Ten Simple Steps to Eliminate Debt

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$10 BillI’ve never liked having any debt because it’s always made me feel uncomfortable owing someone money. When it comes to major purchases like a home, it’s unavoidable; but for smaller ticket items, I avoid debt like the plague because I know it’s a slippery slope to go down. You start owing a little here, a little there, and the next thing you know you’re making large monthly payments with little to show for it.

But we’ve all been there. We all slip up. Whether it’s eating too much at a meal, spending too much when you’re out with friends, or something else, stuff happens and you deal. Well, if debt happened and you’re looking for some tips on how to get it unhappened, I’d like you to check out these ten steps I’ve learned over the years.

1. Dedicate Yourself To Eliminating Debt
The first step to eliminating your debt is to really come to grips with it and your dedication to eliminating it. Whether you have $1,000 of credit card debt because you wanted a new television or if you have $100,000 in student loan debt, step one is to fully understand it all.

Get a piece of paper and write down every debt you have, the monthly payment, its interest rate, and the period of repayment. Just “knowing” in your mind is not enough, write the whole thing down so you know for sure how much you are paying. Now go to a site like and calculate how much you are paying in interest if you were to follow the repayment structure. Take a deep breath because that number will be huge. You now fully understand the magnitude of that debt and the importance of eliminating it.

Now make a promise to yourself, to your spouse, to your children, to whomever – you are going to eliminate this debt.

2. Get A Friend
Everything is easier if you get a friend involved with your goal of eliminating debt. Having a friend know that you’ve made this commitment will help you whenever you face obstacles. For example, let’s say you’re hanging out with a group of your friends and one of them suggests a movie. You’ve already spent your entertainment budget for the week and a $9 movie is going to take away from how much you’ll be able to pay towards the Visa bill this month. Having a friend there, one who recognizes what you’re trying to do, can help when you suggest a cheaper, or free, alternative.

Having a friend involved also helps in keeping you accountable. For me, and many other bloggers, blogging keeps me accountable because so many people know what I’m trying to do. Many debt bloggers talk about their debt out in the open, tracking it monthly, because they know it will keep them accountable. Heck, nothing is stopping you from starting a blog!

3. Budget, Budget, Budget
You can only make progress on your debt if you are aware of where your money is going. A budget is the only way you will be able to get a solid handle on your finances and the only way you’ll be able to continually pay down your debts. If you earn $1000 a pay period and spend $1001, you’ll never be able to repay your debts. If you earn $1000 a pay period and aren’t sure how much you’re spending, you’ll again never be able to repay your debts. Establish a budget for how much you will spend on each expense and stick to it (more on sticking to it later).

4. Prioritize It
How important is it to eliminate this debt? You understand the debt, you’ve made yourself a promise, you’ve even told a friend, but what is this debt preventing in your life? Is it stopping you from putting enough away to buy a house? Is the constant monthly payment preventing you from saving towards your children’s education? Many things in life are about trade-offs, what are you trading away in return for keeping this debt just one more month? By prioritizing, you might recognize that there are a hundred things more important to you than the stuff you bought with that debt or the other things you’re paying for. Trim them so you can put more money towards your debt.

5. Remind Yourself Constantly
I’ve written in the past about how you can curb spending by writing goals on your credit cards. Trent of The Simple Dollar takes it one step further and puts a picture of his kids on his credit cards to remind himself. It’s easy to forget our goals if we don’t constantly remind ourselves of them.

When I was younger, my father smoked cigarettes, as many Chinese men do. My sister and I wanted him to quit and he agreed to. To help him along, we put No Smoking signs all over the house as a constant reminder of his promise to his. I’m to report that my father hasn’t smoked since he made that promise and I like to think our little signs played a small role. 🙂

6. Eliminate Temptation
Alcoholics avoid bars because that’s where the temptation is. What is your vice? Love shopping at the mall? Stop going to the mall. Love electronics? Don’t go to Best Buy or Circuit City. Remember your priorities, remember your promise, and try to eliminate temptation from your life.

One of my temptations is good food, I like going to our favorite restaurants because I can order food I enjoy. To overcome this, I tap on the other things about life that I enjoy that are in concert with good food. My wife and I have been spending more time in the kitchen cooking new recipes and trying new things. I enjoy spending quality time with my wife more than I enjoy good food. The side benefit is that we save money by not eating out and we are healthier for it!

7. Establish Milestones
To help you achieve the goal of paying off your debt, it’s important to establish realistic milestones. Eliminating a large debt is a marathon, not a sprint, and this idea is much like one that I recommended people looking for jobs. By establishing achievable short-term and mid-term milestones, you give yourself a sense of progress and accomplishment. If you owe $10,000 and plan on paying it off over two years, set milestones every six months or every quarter. As you hit them, you’ll feel a sense of accomplishment and it will boost your morale…

8. Reward Yourself
… then rewards yourself for achieving those milestones and stretch milestones. If you manage to pay off $2,500 in the first six months, reward yourself somehow with something fun (but inexpensive!). Go out and get some ice cream (we love Rita’s Ice!) to celebrate your accomplishment. Treat your friend to some ice cream too, to thank him or her for helping you get this far.

9. Snowflaking
So you’ve been humming along for a few months, hitting your intermediary milestone, removing temptations, rewarding yourself for meeting your mini-goals; but you feel like there could be more you could do. There is. Snowflaking (a term I attribute to Paid Twice) is the idea that you take “found money” and put it towards your debt in the form of unscheduled payments. Sell a used book for $20? Put that towards your highest interest debt. Find a $5 bill somewhere? Snowflake it towards a debt.

10. Don’t Go Back
This final step is for those who have achieved their final milestone goal and have eliminated all of their debt. First off, congratulations. What you’ve accomplished is not simple, regardless of how you felt your progress went. It’s difficult taking that surplus each month and putting it towards a debt to someone else, so kudos for the achievement. However, the job isn’t finished yet. Much like how alcoholics are never “cured,” you always have the fear of relapse.

Unless you have the cash to pay for something, don’t borrow (unless it’s for a house or car) the money you need. For some this means you go to an all cash lifestyle and for others it means you simply make the card difficult to get a hold of. If you can’t pay it off at the end of the month, start saving until you can. You know how hard it is to get out of debt, don’t go back in.

(Photo by Christina Lam Photography)

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2 Responses to “Ten Simple Steps to Eliminate Debt”

  1. 11. Don’t let your dogs tear up your $10 bills.

    Great post. I think most people in debt spend their time at step 1, because if you fail at any of the later steps, you’ll find yourself right back at the start.

  2. I completely agree. No matter how much someone wants to be financially independent, if you don’t start with these simple steps, you’ll never get there.

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