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3 Simple Steps To Pay Off Your Debt

Becoming debt free can happen to you in 2019.

Aaron and I had one of those defining moments in our marriage when we tabulated our debt and realized we owed $446,000.  I don’t know about you, but I think that is a whole bunch of money.  It was really scary to realize we owed that much money to other people. 

It felt like a vice around the neck was slowly choking the life out of us.  I felt helpless and honestly kind of stupid.

I knew better, I knew how dangerous debt was. More than anything I was mad at myself. How could I have accumulated so much debt?

How could that number be real, what in the world had we done to put ourselves in such a horrible financial situation?

Hopefully, you’ve never had this realization, but if you are like most American’s you have debt. It is literally a way of life.

I recently posted an article about how we paid off $293,000 worth of our $446,000. I thought it was a pretty good article, I got a lot of congratulations and felt like I had helped out a few people.

Later as I was talking to friends I realized that for many people, the problem wasn’t becoming debt free – everyone wants that.  What people struggle with is actually creating a plan to pay to become debt free.

Most people know they have an issue, they just don’t know how to start reducing their debt.

This article is intended to give you a step by step plan for becoming debt free

So let’s get started.

Are you scared to face your debt?  I was

I don’t care how much money you make, you are most likely scared to face the number. Hopefully yours is significantly less than ours, but either way, you have to face your fears.

You have to know how much money you owe to get out of debt.

1.  The first step to becoming debt free is to gather your financial records.

Your goal is to write down everything you owe. This includes all banking records, credit cards, store credit cards, car loans, IRS, student loans, personal loans, payday lenders. . . . . You get the idea.

If you owe someone money you need to write it down.

I know for some people this may include old debt that you haven’t thought about in years.

Your lenders aren’t going to suddenly forget about you – #toughlove – you aren’t that special.

So pull out your statements and face the fact that you owe the money. If you are worried that you may be missing a debt I recommend pulling your credit report.

By federal law, you are allowed one free credit report from each of the three major credit reporting companies. The free report will not give you your score, but it will provide a list of your current liabilities.

The only site that is legit is Keep in mind that once you’ve got the report they will try and sell you credit monitoring and a copy of your score.

Don’t waste your money. Your goal is to get out of debt, not add another payment to your list.

To get a free credit score and a helpful assessment of what you can do to begin improving your credit check out Credit Sesame Their program is super simple and a great way to get started.

I recommend gathering the following information for every liability:

  • Lender/who you owe money too
  • Account Number
  • Opening Balance
  • Current Balance
  • Monthly Payment
  • Interest Rate

The goal is to know how much you owe, who you owe, and your monthly payment amount.

Once you have gathered all your financial records it is time to bite the bullet and see how much you owe.

Hopefully, the number shocks you into starting your debt free journey. I know it worked for us.

Once you know how much you owe to your creditors the fun begins.

2.  The second step to becoming debt free is to plan your debt attack.

I highly recommend downloading the Excel debt snowball calculator from Vertex42 (a huge Excel guide). It is free and will make your tracking very simple.

With this spreadsheet, you can run various payment scenarios. The spreadsheet will calculate how quickly you can pay off the debt using the following strategies:

  • Highest Interest Rate
  • Lowest Interest Rate
  • Debt Snowball
  • Chose your own order

You can also see how quickly you can get out of debt based on making regular payments or adding a little bit of extra each month.

I loved using this spreadsheet. It really helped me focus my efforts and gave me a clear timeline on when I would have certain debts paid off. I know not everyone is an Excel geek like me, so I created a quick tutorial video.

I loved being able to test out various financial scenarios and figure out what would work best for us.

Ultimately I decided that the debt snowball was the best payment method for us.

How the debt snowball works:

  1. Start by listing your debts smallest to largest – if you use the debt snowball calculator it will sort this automatically.
  2. Make your minimum payments on everything but the smallest debt.
  3. Throw everything you can at the smallest debt until it is paid off. Every bit of spare change goes towards your smallest debt.
  4. Once you have your smallest debt paid it off, you take the monthly amount you were paying towards your first debt, combine that amount with the minimum payment you were making on the second debt and then start paying the second debt off.
  5. You continue down that path until you have paid off all of your debts.

There is a reason they call it a debt snowball. As you pay off your debts and add the money to your debt reduction pile your monthly payments begin to increase very quickly.  By combining your payments you are able to make some serious traction.

The more extra money you put towards becoming debt free the quicker you will be debt free.

I’ve got a Masters in Business Administration and have managed the accounting for multiple companies over the last 15 years. I know that mathematically the debt snowball route doesn’t always make sense.

Mathematically speaking you should look at interest rates and a bunch of other factors and then decide what should be paid off first.

The mathematical approach is great in theory since you’ll be saving money by paying off the high-interest loans first. And for some people that may work – it is all about self-discipline.

Choose the debt reduction plan that works best for your personality type.

Why the Debt Snowball Works

Are you ready to become debt free. 3 Steps anyone can follow to begin their journey towards debt freedom. Tips to help you get out of debt and stay out of debt. How to become debt free in three simple steps.However, most people need the psychological boost that comes from making continual process. There is nothing like paying off one debt to make you realize that becoming debt free is possible.

The feeling of victory that comes with each payment can’t be described – it has to be experienced.

There is nothing more satisfying than sending in a final payment to a debtor. I loved being able to write – “Final Payment” on the checks. I needed that sense of accomplishment to keep me going.

Every time I wrote those little words I was re-energized and fired up to accomplish even more.

Personal finance is about behavior, yes the numbers are important, but your behavior is what will actually get you out of debt.

You know your debt level and you have a plan to pay it off. You are going to use the debt snowball and everything is going to be butterflies and roses.

Can you feel the sarcasm seeping off the pages?

Honestly, you’ve done the two easy steps. The trick is shocking yourself enough to take the next step and then the step after that and then the step 2 years down the road when you are sick of living on beans and rice.

The next step is the most important one you will make.

3.  The third step to becoming debt free is setting up a budget and sticking to it.

If you’ve ever tried to budget you know how hard this step actually is.

I’ve written a variety of posts on budgeting, but feel that these posts are the best place to start.

Once you set up your budget you have to make the choice to actually follow your budget.

You will literally have to recommit yourself to living by your budget pretty much every day. There isn’t a day that goes by when you won’t be tempted to buy something. Food, clothing, entertainment, vacations it is all there for you to spend money on.

One of the best ways to be successful at budgeting is to always, always, always pay yourself first.  I know it sounds counter-intuitive, but when you begin paying yourself first everything else starts to fall into place in your personal financial life.

Every single time you get paid put 10% of your income into a separate account.  I recommend using this account for retirement planning (I’m a huge fan of IUL Insurance – Check out this post to see why), you’ll be amazed at how much easier it is to keep your budget when you know that a portion of everything you earn is going towards you and not some faceless entity that you owe money too.

If you need help getting started check out this post on how to pay yourself first.

The decision to control your spending is what will set you apart from every other wanna-be.  If you can follow your budget you will become debt free sooner then you thought possible.

You grit is what will set you apart.

How To Become Debt Free

So lets get real here for a few minutes.  All of this is great advice that you’ve probably read before in one form or another.  What I’m saying isn’t earthshaking.  It is just plain simple advice.  I hate to say it, but it is the simple steps done day after day after day that will get you out of debt.

I remember wanting to give up so many times during our debt free journey.  And honestly, we did take a couple of breaks over the years (five years is a long time!).

There are some days when you don’t want to make all the right financial decisions and you are going to be stupid and blow your budget.  As long as you can stay strong and make sure they happen rarely you’ll be fine.

What I’m trying to say it don’t give up.  Don’t give up when it gets hard, don’t give up when you are tired, don’t give up when it feels hopefulless.  Just keep going.  When you mess up, pull up your big girl panties and promise yourself you’ll do better tomorrow.  I know it is hard, but you can do this!!!!

– So Now For The Ultimate Question –

  • Do you want to be debt free bad enough to sacrifice?
  • Are you willing to say no and cut your spending?
  • Are you strong enough to begin your debt free journey?

I don’t know you, but I know you can do it. Your job is to prove me right!

I’d love to hear from you.  How much debt do you have and when do you want to become debt free?