The Ultimate Guide to Get Out of Debt

by Carrie | Jan 4, 2022 | Budgeting, Debt Free

One of the best things you can do for yourself and your loved ones is to get out of debt. Cut the worry, stress and overwhelm, and use these five steps to begin your journey to an amazing debt-free lifestyle.

Are you feeling stressed, overwhelmed, or at your wit’s end with your money? Do you dread any little thing going wrong that could put your finances in jeopardy? I’ve been there.

Five years ago, I was over $100,000 in debt and living paycheck to paycheck. Working to get out of debt was the best thing I did for a real life change. I followed these exact steps to get out of debt, and still, use them today to work towards more financial freedom.

After learning the steps to get out of debt, you’ll be ready to embark on your debt-free journey and change your future.

This post is all about how to get out of debt and begin living a debt-free life of freedom.

List all of your Debts Smallest to Largest

This first step can either be one of the easiest steps or one of the hardest. When I first started working to get out of debt, I had no idea how much we actually owed. You might find yourself in this same boat.

Start by gathering all of your monthly debt information. Make sure you know:

• Your minimum payment
• Total amount owed on each debt

You will then list your debts in order from smallest to largest based on the total amount you owe. We’ll talk more about this later, but you will use this information to implement the debt snowball.

Create a Monthly Budget

Creating a budget is one of the most important steps to get out of debt. While many people associate a budget with restrictive living and negativity, it is actually a plan for how you will spend your money each month.

Creating a budget can be started by following these four simple steps:

1. Start with your income

Write down how much income you bring in each month after taxes. Make sure to include any side hustles, overtime, or other sources of income you might have.

Your income is your starting point and the total amount you have to spend. This amount goes at the top of your budget sheet.

2. List your bills in order of date due

Under your income, you’ll list your monthly bills. I recommend listing them in order by the due date, so you can check them off as they are paid. This also helps you to avoid missing a payment.

This section of your budget will include bills such as your housing, electricity, water, subscriptions, credit card payments, loans, and any other regular expenses that you pay on a schedule each month.

Deduct the amount of these bills from your income.

3. List your monthly expenses

Next, you’ll want to list any expenses that you have such as groceries, gas, haircut money, entertainment, or blow money.

These are items that do not have a due date or a set amount you must pay. These expenses will vary from month to month, depending on events that are specific to you.

You might be including an oil change, car registration, or birthday gifts on any given month; however, these aren’t items that occur every month.

Deduct the amount of these expenses from your income.

4. Use the debt snowball to complete your budget

When you are listing your bills in step 2, you will be sure to list the minimum payments due for each debt. This step is detailed more in the debt snowball section, but you will pay all extra money left over on your smallest debt until it is paid off.

[RELATED POST: The Importance of Budgeting and 7 Surprising Benefits]

Track Every Expense

Tracking your expenses goes along with keeping a budget. By doing daily tracking, you will be able to monitor and make adjustments, if needed, to your budget in real-time.

Tracking expenses only takes two easy steps:

1. Write down the amount of every purchase you make or bill you pay.
2. Subtract it from how much money you have.

To track your expenses, you will want to use a budget tracker. The type of tracker you use can vary depending on your preferences. The three most popular ways to track expenses are:

1. Paper Tracker
2. Spreadsheet Tracker
3. Budget App

I highly recommend trying more than one type of tracker to see which works best for you. I used to use a paper tracker, but it was easy for me to skip transactions (or to be honest, just pretend some transactions never happened).

I decided to switch to a budget app, so every purchase came through and I was forced to assign it to a category.

The EveryDollar app is what I use now because it can sync directly with a bank account. It also has a free version, so you can get started with it right away.

Cut Spending

It’s difficult to cut spending, but this step is imperative for success in getting out of debt. The top reason you need to cut spending is so you can use that savings to throw at your debt.

There are many places to cut your budget, and I have done many of them. As a matter of fact, I have continued to do many of them.

Here are top ways to save money to get out of debt fast:

1. Unsubscribe

After examining your completed budget, see if you can identify one or more subscription services that you can do without. Some subscriptions to consider would be

• Cable
• TV/ Movie Streaming services, if you have more than one or two
• Fancy cell phone plans
• Physical or online magazines
• Physical or online newspapers
• Subscription boxes
• Music Streaming Services
• Book Services

2. Cook at home

If you’re like me, this might be difficult. If you work full-time, have kids, and are involved in a lot of evening activities, cooking at home can be a challenge. However, not only is it good for your bank account, but it’s also good for your health.

Some ways to make cooking at home easier can include these options:

• Make crock-pot meals that cook while you’re at work.
• Do meal prep for all meals on the weekend. I’m trying out The Meal Prep King Cookbook right now.
• Make soups that last several days
• Make double portions that will last several days

3. Reduce energy bills

Because energy bills can be one of your biggest expenses, and you have some control over them, reducing energy bills can be an easy way to save money to get out of debt.

Here are a few quick and easy changes you can make to reduce energy today:

1. Take advantage of natural light
2. Use LED light bulbs
3. Turn off or unplug game systems
4. Use a crock-pot for cooking
5. Use task lighting.

These are all inexpensive changes to make without much trouble. Try one or more of these today!

[RELATED POST: How to Save Money on Electric Bills in 12 Surprisingly Simple Ways]

4. Grocery shop with a plan

There can be many pitfalls when doing your grocery shopping. To avoid these, always have a plan before purchasing your groceries. Here are some tips that I’ve learned to help avoid overspending or wasting money buying groceries.

1. Do a meal plan for the week or month before you buy. This will allow you to make a comprehensive list and avoid things you don’t need.
2. Order your groceries online. Most grocery stores now offer free pickup and delivery for a small fee. Take advantage of this to avoid impulse shopping. You will also know exactly how much you’re going to spend and can adjust your purchases, if necessary.
3. Do not grocery shop while hungry. My mom used to tell me this all the time, and it is 100% true. You will buy many extra items if you’re hungry while shopping.

5. Use your local library

This has become one of my favorite ways to save money while working to get out of debt. Local libraries are definitely not the same place that I used to go to as a kid. They offer so much more than just books nowadays, and a library card is my favorite price…free!

Here are some great resources that are available at most libraries:

1. DVD’s- libraries now carry a large selection of dvd’s to check out, including new releases! One of my favorite parts about checking dvd’s out from the library is the return policy. You’ll have to check your library’s return policy, but mine allows you to keep them for a week.
2. Electronics- most libraries now have computers and sometimes even tablets that you can use while you’re at the library. If you’re trying to save money on internet bills, this is a great way to still have access to a computer while not having all of the expense of owning your own.
3. Events- Libraries have become a center for local events in many cities. Check your library’s website for upcoming events they might be hosting. They will often have famous authors come to speak about their books, local artists come and teach classes on their field, concerts for local musicians, and outdoor movie nights. This is a great way to get entertainment for free!
4. Books- I can’t leave this one out. The research shows so many benefits to reading, such a stress reduction, helping you fall asleep at night, improving vocabulary, fighting depression, and improving cognitive abilities. These are all great reasons to pick up a book at your library today!

6. Go outside

This has been one of my favorite distractions from spending money. There are so many great things to do outside that are free, and there are many health benefits to being outside.

Here are some of the top things to do outside and some of their benefits:

1. Go for a walk
2. Go for a bike ride
3. Plant a garden
4. Go fishing
5. Play frisbee or disc golf

It’s been proven that getting outside has amazing health benefits. Not only can you lower your stress, but you can also improve your muscle and bone health. Negative effects from diseases have been shown to be greatly reduced by getting out in nature.

Of course, for us, a great benefit is saving money. Instead of firing up the tv or going out for a movie, get outside and do something free and good for your health.

7. Make your own coffee, tea, and snacks

Many people have developed a habit of stopping on the way to work in the mornings and picking up coffee, tea, breakfast, or snacks.

While the price of coffee can vary greatly anywhere from $1.00 to over $5.00 a cup, this is a great way to save money. If you routinely buy a $2.50 coffee and a $2.50 pastry, you’re spending roughly $100 a month.

That extra $100 a month could make your get out of debt plan go much faster. Make your coffee, tea, breakfast, or snacks at home and start saving money today.

8. Do a no-spend month

No-Spend months are very popular right now and can help jump-start your ability to get out of debt. In order to complete one, you will want to follow the steps below.

1. Make an inventory of what items you have in your refrigerator and pantry.
2. Plan meals that will use up these items. Do not buy additional items that you already have.
3. Refrain from buying non-necessities during the month. These could include:
   1. clothes
   2. shoes
   3. take out food
   4. home decor
   5. beauty supplies

The idea of a no-spend month is not that you will spend $0 because you’ll still have bills and necessities. The goal is to not spend on anything that isn’t pre-planned and is not 100% necessary during that month.

Check out these fun no-spend trackers to keep you motivated during your month of savings.

[RELATED POST: 11 Simple Ways to Save Money Today]

Sell, Sell, Sell

One of the best ways you can generate money to get out of debt quickly is to sell items around your house that you aren’t using.

There are many items around your home that others would like to buy, and you can sell these items at a garage sale, on the Facebook marketplace, Craigslist, Poshmark, or probably a hundred other sites or apps.

One thing to keep in mind is that you will not be able to sell these items for the amount you paid for them. I highly recommend researching to see how much your items are currently selling for.

Here are some of the best things to sell to generate money to pay off debt:

• Vehicle
• Recreational vehicles (RV’s, boats, ATV’s, etc…)
• Toys
• Small kitchen appliances
• Musical instruments
• Expensive hobby items
• Furniture
• Game systems
• Clothes
• Shoes
• All of those “just in case” items you have around the house

You might never need some of these items again, such as old toys and kitchen appliances; however, some of the items might be temporary sacrifices.

If your family loves to go boating, then selling your boat might be temporary while you get out of debt. Later, when you are out of debt and save up more money, you might buy a different boat.

We made several of these tough choices and later purchased better items by saving up and paying cash for them.

Increase Income

I love this step in the plan because it often means using your talents and skills to help you get out of debt. There are many ways to bring in extra money, but I’m only going to focus on the ones that I know are proven to work.

1. Work Overtime (if applicable)

Working overtime may or may not apply to you, as it does not apply to me. However, if you have the opportunity to work overtime at your full-time job, that is a great way to earn extra money.

You don’t need to learn any new skills or spend any additional money, and they pay you at a higher rate than normal.

This is a great way to earn extra to get out of debt.

2. Teach others

We all have skills that others want to master. It may be a hobby or something you’ve done at a job, but there is something you’ve learned how to do that you can share.

Some popular skills others will pay to learn:

• English, Math or Foreign Language
• Digital marketing skills
• Programming (Coding)
• Spreadsheet skills
• Graphic design
• Photography
• Exercise techniques
• Healthy Eating
• Meal Planning

This list only scratches the surface, so start brainstorming all of those skills you could teach others as a side gig.

3. Freelance

You can use your skills to freelance work for others on websites, such as Fiverr, Upwork, 99 Designs, and many others.

These sites offer opportunities to complete individual jobs, including designing logos or websites, doing voiceovers, or content writing. There are hundreds of different types of work on these sites that you could do in your free time.

I have personally not done freelance work, but I have paid for it. It is a blessing for those of us with small businesses.

4. Start a blog

Did you know that when you do a google search, the results are articles written by real people just like you? All of those answers are written by people who have done the research and have experience in the topic you’re seeking information on.

You have information, skills, and the ability to research to help others through a blog.

Full disclosure, you will need to spend some money on tools to get started, but compared with starting other businesses, the cost is relatively small.

The best course that I used to get started with my blog was Perfecting Blogging by Sophia Lee. Her information is super easy to understand, and she shows exactly what she does to earn $100,000 a month with her blog.

I used other courses, but Perfecting Blogging was by far the best one for getting started with blogging.

5. Sell on Etsy

I absolutely LOVE selling on Etsy. Etsy is the platform that I have had the most success with earning money to get out of debt. Millions of people shop on Etsy every single day.

There are so many different items sold on Etsy, so most people can find something that they like to sell.

Handmade items

If you are a crafty person, Etsy just makes sense, because most items sold on Etsy are handmade. You could create and sell wreaths, jewelry, stickers, dolls, etc… There are just so many options.

Print on demand

If you aren’t a crafty person, selling print-on-demand items, such as t-shirts, necklaces, watches, Christmas ornaments, blankets, shoes, and so many other items is easy and popular.

To do print-on-demand, you create a design for your item, such as a t-shirt. Then you connect a print provider, such as Printify to your Etsy shop. When someone orders your design, Printify will print the t-shirt for you and mail it to your customer.

You only need to create the design and upload it to the program and Etsy. Many people thousands of dollars without ever touching the actual items they’re selling.

This is a very low-cost way to get started with Etsy, as you only need a graphic design program to make your designs and an account with a print provider.

The design program that I love to use is Canva. It has a free option or a paid option, which provides many more fonts and pictures for your designs. You can try Canva today with a 30 day free trial of the premium features with my link.

My recommended print providers are Printify and ShineOn. I have worked with both of these companies and had stellar experiences.

Digital Downloads

Many people, including myself, sell digital downloads. These could be SVG’s that people can use with their Cricut cutting machines, printable wall art, printable coloring sheets, Instagram highlight covers, business logos, and so many other digital files or printable items.

All you need to create digital downloads is a graphic design program, and again, I just love to use Canva. You can even get a 30 day free trial of their premium with my link.

If you are new to using Canva, check out the Design with Canva YouTube channel. I have learned a ton from their tutorials.

6. Other ways to earn money

You may be wondering why I haven’t mentioned many other options for earning money that other articles mention, such as doing surveys, transcription, or delivery.

I have tried these ways to make money, but have not had success with them.

The surveys, honestly want a lot of personal information, and the payouts are not very big. You would need to do A LOT of them to make significant money.

I did enjoy doing transcription, and I worked through Rev. Unfortunately, I was only able to make about $3 or $4 an hour. However, if you are really fast at typing and don’t make many mistakes, you may do much better than I did.

My husband tried doing delivery service more than once. He did make pretty good money delivering pizza, but it can be dangerous depending on the area you deliver to, and his car smelled like pizza forever…

As for Uber or food delivery service, he was not able to make enough to offset the gas and wear and tear on the car.

I’m not discouraging you from trying these side hustles but wanted to give you our honest experiences for you to consider.

[RELATED POST: 13 Ways to Get Out of Debt and How to Crush It Today]

Kill Your Debt with the Debt Snowball

The final step to get out of debt is to use the debt snowball method. With the debt snowball, you will take all the extra money that you have been able to accumulate from your budget, cutting spending, selling things, and earning extra money and throw it all on your smallest debt.

There are three easy steps to implementing the debt snowball:

1. Go back to your list of debts that you started with. They should be ordered from smallest debt to largest debt by how much you owe in total.
2. Pay minimum payments on all debts except the smallest.
3. Pay all of the extra money that you can get onto the smallest debt until it is paid off.
4. When the smallest debt is paid off, start paying everything you were paying on the smallest debt onto the second smallest debt.
5. Keep snowballing the amount you’re paying into each debt until you get to the largest one.

By starting with the smallest debts, you will be able to keep your momentum going by having quick wins at the beginning. By the time you get to the larger debts, paying them off will have become a habit, so it will be easier.

Many people argue against the debt snowball, and say you should start paying off the debt with the highest interest rate first. While this seems logical, that may be a very large debt. it could easily become discouraging to take so long to pay it off.

We used the debt snowball to pay off over 25 credit cards and loans a few years ago. I can attest to the fact that it works.

Learn more about using the debt snowball.

I hope you feel motivated and ready to get out of debt in 2022 with these debt-free tips.

Do you have other tips for getting out of debt that you’ve tried? I’d love for you to share them in a comment below!