9 Simple Steps To Pay Off Debt

Does this sound familiar? You work hard at a job that you don’t particularly enjoy for a paycheck. When that check comes, you have to dish that money back out to pay for your car, your house, your credit cards, and so on. You feel like you’re barely making it month to month, and you just wish you had more money.

If that sounds familiar, then you’re in the right place!

Four years ago, we had our wake up call. It came when our monthly budget was stretched to the max, and we had some orthodontic bills for Bookworm coming up. Like I was able to pull an extra $100 a month from thin air.

I tried cutting back from our grocery budget; it was the only place we could control as most of our money went to paying off credit cards, our car loan, student loans and the rest of our monthly bills. I can still remember the day I came home from a “stock up on the basics” grocery run, something that should have been a really low bill, and going over the new budget. Can we talk about how defeating and frustrating it felt?

And let’s not forget stressful. I remember the sleepless nights, wondering how we were going to come up with more money, and not spend a fortune on moving to a new house, new daycare costs, new car costs, and so on, and not go further broke in the process.

I can remember having panic attacks about money too. Being so worried about money that when you can sleep, money is literally haunting your dreams.

I can tell you that more money didn’t solve our problem. As a matter of fact, over the last four years, Hubs is making a little more, and yet we’re in a more comfortable place financially. The sole reason is that we’ve paid off and closed some accounts, freeing up money to put towards more debts and family related things that we feel is important.

As of the writing of this post, we’ve gotten rid of $83,364.15 in debt. In that amount is:

Paid off a car
Paid off a private student loan
Ended a lease on a trumpet
Paid off 3 credit cards

2020 Update

We have paid off over $121,550.14 in debt now! You can grab your copy of the budget workbook I use to help us get laser-focused on our budget and pay off our debt here!

Here’s the steps we’ve followed so far on our journey to becoming debt free:

1 – Determine your why.

Why do you want to be debt free? Resist the temptation to skip this… you’ll want to refer to this later on. Your why is what will give you encouragement and motivation through the tough times, through the moments when you want to, and sometimes do, fall back on old habits. So let me repeat… do not skip this.

For us, our why is because we want to stop the cycle of being paycheck dependent. We want to be able to travel and not worry about how much it’s going to cost us. I want to be able to take that vacation with my kids and not worry about how I’m pulling from money that’s going to bills to cover some things they want to do while on vacation. We want to be able to have money in the bank for car repairs and other issues that come up.

But most importantly, we do not want to continue owing someone else money.

So what’s your why? Write it down.

2 – Get on a budget

Even though we’re paid once a month, I still prefer to set up my budget by the week. I personally love using the You Need A Budget* method. It helps you get to the root of your financial priorities and commitments, and in turn, simplifies your budget.

I use my zero based budgeting worksheet and a Happy Planner Budget Planner*, and go a week at a time. I start with our income for the week, take off what we need to put aside for savings, as well as what bills are due. Then I use what’s remaining from the check for our grocery and fuel budget for the week. What ever is left over I pay towards our current debt that’s in our snowball.

YNAB’s online budgeting software* makes it super easy to start your budget, and even start fresh if you need to! It does come at a cost of $84 per year, but in my opinion, it’s well worth it! If you’d like to try their method, you can get a free month of YNAB by signing up here*.

For more on how I set up our budget, you can check out my YouTube Channel where I post monthly budget setups and weekly budget with me’s.

3 – Get current

We didn’t have this issue, but I know it exists. I know some people who proclaim themselves as the king of balancing what bill could be paid that month and what bill could wait for another month or so. It’s not for me. I’ve always preferred all the bills be paid in full for the month.

If you don’t have enough money to get current, start looking at places you can cut expenses. Some ideas include:

reducing, or pausing retirement contributions
reducing grocery spending
cutting out unnecessary expenses like date nights, sunday brunch, alcohol, gym memberships, monthly subscriptions, etc.
cutting out cable or satellite TV

4 – Build up a small emergency fund.

If you make less than $20,000 per year, a $500 emergency fund should do it. If you make more than $20,000 per year, a $1000 emergency fund. The basis of this is that if you have an emergency arise, such as your water heater busted and needs repairs or replaced, or you got into a car accident and need to cover the deductible, you have the money in your emergency fund.

An emergency fund helps to make sure that you do NOT have to put the cost of repairs and replacements on a credit card, adding to your debt. The point here is to get out of debt, not remain in it.

5 – Control your spending

I was almost going to leave this out, but I think it needs reiterated because we’re only human. It’s easy to get caught up in what is the latest and greatest, and what you want now. But I’m asking you to not. From experience, it’s very easy to revert back to old spending habits, which will result in taking longer to get out of debt.

There is also the possibility that you may not get out of debt at all.

When you slip back into old spending habits, don’t be too hard on yourself. Remember… we’re all human. Just revert back to your why, and start back where you left off.

6 – Write out all your debts.

This is where it can get a little scary, but remember your why.

I want you to write down everything. Yes, everything. Get all the ugly out. Write the company you owe, how much you owe them, and what for.

I suggest doing a dive into your credit report as well. With the security breaches that have been happening lately, it’s never a bad thing to see if everything on your report is for you. If something on your report seems out of place, you can always contact that company and look into it further.

7 – Determine how you want to pay your debts off

Most people go with the debt snowball method of paying, while others choose to do the avalanche method. You can read my post about the differences between the two methods. Us personally, we’re using a mix of the two.

Whichever way you decide to pay off your debt, you need a plan and order of attack. It will help keep you motivated.

8 – Start putting all the money you can at your first debt

It doesn’t matter the amount, whether it’s $2 or $200, put it towards that debt to get it paid off and out of the way. Any more money that you can spare towards your debt is perfectly fine.

At the beginning of our journey, we were splitting a $500 minimum payment between three different credit cards. It was all we could afford at the time.

9 – Continue paying your debts off in your determined order

Once you get your first debt paid off, take the money you were paying towards that debt and add it to the minimum payment on the second debt. Continue with that payment method until all debts are paid off.

Those three cards we were paying to initially? Once we got them paid off, that was $500 we were able to send to our next debt in line.