How to Get out of Debt in 5 Simple Steps

Are you ready to say goodbye to debt but are not exactly sure how to do it or where to start? If yes, here’s a simple strategy for how to get out of debt in 5 simple steps.

Being in debt can be a terribly discouraging, burdensome experience. It’s no surprise since the slave is borrower to the lender. No matter what your circumstance if you signed for a loan, you are obligated to pay.  Losing a job, getting into an accident, or even an illness does not obligate a lender to let you off the hook.

Many people try to get out of debt, but life kicks them in the face hard enough that they give up. But that doesn’t have to be the case. I’ve been kicked in the face, HARD, too. Still there are so many people who are getting out of debt every single day, and in short periods of time. Like 12 – 36 months.

So, if you’re ready to break free and get on a path to financial freedom, it’s important to have a plan for how you’re going to tackle that debt

Here are 5 simple steps to get out of debt

1. Make a serious commitment to stop borrowing money

If you want to get out of debt fast, you have to stop being loose and unwise with your cash. So, kindly do yourself a favor and STOP using debt to fund your lifestyle. STOP financing things you can’t afford. This means no more cars or furniture you don’t have money to pay for. No more signing up for credit cards.

This will help you focus solely on the debt that you currently have. This way you can develop a game plan to pay it off quickly.  There is a huge difference between being able to afford something outright vs. being able to make the payments.

2. Establish a genesis emergency fund ($500 – $1000)

Before you begin attacking you debt it is crucial to start your genesis emergency fund. We call it your genesis emergency fund because to change your financial trajectory you Must. Have. Some. Money. Money. In. The. Bank. Period. or nothing else you read here is going to work.

You might be wondering, ‘Why is having an emergency fund SO important’? It’s simple, if you don’t have money in the bank and there’s an emergency, how are you going to pay for it? NOT the credit cards… You committed to stop borrowing money in Step 1. If you are trying to get out of debt, then you need to build a barrier between you and debt; that is exactly what an emergency fund does.

3.   Create a realistic budget and stick to it

Creating a budget that tracks your expenses and your income is ESSENTIAL to getting out of debt quickly. It will help you truly see where you are with your finances.  This makes it that much easier to move forward toward your goal.  It makes it easier to break free from debt. Because It will expose whether you have money left over, (surplus), or if you are in the negative, (deficit). The goal is to increase your surplus and use that money to pay down your debt. Below are two ways that you can do this.

The first thing that you can do is reduce your expenses. Go over each item on your budget and ask yourself, ‘how can I make this number smaller?  Download my FREE Quick Start Budget Planner Printable to do this. It may involve cancelling services that you rarely use or cooking at home more. The bigger your commitment the more you’ll cut out. The more committed you are, the easier it will be for you to give up some of the unnecessary extras in life. Yes, may need to sacrifice for a short while.  It’ll definitely pay off.  I’m a witness!

Also, see if you can find the items or services for less. Check out this helpful post I put together 6 Ways to Save Money This Month to get some great ways to help you in the process.

The second thing is to get your income up. If you are in a commission-based job then make more sales, which will probably mean having to work more hours. If you are in a salary job and cannot pick up some extra hours, then pick up a second job.

This can help tremendously when paying off your consumer debt.  People have worked at DoorDash, delivering food for 18 months so they could obliterate their debt.  You can start a side hustle.  Use your God given talents and step up your income.

4.   Organize your debt

This is crucial to your plan to know how to pay off your debt. There are two methods that I have tried.  The first is where you list your debts smallest to largest regardless of the interest rate. This is the method that my family used to and it worked great because it helped us build serious momentum. When we paid off our first debt the fire was LIT and it couldn’t be put out. Though we had higher interest debts, this gave us something that was very powerful — the belief that we could get out of debt quickly if we stuck to the plan.

The other method (not my favorite) you list your debts, starting with the highest interest rate debt first and end with the debt with the lowest interest rate. This method makes the most mathematical sense, because you will save the most money in interest over time.  This is not my preferred method because the problem is usually a LACK of discipline not math. If you can’t say amen – say ouch!

I included this method because personal finance is personal. I am not a fan of this strategy –  but  I am not a financial dictator.  Regardless of which process you choose, the key is to stick with it.

5.    Use your excess cash to obliterate your debt

When we were getting out of debt, there were a few times where extra money fell in our laps.  We put that extra cash toward our debt to DESTROY IT! Because we were so committed to freedom we decided to use any extra cash to obliterate our debt. Some good examples would be a tax refund, selling a car, a raise, a government stimulus check etc. The more cash you can put towards your debt, the faster you will break free from it!

Here’s a quick recap.
1. Make a serious commitment to start borrowing money.
2. Establish your genesis fund.
3. Create a realistic budget that works for you and stick to it.
4. Organize your debt.
5. Use excess cash to destroy debt.

So, there you have it. Now you can say goodbye to debt and set a plan in place using this simple strategy for how to get out of debt in 5 simple steps.

Everything we do at The Broke Edit is to help you organize your life and money so you can live a life you love.