8 Steps To Paying Off & Staying Out Of Debt

8 Steps To Paying Off and Staying Out Of Debt

Before you can create wealth and reach Financial Freedom, you have to get out of debt. Your debt is weighing you down and literally holding you back from reaching your goals.

Need a blueprint of how to get rid of your debt? I got you. Check out the 8 steps below and get the Free downloadable Debt Payoff Blueprint at the end of this blog post:

Step 1 – List Your Debts

Create a complete list of your debts (excluding your mortgage). Write out the following for each consumer debt you have:

  • Name of Creditor
  • Minimum Monthly Payment
  • Outstanding Debt and
  • Interest Rate

*You can choose to pay off your mortgage early AFTER you’ve paid off all of your consumer debt and are caught up on retirement savings.

 

Step 2 – Complete A Debt Behavior Assessment

For each debt listed, jot down what made you accumulate the debt in the first place. The reason for some debts will be more obvious than others; like student loan debt. What about the other debts you’ve listed? How did they accumulate? What did you spend the money on? Christmas gifts, going out to eat, vacations, an emergency, random shopping?

Go back and identify the reason.

Coming to terms with why and how the debt was accumulated in the first place is a good accountability exercise.

Was it worth it?

If you could go back, would you still make that purchase? The answers to these questions will hopefully stop you from making unnecessary purchases going forward and force you to be more thoughtful in your spending decisions.

 

Step 3 – Debt Pledge

Pledge to yourself that you will not use credit cards or take on any more debt going forward. If you can’t pay for it in full at the time of purchase, you can’t afford it and don’t need to buy it.

 

Step 4 – Organize your Debt

Organize your debts in the three lists below:

  • Lowest to highest outstanding debt balance
  • Highest to lowest interest rate debt and
  • Highest to lowest emotional discomfort/annoyance

The three lists are important because it helps you to determine the pay-off strategy in the next step.

 

Step 5 – Determine Your Payoff Strategy

Decide the order in which you want to pay off your debts. I recommend paying off the smallest balance debts first; especially the debts that you can pay off in 6 months or less. Getting rid of these relatively smaller balance debts will improve your financial confidence and build the momentum you need to keep you motivated.

If you have debts that are around the same balance, pay off the ones with the highest interest rates first. This will save you money on interest payments.

If a particular debt causes you more angst and emotional burden than another, make that debt pay off a priority, regardless of the interest rate or loan balance. Knocking out the loans that alleviate negative feelings will improve your morale.

How you FEEL about your finances and the progress you make towards your goals is very important. It’s what keeps you motivated.

If you are able to find a Debt Payoff sweet spot- a debt that ranks the top on each list, pay it off first. Click here to sign up for access to the Free Resource Library and download the Debt Payoff Blueprint now.

 

Step 6 – Create a Budget

If you don’t have a budget, now is the time to create one. Find out how to create a budget here.

If you do have a budget, go through it again and find ways to maximize the amount you can allocate to debt above the mandatory minimum payments. Squeeze extra money out of your budget by spending less and finding ways to increase your income.

If you want steps on how to find more money in your budget, accelerate debt payoff and build wealth, check out the Your Way To $85K Manual.

 

Step 7 – Accelerate Debt Payoff

Apply any extra money you find in your budget to paying off outstanding debt. You should hold off of spending on discretionary items while in debt payoff mode. If you feel the need to reward or treat yourself, do so by paying down your debt, not by buying another item you don’t need or won’t remember years from now (see Step 2).

 

Step 8 – Stay the Course

The journey to debt freedom will not be easy but you need to stay the course. Setbacks, emergencies, and unexpected expenses will occur. It may even feel like you’re taking 2 steps forward and 3 steps back. Stay determined and keep moving forward and I promise that you’ll make progress on your debt free journey. The road will not be easy, but it will be worth it.

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Comment below if you plan on following these 8 steps and join the conversation in the Private Facebook Group.

Check out this Free Debt Reduction Calculator by Vertex 42 & don’t forget to grab your FREE Debt Payoff Blueprint Workbook below.

 

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25 thoughts on “8 Steps To Paying Off & Staying Out Of Debt”

    1. Thanks Elle. Adulting is hard , that’s for sure. Let me know if you try the steps and how they work out for you.

  1. That’s a really good outine to follow. I don’t have a big income and I struggle to make a budget, so I will go and have a read on your other post! Really helpful to me, thanks!

  2. I love how you started from the top about our debt holding us back this is so true a lot of times we don’t realize how much money we can free up to invest in our future because of the debt great tips

  3. Love this post! It’s very informative, makes sense & will work. I’ll be using to pay off our random little debts. 🙂 Thank you!!

  4. Hi! This is great stuff. I have a ton of law school debt and my husband also has grad school debt. Both of which we’re aggressively workin to narrowing down. A few months ago I consolidated with a private company to obtain a lower interest rate. My husband is nervous about doing that (his is still govt based which has some safeguards but ridiculously high interest, some at 7.5%). I would love to see how student debt affects or is treated under this model. Would you suggest substituting mortgage for student debt in the event you don’t have a mortgage or would it be tackled differently?

    1. JourneyToLaunch

      Hi Andrea- I would work on paying off your student loans aggressively, so no, I wouldn’t delay paying it off or only paying the minimums. If you have other consumer debt that you can pay off faster than the student loan debt then focus on paying those debts first and then move on to your student loans.

  5. Awesome advice. I favor the debt avalanche. Just the idea that each debt paid off just increases and swallows up the next debt that much faster is empowering. Also you pay a lot less interest that way which is nice!

  6. Pingback: Episode 8- A Step by Step Guide To Pay Off & Stay Out Of Debt

  7. Thanks for these great tips on paying off debt! I now have a plan and will start paying off my lowest debts and being one step closer to financial independence.

  8. This is a great plan, especially step two. I think we all should really look at how we got to the point of having so that we won’t go down that path again.

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Hey! I'm Jamila!

I want to teach you what I’ve learned through a little trial and error and a lot of discipline over the years. My goal is to help you eliminate debt, save more money and increase your net worth.

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