According to the Federal Reserve, Americans hold over $1 trillion in credit card debt. To further that, loans total over $2.8 trillion.

Let’s face it – most of us are in debt.

In fact, according to the U.S. Census Bureau, about 62% of American adults carry credit card debt balances and nearly 18% of Americans carry student loans.

You’re probably wondering “what can I do to get out of debt”?

Well, you can sit here and worry about it. Or you can ignore it and keep racking up the debt.

I have a better solution – let’s pay it off.

In this guide, I’ll walk you through how to get out of debt, covering every step you need to take along the way. Let’s jump right in by finding out where your debt lies and how much of it you have.

Find out how much debt you have

 

The first step in getting out of debt is understanding how much you owe. While this might be one of the scarier parts of paying off your debt, it’s one of the most critical. In fact, one study showed that households thought they owed nearly 40 percent less than what they actually owed.

So how do you figure out what you really owe?

The easiest way is by pulling a copy of your credit report.

Pulling your credit

The first thing to know is that in the United States, there are three national credit reporting agencies:

These agencies house and update the credit history of nearly all American consumers. Each of the three credit reports will look different, but they’ll have almost the same information. Almost.

There are some differences between reports, which is why you’ll want to pull all three the first time you’re checking your debts. One of the most common differences is a minor debt that is listed on one credit report but not another. While these debts may have been eliminated, it’s always helpful to see what’s out there in case you need to file a dispute.

To get a copy of your credit report directly from each of the credit reporting agencies, just do to their individual websites (linked above) and they’ll have a link to obtain a copy of your credit report. Alternatively, you can go to annualcreditreport.com.

Remember – you’re entitled to one free copy of your credit report from each of the credit reporting agencies per year. More than likely, they will try to upsell you on a product, but you’re not obligated to pay anything for a basic copy of your report. Some of these products are helpful for monitoring or getting more information, so feel free to take advantage, but I want to be clear that you don’t have to pay for your credit report.

Once you receive a copy of your credit report (available electronically), you’ll have the opportunity to review it to add up each of your debts. Here is an excellent sample credit report that Experian put out there – they go over each section of the report in detail so you know exactly what you’re looking at.

Each entry on your credit report will have the total balance you owe as well as the estimated minimum payment. Keep in mind that this is not always 100 percent accurate, so you’ll want to check in with your creditors to make sure – especially when you’re trying to get out of debt (more on this below).

Check with your creditors

Once you have a copy of your credit report, finding the creditors that hold your debts should be pretty easy. Most of your creditors will have a website where you can log into your account. If you haven’t done that yet, simply call them and they’ll walk you through setting up an account online. For creditors that don’t have that option, just give them a call. Most times the phone number will be listed for the lender on your credit report for simplicity.

When you speak with them, you’ll want to know how much your total outstanding balance is and how much your minimum payment is. It’s also helpful to understand how the minimum payment is calculated, so you can estimate how it will change as your balance goes down. This is common for credit cards, as it’s typically a percentage of the total balance (but each credit card issuer is different).

Action items

Obtain and review all three copies of your credit report and write down the following on a piece of paper:

  1. The total balance you owe
  2. The minimum payment
  3. The creditor and their corresponding information (i.e., website, phone number)

Confirm the balances and minimum payments with each of your creditors by calling them or checking online. This will be your guide for the rest of the way as you work toward a plan to get out of debt.

Decide on a payment method

Now that you have a better understanding of how much debt you have and where it’s sitting, it’s time to think about how you’ll attack the debt. One of the biggest problems I see is that we noodle on ideas and don’t take action.

It’s really important that you think about how you’ll take action here. It’s one thing to plan all of this out on paper, but actually moving money out of your account to make debt payments is a whole different ballgame.

The snowball method

The debt snowball method was made famous by financial guru Dave Ramsey years ago. It’s a catchy spin on a very basic financial concept. Basically what the debt snowball is trying to do is help you pay off debt by looking at it more psychologically, not mathematically.

The basic process of the debt snowball goes like this:

  1. List out all of your debts, from smallest to largest
  2. List out the minimum payments for each debt
  3. Throw as much as you possibly can at the smallest debt first while making the minimum payments on everything else
  4. Once a debt is paid off, you add that minimum payment to the next debt on the list (i.e., creating a “snowball”)
  5. Repeat steps 3 and 4 until your debts are paid in full

Let me give you an example to show what this might actually look like. Let’s say you pulled your credit report and called your creditors to validate, and found that you have the following debts:

Loan IssuerBalanceAPY
Minimum Payment
Chase$4,50015.00%$90
American Express$2,00019.99%$40
Capital One$15,00018.50%$300
Local credit union (car loan)$20,0004.00%$400

For now, we’ll ignore mortgages and home equity lines. Dave Ramsey says to hold off on paying down your mortgage until your other debts are wiped out, but you can work on paying off a HELOC early.

Following the debt snowball method, I’ll list the debts in order of smallest to largest balance, followed by the APY and minimum payment:

  1. American Express credit card – $2,000 / 19.99% / $40
  2. Chase credit card – $4,500 / 15.00% / $90
  3. Capital One credit card – $15,000 / 18.50% / $300
  4. Credit union car loan – $20,000 / 4.00% / $400

At first glance, it would make the most mathematical sense to pay off the American Express credit card, then move on to the Capital One credit card, based on the interest rate you’re paying. You could even make the argument to tackle the Capital One credit card first because the balance is high and you have a high interest rate.

But the debt snowball method ignores math and focuses on psychology – remember? By putting every extra dollar you have toward that first balance on American Express, you’ll have it paid off a lot quicker, wiping out one of your four debts.

Feels pretty good, right?

After you’ve wiped out the American Express credit card, your debt snowball would look like this:

  1. Chase credit card – $4,500 / 15.00% / $90 + $40 (previous American Express minimum payment) = $130
  2. Capital One credit card – $15,000 / 18.50% / $300
  3. Credit union car loan – $20,000 / 4.00% / $400

So you’re “minimum payment” on the Chase credit card is now $130 because you’ve “snowballed” the minimum payment from American Express onto that. This will help you pay it off faster. And when you’re throwing every extra dollar you can at that debt, it’ll go even quicker.

Here’s a great video of Dave Ramsey himself explaining the debt snowball process:

The avalanche method

Another popular strategy for paying off debt is what’s commonly referred to as the “avalanche” method. Unlike the snowball method, which is more rooted in psychology, the avalanche method focuses on what makes the most sense mathematically.

Instead of paying off the debt with the lowest balance first, the avalanche method focuses on paying off the debt with the highest interest rate. Again, this makes sense mathematically. The rest of the process is similar to the snowball method, in that you take the minimum payment you were making on the highest interest rate debt, and apply it to the next highest interest rate debt.

Just to make sure we’re all on the same page here, I’ll go through another example – this time using the avalanche method. Let’s take our same debts from above, only this time we’ll order them by the interest rate to follow the avalanche method:

  1. American Express credit card – $2,000 / 19.99% / $40
  2. Capital One credit card – $15,000 / 18.50% / $300
  3. Chase credit card – $4,500 / 15.00% / $90
  4. Credit union car loan – $20,000 / 4.00% / $400

So with this method, the first debt you’d go after is the American Express credit card. You’d throw every single dollar you had at that debt while making the minimum payments on all the other debts until it was paid off. Then you’d take that minimum payment and roll it onto the next highest interest rate debt. Here’s what it would look like after you’ve paid off the Amex card:

  1. Capital One credit card – $15,000 / 18.50% / $300 + $40 = $340
  2. Chase credit card – $4,500 / 15.00% / $90
  3. Credit union car loan – $20,000 / 4.00% / $400

The next highest interest rate debt is the Capital One credit card, which originally had a minimum payment of $300, but now has a “minimum payment” of $340 since you rolled the $40 Amex minimum payment onto this card.

You’d go on and on with this method, snowballing your payments, until all your debts were paid in full.

Action items

This is where the rubber meets the road. Remember when I talked about taking action? This is your time to do it.

So many people come up with big plans for paying off their debt, but they never see it through. These two methods are proven and will work, as long as you’re disciplined.

So here’s your action item:

Choose one of these two methods. Yes, there are other methods out there for paying off debt, but for now, choose one of these two. They’re easy to follow and proven to work.

Once you’ve selected a method that makes sense for you, set up autopay on each and every debt account you have. Set it up for the minimum payment, that way you make sure you’re not missing payments, and you’re on track to follow this method.

Finally, set up a budget (more on this below) to follow very strictly. Take every extra dollar you can possibly find and throw it at your highest priority debt – whether that’s the one with the lowest balance or the highest interest rate.

Stick to this for at least 60 days before you re-evaluate how everything is working. Charles Duhigg, the author of The Power of Habit, indicates that new habits take at least 30 days to form for most people. If you don’t give yourself a chance to change, you never will.

So pick a method, set up autopay, and stick to this for at least 60 days before doing ANYTHING. Trust me, you’ll be happy once you see the progress you’re making.

Cut spending and/or raise your income

Here we are – step 3. Progress is being made! Now that you’ve figured out what you owe, gotten everything organized, and figured out a debt repayment plan, it’s time to accelerate the heck out of this process.

The two most effective ways to create extra disposable income to pour onto into your debt paydown are to cut your spending and earn more money. Let’s dive into some ways you can do both.

Cut your spending

Wouldn’t it be nice to just snap your fingers and be able to spend less? It’s not that easy, but it is simple. The best way to cut your spending is by creating a budget. Yes, a budget.

If you haven’t given up on me yet, thanks.

Trust me on this one – I used to be terrible at budgeting. I thought that as long as I didn’t overdraw my checking account and my bills were paid each month, I was fine. I would take any extra cash I’d have and throw it into savings.

Obviously, that doesn’t really work long-term. I had no plan. I was just floating by each month hoping for the best.

A budget gives you a plan. It helps you stay super-connected with your money.

But in order to effectively budget, you have to see where your money is going. Otherwise, it’ll be like throwing darts at a wall while you’re blindfolded. You’ll make the attempt, but you’ll have no target.

Track your spending

The first step here is to load your accounts into a tool like Mint or Personal Capital. Both of these tools do a great job of telling you where your money has gone. I don’t personally like them for budgeting, because it’s very backward-focused, but they do an excellent job telling me where my money has gone so I can make a more effective budget. You can follow this guide to learn more about using Mint to track your spending.

Create a budget

Once you’ve figured out where your money is going, it’s time to create a budget. I am completely biased when it comes to budgeting, but it’s only because it changed my financial life. I used to be horrible at budgeting money (see – above). I tried different budgeting methods and none of them worked. Then I found You Need A Budget.

You Need A Budget (or YNAB) is different because it forces you to budget the money you already have. This is different than using a traditional budgeting method, where you’d guess at how much money you should be spending in a variety of categories throughout the month. That’s forecasting – not budgeting.

And according to Jesse Mecham, creator of YNAB, it’s why most of us fail. We forecast what we think we should spend and when we can’t meet those expectations, we quickly give up. That’s what happened to me.

I’m not going to go into extreme detail on how to create a budget with YNAB – mostly because they have gobs of information on their site, including training videos and classes. So I will just give you the basics.

In order to cut your spending, you need to create a budget using only the money you have in your accounts right now. Whether you use the YNAB software or a piece of paper – it doesn’t matter. You only budget money you have right now.

YNAB calls this giving every dollar a job. Every single dollar that you earn should have a job – whether it’s to save, spend, invest, or pay off debt. Once you do that, you need to follow your spending and get very intimate with your money.

This means tracking every dollar.

If you want to get out of debt, you need a system that will help you cut your spending big time. When you’re ready to take the leap and create your first budget, check out this great article on how to set up a budget using YNAB.

One of the things I love about Jesse’s philosophy is, he doesn’t care whether you use his tool or not. He is truly trying to help others manage their money better and reach financial freedom quicker. You can read about his story and the philosophy behind YNAB in his book that was recently released, You Need A Budget. That’s actually a great starting point.

Other budgeting methods

Okay, I’ll get off my YNAB soapbox (I told you I was biased) for now. If that methodology doesn’t work for you, no worries. The point here is that you’re cutting back on your spending – and in order to effectively do that, you need a budget that works for you. Here are some other popular budgeting methods:

  • 50-20-30: this is a very common strategy for budgeting, and for many people it works. The basics are that 50% of your money goes toward necessities, 20% goes toward debts, and 30% goes toward everyday spending. You can manipulate this however you want, but the framework is there to give you a basic starting point. You can learn more about this budget here.
  • Cash-based: a simple method of budgeting is by only using cash. It becomes difficult when you go to pay for things like rent or gas for your car, but having a finite stack of money each week or month will limit you to how much you can spend. For many people, this works really well.
  • 60% solution: this is an old-school method that former MSN Editor-in-Chief Richard Jenkins created and made popular years ago. The basics are that you put 60% of your pre-tax money toward “committed expenses” (rent, food, and other needs) while the other 40% gets split into four categories, each getting 10% – retirement, long-term savings, short-term savings, and fun money. I’ll be honest, I tried this method years ago and failed. It might work for you though.

Raise your income

You should always create a budget and find ways to cut your spending. But sometimes that will only take you so far. The next thing you need to do is find new ways to increase your income. Here are some ways to do it.

Ask for a raise

The first, and probably most obvious, method of getting more money is to ask for a raise at your current job. According to AAUW, the current pay gap between men and women is about 20 percent. A recent study done by Payscale surveyed about 30,000 people, finding that 43 percent of those people had asked for a raise. Out of that 43 percent, 44 percent got a raise. That may not seem like a significant number, but in a study of 30,000 people, 57 percent of those people didn’t even bother asking for a raise. Of those who did (12,900), nearly 6,000 of them got the raise they asked for.

Hockey legend Wayne Gretzky said it best – you miss 100 percent of the shots you don’t take. If you don’t bother asking for a raise, you’ll never get it. If you do, there’s a chance you will. What’s the worst that can happen? Your boss will say no, and you can move on (see below – looking for a new job).

CNBC personal finance writer Jessica Dickler says that “it’s a good time to ask your boss for more money: The job market has the lowest unemployment in 18 years, starting salaries are better and wages are finally picking up.” If you do decide to ask for a raise, there are a few rules to follow. In her article, Michael Erwin, a senior career advisor with CareerBuilder, gives four things to consider when you’re asking for a raise. Be sure to check that out.

Get a new job

If you don’t get a raise, or simply want to find a new career, the next best way is to start looking for a new job. More and more people are favoring job-hopping – and it’s for a variety of reasons. One of the major reasons is that you tend to make more money when you leave a company for a new one.

According to Cameron Keng of Forbes, “the average raise an employee receives for leaving is between a 10% to 20% increase in salary. Obviously, there are extreme cases where people receive upwards of 50%, but this depends on each person’s individual circumstances and industries.” That’s a lot of money you could be leaving on the table by staying in your current job.

But looking for a new job isn’t always a walk in the park. You need to build up your resume, make sure your networks are intact, and be very aggressive with looking for jobs. You may also have to be open to relocating, taking time off for interviewing and considering new career paths. It’s not easy. Once you’re ready to get serious, though, TopResume put together a nice list of things you need to think about before you start the job hunt.

Pick up a side hustle

If neither of the above options is for you (or even if they are) you should consider picking up a side hustle to pad your monthly income. What’s crazy is that 37 percent of Americans now have a side hustle, according to a recent Bankrate survey. Side hustles can be full-blown jobs or just quick ways to make cash. I’ve done both – but they have different approaches.

If you’re just looking for a quick buck, you can do all kinds of side jobs online – like running tasks for TaskRabbit or Amazon Mechanical Turk. You can check out a laundry list of ways to make money fast here. Doing quick side jobs like this is a nice way to get started, but I don’t really consider it a full side-hustle.

To take it a step further, you should consider hustles that you can build a real income with. For example, I work full-time and have built a lucrative career on the side as a freelance writer, niche site builder, and I now run a profitable digital marketing agency. My advice is to find something you’re passionate about and learn as much as you possibly can about that topic. Then find a way to work it into a second career on the side.

For example, if you want to become a freelance writer, start writing. Learn everything you can about it and get good at it. Then start offering your services to people and building a network. And trust me, this you don’t have to work for peanuts. Raj Jana is a great example. He built a multimillion-dollar side hustle while he was working full time. Sujan Patel, the co-founder of Web Profits, did the same thing. And if you haven’t heard about Pat Flynn by now, you just need to read his story. He now makes millions of dollars a year after losing his job and starting a side hustle.

So get serious about it. Find something you’re interested in and passionate about, and find a way to make it a real side hustle. Start with quick jobs to earn extra money, then blow it up into a real second income. This will help add to your existing income and help accelerate your path to having no debt to your name.

Action items

If you’re serious about paying off your debt, you absolutely must create a budget for your spending. I know I raved about YNAB, but you don’t have to use that if it’s not for you. I don’t care if you track your spending on a napkin – just find a way to do it. You need to understand how much money you have coming in, and exactly where that money is going. Then you need to plan for purchases and cut back as much as you possibly can.

Beyond that, you should immediately ask your boss for a raise. There’s no harm in doing it – the worst they’ll say is no. Regardless of that, you can start picking up side jobs and building a profitable side hustle while you’re working full time.

Exhausted yet?

You should be.

Paying off debt isn’t a sprint – it’s a marathon. It’s easy to get into debt, but it takes a lot of time and dedication to get out.

Take advantage of other tools to help you get out of debt

By now you should have developed a pretty solid plan for paying off your debt. You’ve identified where your debt is at, how much you owe, and how you want to start paying it off. You’ve also determined what you’re spending and where, and begun developing a budget. You may have also started thinking about ways to earn extra money to move this process along even quicker.

Great work.

Now it’s time to look at other tools that are out there to help you even more.

Debt consolidation loans

A debt consolidation loan can be an excellent option when you’re looking to pay off your debt. There are a couple of ways of looking at this, too. The first, obviously, is the money-saving aspect. By consolidating your debt into a single loan, you can take advantage of one, lower monthly payment. This should save you money on a monthly and long-term basis.

The second reason this is helpful is due to the psychology behind not having a ton of balances in many different places. Even using our example above, we had four debts at four different places. That’s four monthly payments, four interest rates to manage, and four headaches each month (at least).

Consolidating your debt into one spot can save a bunch of stress and just make the whole debt paydown go quicker. To do this, you need to first identify a company or bank that you want to consolidate with. We recommend going with EVEN Financial – they scour the internet for the best loans available and present the ones that perfectly suit your needs. But, you can also check into your local bank or credit union to see if they have any better options for you.

If you go with a company like EVEN, the process is incredibly easy. You are basically taking on a new loan that you can use to pay off your debts. Just tell EVEN how much you want to pay off, submit an application, and assuming you qualify, you’ll be approved in a few minutes. From there, you will receive a deposit for the amount you need, and you can pay off your debts right away (it usually takes about a week, end-to-end).

If you use a bank or credit union, they would most likely take your account information and balances, and pay them off for you. This is similar to how a balance transfer works (see below). Regardless of what you decide, you should at least explore your options with a debt consolidation loan – it can save you thousands of dollars in the long-term.

Balance transfers

Another really good option for consolidating your balances is a balance transfer. This can be done without even applying for a new loan – which is what makes it attractive to so many people. A balance transfer is basically paying off one credit card with another by using a promotional rate.

The benefits in doing this are that you don’t (necessarily) have to apply for a new credit card – you may already have a balance transfer promotion available; as well as the consolidation aspect of simplicity and money-saving. By moving your balances to one card, you will save time, energy, and money – just like you would with a debt consolidation loan.

The downside to a balance transfer is that you are only on a promotional rate. Once that rate ends, your balance reverts back to the default rate on the credit card – which is often much higher. You’ll also have to pay a fee to transfer your balance in most cases, so be mindful of that.

To do a balance transfer, first, check your existing credit cards to see 1) if you have enough space to move the balance to, and 2) if you have any promotional rates available. You can do this by checking online or by calling your creditor.

If you’ve found an offer, you can almost always do this process online. Simply type in your account numbers and corresponding balances, and your credit card company will do the rest. They’ll make fast, electronic payments to your creditors to pay them off, bringing your balance to their card.

If you don’t have a balance transfer option available, you can apply for a new card – assuming you meet the qualifications. In fact, new applications and new cards tend to have the best offers available. Many times you’ll see a 0% promotional offer, good for up to 18 months. That gives you a year and a half to knock out your debt at zero interest.

Budgeting apps

Depending on what you did with your budget above, you may want to create a budget on the fly and have your money plan with you wherever you go. That’s where budgeting apps come in. Here are some of the best to get you started:

PocketGuard

The goal of PocketGuard is to keep you from overspending each month. Once you connect your accounts, it tracks your spending versus what you have in your account. It will pick up on any recurring subscriptions you have, as well as your overall monthly income, bills, debts, and savings. I highly recommend this app if you have a problem with overspending.

Wally

Wally is a good app if all you want to do is create and manage a budget. It doesn’t have all the bells and whistles of some of the other apps you’ll see, like Mint or PocketGuard, but it does a fine job at tracking your spending. If you want something easy and no-frills, go with this app.

Mvelopes

Building on the envelope concept, Mvelopes is designed to be used if you follow a cash-based budget (as discussed above). There’s manual work involved with this app, and it’s pretty much useless for debit and credit cards, but if you’re stuck on cash, this app is perfect.

Action items

Although you have a firm plan in place for knocking out your debt, it doesn’t mean you shouldn’t take full advantage of some excellent tools out there to help you along the way. By consolidating or transferring your balances, as well as looking into new apps, you can become a debt-paying guru in no time.

My ask at this point is to simply explore these options. Consolidation won’t be for everyone, for example. So explore these options and see if any of them work for you and your lifestyle.

Other tips to reduce debt

When it’s all said and done, the above guide should give you a very solid path toward paying off your debts. But just in case you want even more ideas, here are some additional tips for paying off your debt:

1. Look into credit counseling

Consumer credit counseling is a service that’s offered to people who are in debt. They’re non-profit organizations that will negotiate lower payments on your behalf. In many cases, this has little to no impact on your credit, unlike a hardship program (see below).

Essentially, these companies will walk you through a budget of your monthly income and expenses. They’ll give you advice on how and where to cut back. Then they’ll ask which accounts you want counseling on and ask you to close those accounts.

Once the accounts are closed, the organization will contact your creditor and negotiate a reduced rate. Banks are likely to negotiate with these organizations because they have pre-existing relationships, and the success rate of paying the debt back is higher in working with a credit counseling program.

This is considered a hardship option, so only go this route if you have exhausted all other options. To learn more about credit counseling, go here. You can also find a list of trusted credit counseling organizations here.

2. Ask about a hardship program

Credit card debt is unsecured – meaning that there’s nothing the bank can do (besides destroying your credit) if you don’t pay. Unlike secured debt, such as a home or car, there’s nothing that can be taken from you if you don’t pay your credit card balance.

That’s one of the primary reasons banks offer hardship programs. Basically, this is an internal debt management program your credit card company will put you on in order to pay off your debt. They’ll close your account and reduce your rate so you can pay it off quicker. They’ll also make a note on your credit file that will tell other creditors the balance is in a debt management program (this may or may not hurt your credit score).

To do this, call your credit card company and tell them you’re having a hard time paying your balance and ask what types of options they have to help you pay it back. Remember – this should only be done after you’ve exhausted other options since a hardship program is considered a negative credit event by most lenders.

3. Ask family

Asking family members can be incredibly awkward and uncomfortable, but it might be one of your best options if all else fails. Family members, once past the uncomfortableness, will many times loan their loved one’s money at no interest.

Now, while this may be one of your best options from a financial perspective, it’s one of the worst from a relationship perspective. I’ve had relatives destroy their relationship within the family because of money issues. Think about it – what happens if you can’t pay the money back?

Be cautious about this option, and only use it if you’re in dire need and have no other options. If you reach this point, here are some tips on how to ask your family to borrow money.

Don’t forget to establish an emergency fund

All this talk about paying off debt and you’re probably focused on doing everything you can to get rid of debt. But what happens if there’s an emergency, such as a major car repair or medical bill?

If you’re throwing everything you can at your debt, you may have nothing left to cover these types of expenses, so you will find yourself getting right back into debt.

This is one of my key disagreements with Dave Ramsey’s philosophy. He says you should keep $1,000 and put everything else toward debt. I think you should build up an emergency fund, of at least six months, while you’re paying off your debt.

This means balance.

This means that with an effective budget, you should have room to save a little bit and put money toward debt. That way you’re building up emergency savings in case anything happens.

How to build an emergency fund quickly

Assuming you’ve followed this guide to this point, you’ve already tracked your spending and created a budget. Those are the first two steps to creating an emergency fund. Here are some additional things to do:

Pocket lump sums

Instead of using things like a bonus or a tax refund to buy something, sock it away in a savings account. It’s hard sometimes when you have a huge influx of cash to not want to do something with it, but just think of your emergency fund as a holding place for money you will do something with. It’s still your money, you’re just saving it for a more defined purpose down the road.

Find ways to save little bits

Every little bit helps. You can use an app like Acorns to round up your purchases to the nearest dollar and invest the difference. So for example, if you spend $47.25 at the grocery store, Acorns will round that up to $48 and invest $0.75. This may not seem like a lot, but if you consider the amount of money you’re already spending, carving out little bits here and there will help.

You can also do this more manually by finding cheaper alternatives to things you’re already buying. For instance, go to Aldi instead of Whole Foods. You can save a ton of money on the same types of foods by purchasing generic brands.

Automate your savings

David Bach, the author of The Automatic Millionaire, says that you should pay yourself first and live off the rest. He’s talking about automation. If you automate your savings, after a while you may not even know it’s missing. You’ll begin to live off of what you have left from your paycheck, while the rest is sitting in a savings account somewhere.

Simply set up an auto contribution within your bank’s online banking system and you’re good to go. I have a set amount of money transferred to my savings account every week for instance. It’s great because I feel like I never know it’s there, to begin with, but then my emergency savings balance grows over time.

Will I ever get out of debt?

If you put your mind to it, stay focused, and follow this guide – yes. In fact, here are some of the best success stories of people who have overcome tremendous amounts of debt:

Conclusion

Whew. Well, there you have it. The ultimate guide to paying off your debt. Since this was a beast of an article, let me recap it for you, in case you skimmed.

Here are the steps you need to take to pay off your debt:

  1. Find out how much debt you have
  2. Decide on a payment method
  3. Cut your spending and/or increase your income

Once you’ve carved out a plan for that, it’s time to up your game a bit. Here are some other things to do:

  • Use other tools to help you get out of debt faster
  • Look at alternative options
  • Don’t forget your emergency savings account

Now I want to hear from you:

What steps did you follow to get out of debt, or how are you working your way through your existing debt now? Please share in the comments section below!

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