or high-interest debt.
Other Considerations
In addition to the snowball and avalanche methods, consider consolidating or refinancing your debt to secure lower interest rates, simplifying your payments, and making the process more manageable. Also, consider calling your lenders about lowering your interest rates. You can also pay down the principal on your loans or pay your mortgage twice a month to save on interest payments and pay off your debt faster.
The snowball method is excellent if you need quick wins to stay motivated, while the avalanche method is better if you want to minimize how much you pay in interest over time. Choose a strategy that aligns with your personality, timeline, and financial situation. The key is consistency—sticking to your plan is more important than which method you choose.
AUTOMATE PAYMENTS AND START SAVING FOR EMERGENCIES
Automating your payments is one of the most significant actions you can take to pay off your debt. It makes your finances run on autopilot and makes budgeting much more effortless. When you automate your payments, your money works without you having to think about it.
Set up automatic payments for your debt so you get all the due dates and avoid late fees. In addition, you can automate savings to avoid debt when unexpected emergencies happen. Start building an emergency fund to cover unexpected expenses, like car repairs or medical bills. Even a small emergency fund (around $1,000) can prevent you from returning to credit cards when life throws you a curveball.
Create sinking funds for anticipated expenses throughout the year, like insurance premiums, Christmas, or a wedding, so your money builds up over the year. Put your savings automatically in a high-yield savings account (HYSA) at institutions like Wealthfront or Ally Bank, so your money is growing because of the higher interest on the accounts.
SAVE MORE MONEY TO HELP PAY OFF DEBT
Once you track your spending, make a budget, and automate your finances, find ways to save money in your budget to help pay off debt. The best way to save money is to pay attention to where your money is going and find ways to reduce expenses. Using apps like Ibotta, coupons, and loyalty programs to grocery stores can save tons on your food bill. Making food at home, meal planning with programs like a $5 Meal Plan, and avoiding eating out or drinking also saves you a lot of money that can help pay off debt. Use apps like RetailMeNot, Rakuten, or Honey for extra savings when shopping online.
You can also find subscriptions you forgot about and cancel them, or use Rocket Money to help you find unused or unknown recurring bills that you can cancel to save money. Cutting back on vacations or scaling back on your wedding expenses can also give you more cash to tackle debt faster. Save more money by calling your insurance and utility companies to see if you can negotiate a lower rate. Cut back on electricity by unplugging devices and using energy-efficient bulbs. Consider house hacking, like getting roommates or renting out part of your home, to reduce your housing costs. Downsizing or renting instead of owning can also minimize housing expenses.
Lastly, try a savings challenge like a no-spend challenge. Imagine how much money you can save to pay your debt if you focus on the bare essentials and go one month without shopping online or eating out. A no-spend challenge has several benefits, like revealing how you spend your money, identifying your spending triggers, and helping you trim your budget. You can also use saving challenges to get creative about saving money for other goals like your emergency fund, Christmas, or saving for your wedding.
EARN MORE MONEY TO REACH YOUR GOALS FASTER
If you want to accelerate your debt payoff, earning extra income can give you the boost you need. Consider picking up a side gig, freelance work, or selling items you no longer use. You can earn more money by taking surveys online with Swagbucks, delivering groceries with Instacart, offering your services on Care.com, or driving for Uber.
You could also ask for a raise or take on extra hours at work if that’s an option. I used my raises at my job to speed up paying off debt. The more money you can allocate toward your debt, the faster you’ll see results. Remember that even small amounts add up—whether $50 from a weekend side job or $200 from selling unused items, every dollar gets you closer to debt-free.
GET AN ACCOUNTABILITY PARTNER
Having someone to share your goals with can make all the difference. Find a friend, family member, or spouse who can hold you accountable and encourage you on your debt payoff journey. They don’t have to be in the same financial situation as you, but they should be someone you trust. Your accountability partner can offer encouragement, help you stay on track, and even celebrate your successes with you. Consider getting a certified financial planner, a financial coach, or a financial advisor to help you if you need more professional assistance.
BUDGET TO SAVE, PAY OFF DEBT AND ENJOY LIFE
A budget doesn’t have to mean cutting out all the fun in life. A budget allows you to cover your debt payments, save for future goals, and enjoy life along the way. Allocate funds toward your debt and savings while setting aside an amount for entertainment or hobbies that bring you joy. If you are planning a wedding, create a budget that supports your debt payoff goals and wedding planning. Also, start saving for retirement, even if just 1% of your paycheck goes to your 401K at your job. Saving for retirement allows you to build wealth through investing as early as possible while paying off debt.
The key is to create a budget that reflects your values and supports your financial goals. This way, you can maintain a healthy relationship with money and enjoy your financial journey.
CELEBRATE SUCCESS ALONG YOUR FINANCIAL JOURNEY
As you pay off debt, it’s essential to recognize and celebrate your progress. Whether it’s paying off your first credit card or finally eliminating a student loan, every milestone is worth celebrating. You can treat yourself to something small, like going out for dinner to acknowledge the hard work you’ve put in. Track your net worth regularly, and celebrate when it becomes a positive number because you are building wealth. As you reduce your liabilities, your net worth grows, which can be a huge motivator. Seeing your efforts' positive impact on your financial health reinforces that you’re on the right path.
CONCLUSION
Following these steps will pay off your debt and build a solid foundation for wealth beyond the wedding. The day I became debt-free gave me relief and freedom to live my dream life and create a wonderful wedding. Remember, the road to financial freedom is a marathon, not a sprint. Stay patient, stay focused, and celebrate every win along the way!
IN SUMMARY
1. Envision your debt-free life.
2. Face your debt and calculate your net worth using tools like YNAB or Simplifi.
3. Track your spending and create a budget.
4. Avoid more debt by creating money rules.
5. Set a date for when you want to be debt-free.
6. Create a payoff strategy that supports you.
7. Automate your payments and savings. House your emergency fund and sinking funds in HYSA at places like Wealthfront or Ally Bank.
8. Save more money to help pay off debt.
9. Earn more money to reach your goals faster.
10. Get a debt accountability partner.
11. Budget to save, pay off debt, and enjoy life.
12. Celebrate success along your journey.
Are you ready to become debt-free?
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