How do I get out of debt?
Do you have too much debt? Don’t know where to start? Every repair takes too long or is too expensive. Here’s what we did to pay off $51,000 in less than three years, and we’ve helped others pay off over $1,000,000 (so far). Or skip ahead and start here: 7-Step Credit Card Debt Reduction Here.
Becoming debt free is more than a list
Becoming debt free is more than a long list of do’s and don’ts, which ChatGPT will find for you if you search for “how to become debt free.” Yes, doing and not doing things like:
Cut out vouchers
Buy in bulk
shopping shipment
Use tax refunds, bonuses and cash gifts to pay off debts
Cutting the cable cord
Sell your car
Downsize your home
Don’t take on any more debt
Selling unwanted/unused items
I’m stopping eating out so much
Cancel monthly subscriptions
Cancellation of gym and other memberships
Reduce your social life
Take out life insurance to pay off debts
Find free and cheap entertainment
Temporary reduction or cessation of investments
Quit Facebook and Instagram
Make your own coffee
Earn more money with a new job, a promotion or a part-time job
Cancel Amazon Prime
Meal planning
Increase monthly payments on your credit cards
Cutting your credit cards
Implement a spending freeze
Negotiate lower interest rates
Reduce the time you spend on social media – it makes you buy things
Using a shopping list
Use of the library
Create a budget
are great ways to save money and put more money toward paying off debt to become debt free. But all of these practical and tactical steps don’t address the real reason most — not all — people have credit card debt.
For most of us, the reasons we rack up credit card debt are limiting beliefs about who we are and what we’re worth. So step #1 to being debt free is always, always, always. . .
1. Adopt the mindset of becoming debt free
Designer clothes, great vacations, homes in the choicest neighborhoods, and happy times that lasted well beyond an hour – does that sound familiar?
Some may call it the “gay lifestyle.” A while ago, a young gay man in a Facebook group asked, “Why is it so expensive to be gay?” We knew exactly what he meant. Maybe you do too.
Keeping up with the “gay money” made us two very unhappy homos. We were the epitome of the gay stereotype: we looked great but were incredibly broke – like those four guys crammed into a two-bedroom apartment in LA but somehow still driving Beemers and Audis.
Does this sound familiar? Yes, we thought so.
One evening, sitting on the dining room floor of our basement apartment—yes, a basement—we finally said, “Enough!” We were beyond frustrated with the debt itself and how it was getting in the way of the life we really wanted. The life we claimed to lead. We had tried to fix the problem before, but every quick fix only made things worse. We couldn’t continue living like this and knew that something had to change.
We had to change. Maybe you feel the same way too?
The first step in any fundamental transformation is to change your mind. There’s a big difference between wanting to change and believing you can.
That’s why it was crucial to change our mindset. We had to stop dreaming of a different life and start believing we could do it.
2. Create the vision of becoming debt free
Many of us cannot imagine a life without debt. Whether it’s student loans, credit cards, or medical bills, debt feels like that annoying friend that’s always pushing past its limits. But here’s the kicker: it doesn’t have to be this way.
When we finally got honest about our $51,000 in credit card debt (yes, that’s not a typo), we had to ask ourselves, “What would life be like without this financial ball and chain?” We were paying $10,000 a year. Dollar interest paid to credit card companies. I know, ridiculous right? So we started imagining what we could do with that $10,000 instead of using it to fund our luxury debt club subscription.
It was FUN to dream. We dreamed of real vacations that didn’t give us credit card hangovers. We even dared to dream of moving out of our basement apartment and into a condo without the soundtrack of creaking upstairs neighbors.
What would your debt-free life look like? Imagine freedom without debt – a little more money in your pocket, a lot less stress and maybe even some money without a guilty conscience. Can you imagine living this debt-free dream? Because if we can do it, so can you.
3. Be friendly with the Benjis
When Macklemore sang in Thrift Shop“I only have $20 in my pocket, I, I, I’m on the hunt. This is fucking awesome.” Turns out you can have a lot of fun when you know where the hell your money is coming from and where it’s going.
Having a clear sense of where you are financially and where you want to be will give you a roadmap to get there. This roadmap was critical when we decided to get serious about becoming debt free. Without them, we would still be stuck on the path of least resistance – Sunday Funday, popping bottles at happy hour and feeding our Amazon addiction while Visa and MasterCard happily enable our bad habits.
One of the best things about our fiscal policy is that we are now spending with purpose. We ask ourselves, “What brings us true joy, not just a fleeting hint of happiness?” We’re not talking about the light mood that comes with a few cocktails at happy hour, but what makes you smile days or weeks later ?
This is where your money should go. So ditch impulse purchases and instant gratification and start spending on what makes you happy. Your wallet – and your future self – will thank you.
4. Have the courage to do it
Think back to your last unique first date. How did everything develop? I’m not talking about the logistics – some details are too exciting to share unless you’re on Grindr or Bumble.
Think about how it started. Who took the first step? Who had the courage to ask the other person out? Didn’t you feel totally great after this date? (Keyword: mischievous grin.)
Well, managing your money is a bit like the first date. It’s not a lifelong commitment, but your wallet and your future self will thank you. Because let’s be honest: Nothing is sexier than someone who has everything under control – and that includes their finances.
Speaking of which, did you know that couples who talk about money have better sex? So get your finances under control and you might find that both your wallet and your love life get a little extra boost
5. Make it smart to get out of debt quickly
Most people who search Google for ways to get out of debt often read advice from one of Dave Ramsey’s employees. Ramsey, a big fan of the debt snowball method, suggests paying off the credit card with the lowest balance first. You throw extra money at it — bonuses, gift money, tax refunds — while you make minimum payments on your other cards. As soon as the smallest balance is used up, you move on to the next smallest balance.
The snowball method is great for initial success and a bit of debt payoff drama. But here’s the kicker: it may cost you more in the long run because it’s not the most financially responsible method. Plus, tuning into Dave Ramsey’s show or buying Financial Peace University might also come with a side of religious fervor that some people aren’t interested in – hey, “don’t force your lifestyle on me and stuff!”
On the other hand, the Avalanche method is the more financially responsible option. This method focuses on paying off the credit card with the highest interest rate first and making minimal payments on the rest. This is a surefire way to save more money over time. The only downside? It feels like it takes forever to see the light at the end of the tunnel.
As we looked at these methods for tackling our $51,000 in credit card debt, we realized it would take five to eight years to be debt free. Patience is not exactly our strength!
So we had to figure out what was delaying our trip. Can you guess?
It was the annoyingly high credit card interest rates – some charge over 22%! That’s why we developed our approach: the debt lasso method. Because if you need to deal with debt, you might as well do it with a little style and a lot less time.
6. Lasso your debts
The debt lasso method states that you should limit your debt to as few locations as possible with the lowest interest rate, ideally 0%. The easiest way to do this is with credit card balance transfer offers at 0% interest rate. Other options include low-interest personal loans or loans from friends and family, although we’re not big fans of the latter two.
The debt lasso method consists of a total of five steps to make it extremely effective:
- Commit
- Commit to stopping using your credit cards
- Commit to paying more than the minimum monthly payment each month
- Trim
- Immediately trim or cancel any cards that can be paid off within a month or two
- lasso
- Spread your debt across as few locations as possible with the lowest interest rates possible
- Automate
- Automate credit card payments, focusing on paying more than the minimum amount on your highest interest rate credit card
- monitor
- Make sure you don’t miss a payment and adjust your payments as you pay off credit cards
More tools to get out of debt: