Five years ago, when I was in my mid-30s, I opened my first adult savings account. I was attending a friend’s wedding in India and wanted to make sure I had enough money to go.

What I didn’t consider but later realized was that, at that time, I had $6,500 of credit card debt and $18,500 of student loan debt. Looking back, I can see that a more practical person would have said that going to India for three weeks might not be a prudent idea.

By the time I got back that August, the credit card balance had grown to $7,500. Panic gripped me. I had been in this situation before, in my 20s. The only difference was that, then, I had an okay excuse to fall into credit card debt: I was making very little money, and doing so irregularly. But this time around, I had a good, steady job, making decent money. I had nothing to blame but my own stupidity.

That September I took a workshop that, for the first time in my life, got me a budget. That step put me on the road to knocking out the credit card and student loan debt, saving up enough money to freelance, and then quitting and now earning more than I ever did in any full-time job — all in the span of four-and-a-half years.

If your bills give you anxiety and your debts are getting in the way of other dreams, it may be time for you to follow the path that I did. I’ve laid out a strategy based in both personal experience and my work as a personal finance journalist that will hopefully get you on the path to being debt-free.
(Simon Cunningham/Flickr)

(Simon Cunningham/Flickr)
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1. Commit to getting out of debt.

This may seem like a throwaway tip, but it is one of the most important. Getting out of debt is hard. It takes maintaining discipline over a long period of time. It demands lifestyle changes. It also sometimes requires bucking peer pressure.

While you shouldn’t build a plan so austere that it would be impossible to stick to, you will have to make some tough choices. If you’re used to treating yourself to spa days or shopping sprees or wild nights out, you’re going to have to give up some of these tangible and expensive pleasures in order to obtain what right now seems like the abstract state of being debt-free. If you and your partner are collectively in debt, they’ll need to be on board as well. It’s not possible to do this on your own if your other half is still spending up a storm.

Before you embark on this journey that will last months, if not years, think about how sweet it will be to be debt-free and be able to pursue other dreams you have, whether it’s buying a house, taking big vacations every year, sending your children to college, or something else. If those goals are more important to you than nights out and wearing the latest styles, then you have the mindset to get out of debt.

For motivation, create a visual reminder of what you’re working toward, such as a photo of the kind of house you’d like to buy, or the destination you plan on hitting when you can afford it. Put the image in your wallet, on your computer — wherever you spend money — to remind yourself of what you’d really like to do with it.

2. In a spreadsheet, list all your debts, balances, interest rates and minimum payments — and find out the total of what you owe.

Both times I fell into debt, I didn’t know the total amount until I was pretty far along. Knowing the total will give you a rough sense of how long this might take. If you’re shocked by the number you see, just remind yourself that this is the highest the number will be. Within the next month, it will start to get smaller.

Knowing your minimum payments will help you budget, and having your interest rates will help you decide on your debt repayment strategy.

List your debts in order of highest-interest rate to lowest. Tally up your minimum payments so you know the minimum amount you need to put toward your credit cards every month.

Keep the list easily accessible and editable so you can refer back to it in the coming months.
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3. Try to make 0% balance transfers, get your APR lowered or refinance.

Now that you’re committed to paying down your debt, it would really help if it weren’t simultaneously increasing bit by bit. If you’re eligible for 0% balance transfers (you can search for credit cards on sites like Bankrate, Creditcards.com, Credit Karma, NerdWallet and others), see if it makes sense to transfer your credit card debt.

But beware the fine print. If the 0% offer only lasts six months, be sure you can pay that debt off within that timeframe. If not, you could end up paying higher interest than you were before — and it could even apply to the initial six-month period (look for the term “accrued interest” to see if this might happen). Also, calculate what the balance transfer fee is and make sure that even with the fee, you’ll still save money on the transfer.

If you’re not eligible for a 0% balance transfer or decide it doesn’t make sense for you, call your credit card company to see if you can negotiate the APR down. If your main debt is a mortgage, look into refinancing. And if it’s student loan debt, refinancing might make sense for you. If you have federal loans, be aware that they offer a lot of flexibility — you don’t want to later regret losing that. If you refinance a federal loan, you should be confident you have the financial capacity to pay it off. Also, if your desire to refinance your student loan debt comes from not being able to make your payments at all, refinancing won’t help you — your focus should be on not defaulting. (Work out a plan with your student loan provider.) If you decide refinancing might make sense for you, check out some of the new online lenders, such as CommonBond, Earnest, SoFi and Upstart, that have cropped up to help burdened graduates. Plus, also see if any credit unions available to you have appealing refi rates.

4. Start tracking your spending.

In order to pay down your debt, you’ll need to find ways to free up the money you already have. Knowing where your money goes will help you spot where you can cut expenses. A number of online resources such as LearnVest (disclosure: a former employer of mine) and Mint will pull the transactions from your financial accounts so you can start categorizing and seeing where to trim the fat.

Look for big expenses that don’t align with your priorities. If you’re surprised to see you spend $200 a month at Panera or Chipotle for work lunches, start packing PBJs. Also keep an eye out for expenses that you’re not utilizing — goodbye, gym membership! And note anything that was more expensive than it should have been, and get used to searching for coupon codes for online purchases and only shopping at in-store sales.

5. Do a first-pass at your budget.

Figure out your annual take-home pay — what hits your bank account after taxes and 401(k) retirement contributions. (If you receive a paycheck every other week, multiply the amount by 26, then divide by 12 to get the exact monthly figure.) Tally up your necessary expenses: housing, transportation (hold off on including discretionary cabs and ride shares for now), utilities and groceries. Try to come up with a reasonable amount for your monthly groceries that you can stick to and that isn’t so rich you’ll be filling your cart with fancy cheeses every week.

If the sum of your necessary expenses is greater than 50% of your take-home pay, it might be hard for you to pay off your debts in an expedient fashion. (If you have other necessary expenses like childcare, which allows you to work, then it’s fine to go over the 50% threshold.) Otherwise, if you’re exceeding the 50% mark, see if you can cut back on any of these necessary expenses in any way. Maybe your cell phone plan provides you with many more minutes than you need every month? If you are single, you may want to get a roommate to save on housing costs.

6. Work your debt and discretionary expenses into your budget.

Now, calculate what percentage of your take-home pay your minimum debt payments are. If your necessary expenses are 50% or less, aim to put 20% of your take-home income toward your debt. If your minimum payments are less than 20% (say they tally $300 but 20% of your take-home is $600), you’ll be able to put more than the minimum toward your debt each month.

Finally, see how much you have left to live on each month. From your monthly take-home, subtract your necessary expenses and your projected 20% debt payment. Divide the leftover by 4.33 to see how much you can spend each week. Is this enough to live on each week for your dining out, shopping, gym, entertainment, travel, gifts, cable, health and other costs?

If not, get the numbers to a ballpark range that feels doable, even if it means not hitting that 20% debt repayment goal. Expect that you’ll have to go through a period of trial and error before you find the exact plan for you. But make a decision, and head into the next step knowing what you’ll be paying toward your debt every month.

7. Start your debt-repayment plan.

Now that you have a monthly debt repayment target, go back to your debt spreadsheet. Pay the minimums on every debt except the highest-interest rate debt. Put the rest of your debt repayment money toward that debt every month until it’s gone. Afterward, cross it off the list and do the same for what is currently the second-highest interest rate debt. Continue like this down the list.

This method of repayment will ensure you pay the least interest. If that top debt has a huge balance and you’re worried your motivation will flag, then you can try the “snowball” method, in which you start with the smallest balance and then use the momentum from paying that off to continue on to the rest.

If you can, set up all the payments on auto-pay so you don’t have to worry about missing any of them one month.

8. Stick to your weekly allowance.

The only way you’ll be able to pay off your debt is if you don’t keep adding to it. This means being vigilant about living within your means.

Depending on your income and the cost of living in your city, this can be difficult unless you keep an eye on it. If you know you need to make a shift in your spending habits, try using cash. Take out your weekly allowance in cash each week and only let yourself spend that amount until it runs out. If your allowance week goes from Saturday to Friday, and you run out on Wednesday, then get creative for Thursday and Friday.

If you’d like to still use credit, beware the studies show that paying with plastic makes people more inclined to overspend. What I did was to keep using my credit card but log my expenses on a spreadsheet that noted my weekly allowance and automatically subtracted the amount I had leftover after I entered each expense. The surpluses could carry from week to week, and if I went over one week, then I would enter the next week knowing how much less I had to spend. I also liked that it allowed me to “plan” my spending. If I had a friend’s birthday dinner planned for three weeks ahead, I could enter an estimate for the cost of the dinner in advance and then start the week knowing I had that much less to spend that week.

You could also make sure you’re staying within your allowance with a budgeting app like LearnVest, Level Money, Mint or You Need a Budget. Be sure to enter cash transactions manually so you’re not inadvertently overspending. If you’d like some help in finding ways to put more money toward your debt, use Digit, which will, in the background, find ways to siphon some money out of your checking into a Digit savings account. You could then put the accumulation toward your debt payment every month.

9. Adapt to your new lifestyle.

Now that you’ve started on your plan, you need to learn what behaviors will support it. If you feel comfortable doing so, tell friends and family about your debt repayment goal so they understand why you’re suggesting more potlucks and Netflix nights. If a friend suggest an activity that will be difficult on your budget, look for good free or inexpensive alternatives.

Even for non-social activities like personal hobbies, look for ways to cut costs: If you dropped the gym, can you run outside, play tennis with a friend or join the city pools? In lieu of your yoga center membership, try one of the yoga websites that allow you to stream yoga classes online for a small fee each month. Instead of buying all the latest books, dust off your library card. If you’re paying a hefty fee for tons of cable channels you don’t watch, see if you can use cheaper online providers such as Hulu, Netflix and iTunes or buy an AppleTV to slake your thirst for TV.

As you continue to track your spending in your online tool, look for more ways to cut expenses. You might have forgotten about the annual fee on that credit card you barely use, or realize you can use Google Voice and Skype more often to cut back on your mobile phone plan. Or, maybe you realize that with advance planning, you can more cheaply stock up on household items by buying in bulk at Costco. To freshen up your wardrobe, browse good local thrift shops or hold clothing swaps with friends.

10. Earn more money, and put gifts and windfalls toward your debt.

Finally, one of the best ways to get out of debt — and what ended up being the crucial factor for me — is to earn more money. While cutting costs might free up a few hundred every month, a solid side gig could give you an extra $1,000 or more to put toward your debt. (In my case, I probably averaged an extra $2,000, which allowed me to reach my goals fairly quickly.) If you’re in a strong position at work, see if you can negotiate a raise. Don’t mention that the request stems from wanting to pay off your debt — make your argument based on your performance at work. (Learn here the ten mistakes not to make when requesting a raise.) But again, if this gives you another $500 to work with every month, you’ll be able to pay off that debt more quickly.

If, as you’ve been reading the cost-cutting suggestions, you have a sinking feeling you have no fat to cut from your budget, then earning more will be your ticket out of debt. If a raise isn’t on the table for you, let everyone in your network — from friends to family to former coworkers — know that you’re looking for freelance gigs. (Check out these 44 ideas for making more money.)

Put your gifts and windfalls to work as well. If you receive a large sum, put the vast majority, if not all of it, toward your debt. If your monthly debt payments are $600, and you receive a gift of $5,000, putting $4,800 of it toward your debt will get you to your goal a full eight months earlier.

Finally, every time you reach a debt repayment milestone, celebrate! Doing so will give you more motivation to keep going and help your progress feel tangible. Don’t be afraid to splurge, as long as it is on an expense that you’ll really savor and that won’t take you too far off your goals.

Good luck, and congratulations to getting on the road to being debt-free.

Great post.

Actually, getting out of debt means being proactive and disciplined enough to pull it.

Most importantly, for those living in some parts of the world where most of the basic things of life can easily be purchased on credit.

In such cases, getting out of debt means saving for college, putting a stop to acquisitions of liabilities and even saying no to furniture financing.

Here's one post you may want to check out on that: http://www.incomefizo.com/2018/05/financing-furniture.html

To sum it up, it calls for discipline...