Debt is scary, I should know.

I woke up on January 1, 2020, to $33,000 worth of medical, personal, and credit card debt.

For some people, debt is the bane of their existence. For whatever reason, it keeps coming back and never seems to go away. It holds them back from achieving their financial goals and is a never-ending source of stress and anxiety.

16 months after that frightening New Years Day morning, my consumer debt was $0. How I managed to pay all that off in such a short amount of time feels like a miracle. Except that it wasn’t.

Becoming debt-free is not impossible when you employ the right debt management techniques. In this article, we’ll explore how you too can pay off debt and use debt wisely to grow your financial situation.

We will discuss how to get out of debt by avoiding bad debt. We’ll talk about spending habits and budgeting. We’ll also cover topics such as how a credit card company may help with a balance transfer and why that might help you pay off debt faster.

What is debt?

Before diving into how to get out of debt, we should first understand the nature of this beast. Debt is nothing more than paying for money you don’t have. In some cases, debt is a good thing. Take student loans for example. Student loans help millions of students get a higher degree of education who otherwise wouldn’t have a chance to afford college.

Yes, I’m not particularly fond of my monthly student loan bill, however, my student loan yielded an education that has yielded financial and professional gains over the course of my adult life.

When you leverage debt to grow your assets or create better financial opportunities for yourself and others, then that is using debt wisely.

This article will focus on consumer debt, aka credit cards. Credit cards make buying things you “need” stupidly simple. One swipe and you’re done. Where they get you is with the high-interest rates.

A $10 purchase might seem innocent enough, but poor spending habits could put you in a position where you don’t have enough money to pay off your credit card balance in full, or worse, make your minimum payments.

That’s exactly what happened to me. Those $10 automatic purchases added up. Before long, interest took over and the beast grew.

How to get out of debt?

The best way to get off your debt is by using the right tools and motivation. But first, before anything, take a deep breath and gather your thoughts for a second.

Making the commitment to pay off debt is a big decision. Paying off debt is hard, it takes sacrifice and dedication over a long period of time. As someone who’s slain the beast, getting out of debt is worth the effort.

You can do this.

Let’s get started.

Write down everything you owe

Get out a piece of paper or a fresh Google Sheet and start listing out every debt, personal loan, credit card payment, and medical bill. Even the smallest ones count. If you have $20 left to pay off your phone, add that to your list.

The purpose of this initial step is to give you an overview of all your debt in one single place. Write down the outstanding balance for each as well as the interest rate.

Now go back through your list and remove any debt that is considered “good” debt. In my opinion, good debt is used to acquire life necessities such as housing (mortgage), transportation (can loan), and education (student loan). Keep in mind that debt is still debt, however, we are focusing our attention to eliminating the bad kind first.

Finally, organize the bad debt that is left from the smallest outstanding balance to the largest. If you’d rather adjust the list to prioritize debt with higher interest feel free to do so. The goal here is to prioritize which one you’ll go after first.

Speaking of which…

How do I get out of debt with debt snowball?

Think about an avalanche for a second. An avalanche begins with a few bits of snow falling down a mountainside. Before long, the snow attracts more snow until a giant wall of it is hurdling toward the mountain base.

Paying off debt is a similar experience.

Dave Ramsey, the personal finance guru, recommends what he calls the Debt Snowball Method.

In his method, you pay off your debt from smallest to largest. While making minimum payments for all your other debts, you focus all your extra money towards paying off the smallest debt on your list. Once the smaller debt has been paid, all of those dollars are then added back into your debt snowball to pay off the next smallest debt on your list.

This method really resonated with me during my debt management days and can help you pay off your debt a lot quicker than sporadically making payments. When I first started out, I was paying $58 a month towards my phone purchase and $38 towards a medical bill. I paid these two debts off first and then had an extra $96 a month toward paying down my high-interest credit card.

Eventually, the only debt you may owe will be one or a few large debts that’ll take longer to pay down. Stay patient. Paying off your debt is a marathon, not a sprint.

Create the best budget to pay off and stay out of debt

You might be wondering, “Okay, I know how to pay off debt, but how do I find extra money to pay off debt more quickly?”

The answer to that question is budgeting.

The only reason I was able to pay off $33,000 over a span of 16 months is that I am a meticulous budgeter. I use a tool aptly named You Need A Budget to plan for every single dollar that comes into our family bank account.

Budgeting, just like getting out of debt, requires the same diligence and patience. You need to know where your money is going, and you need to be able to recognize what isn’t working.

In order to create the best budget for debt payoff and stay debt-free in general, there are a few things we want to accomplish:

• We must learn about our spending habits — How much do we spend on food? How much do we spend on entertainment? etc.
• We must know how much extra money we can realistically put towards debt management.
• We must break our dependence on credit cards and spend only the money we have.

The third point is why I got into budgeting in the first place. I took all the credit cards out of my wallet and locked them away in my desk. I told my wife to do the same. We were no longer going to swipe our credit cards anytime we felt like buying something. Instead, we would rely on a budget with carefully curated line items to determine if we had the money or not.

I’ve written extensively before about how to start your first budget so I won’t elaborate too much here. However, I will say this: you cannot expect to get out of debt without a budget.

Consider balance transfers and debt consolidation

Here’s something you might not be aware of: you can shop around for a lower interest rate. Originally I had nearly $9,000 on a credit card with a 24% APR interest rate.

My bank reached out to me with a special offer, transfer my credit card balance over to them and receive 18 months of 0% interest. There was a small upfront fee but it was way less than how much I’d save with the lower interest.

Instead of multiple monthly payments, I made one debt payment towards a balance that wasn’t growing because of interest.

If you are struggling with multiple payments and high-interest rates, you can consider looking into debt consolidation services, but make sure to do your research. Rolling all your payments up into one to avoid the extra payments is only a smart move if it frees up extra cash or makes debt repayment go faster.

There are debt consolidation scams to watch out for. Be careful and do your research before you decide on a debt management company or credit card that offers a low-interest rate for debt consolidation.

Negotiate credit card debt

You can negotiate with your credit card company to reduce interest rates, adjust your monthly payments, or even receive a six-month interest-free payment plan.

You can also attempt to negotiate with other creditors like student loans, personal loans or any debt you have accrued. You’d be amazed at how much you can change with one phone call.

If you are able to pay off the remaining outstanding debt with one lump sum, you will have a good opportunity to change your lifestyle. Most companies will want to keep your business and will offer another option to give you a lower monthly payment thus helping you to pay down your debt faster.

There’s no need to go out looking for a second job, pick up the phone and just ask for help.

Get radical about paying off your debts

Every month, the amount of money you put toward your loan debt means you’ll spend less on things you want. It’s a personal finance situation that is honestly not a fun time.

But it doesn’t have to be.

Getting radical about paying off your debt will require you to get creative, mentally that is. When I was paying off my loans I made the process as much of a game as possible. I was adamant about knocking off the next debt on my snowball list that I’d put as much money as possible into my monthly payment.

Don’t underestimate the power of motivation. Read books, watch YouTube, listen to podcasts. Keep learning about personal finance so that when the day comes and you pay off the last remaining balance of debt, you’ll have a plan to keep, and grow, your money.

It’s all about your mindset from what you can and cannot purchase at the store, to throwing an extra $20 to get rid of debt just a little bit faster. Create a plan, sick to it, and keep going.