If you’ve read any of my other posts, you know I’m a huge believer in the Dave Ramsey method of debt-free living. I think debt is stupid but I definitely still have a lot of it!
Like many people, I went to college to get a degree and ended up with a lot of student loans. Then I bought a house, and I needed a HELOC (home equity line of credit) to go with it. So, even people who think debt is stupid get into debt!
However; we are trying our hardest to get out of debt. We still need our HELOC to finish some things around the house and get it put back together (more on that here). Once we are done, we will attack that debt! Meanwhile, I’m trying to get rid of my student loans as fast as I can.
Step 1: Write out a budget
This may seem easy, but until you have spending categories on paper, you won’t know how much extra (if any) that you can put into your debt. After you list out your monthly payments, make a separate list for your debt. Include the total amount you owe for that debt next to it.
A written budget is huge for knowing where your money is going and how much you are spending. Write a budget category for everything you can think of and assign an amount to it. You can always come back to this later and adjust if needed.
I’ve had to adjust my budget several times, most recently because we went to one income!
Becoming debt-free is something that I have always wanted. I want to share all the tips I have with you!
Step 2: Decide which debt-free strategy you want to use
Use the “debt snowball” or “debt avalanche” method to pay off your debts one by one
I’m sure most of you have heard of the debt snowball, but if not here are the basics.
- Write all debts down in order of how much you owe
- List the minimum payments next to these debts
- Attack the first debt with as much extra money as you have (while still paying the minimum payments on your other debts). If you don’t have extra, just pay the minimum that you can until that debt is paid off!
- Once the first debt is paid off, add the minimum payment that you were paying to the first debt to the second debt. Once the second is done, roll payments #1 and #2 into payment #3, and so on.
So, say you have the following debts. Listing them out according to the “debt snowball” rule would look like this:
| Bill Name | Minimum Payment | Total Amount Owed |
| Credit Card #1 | $25 | $1,000 |
| Credit Card #2 | $50 | $2,000 |
| Credit Card #3 | $50 | $4,000 |
| Car Payment #1 | $350 | $15,000 |
| Car Payment #2 | $400 | $20,000 |
In this example, start by paying your first credit card off as soon as you can. If you can only make the minimum payment, do that until it is paid off. Then move on to Credit Card #2 and pay $75 towards Credit Card #2. Once that is paid off, you’ll take that $75 and add it to the $50 you’re already paying for Credit Card #3. Get it? In this example, you’re getting small wins because you’re paying off little balances at a time.
This is what Dave Ramsey says on how to pay off debt to get your mind in the right place!
Pay off your debt using the debt avalanche
I prefer the debt avalanche method because I am more concerned with how much interest I’m going to pay rather than getting the “win”. Even when I started my debt-free journey, I still went this way when I had smaller debts than I do now. The debt avalanche method will go one step further. Write out the interest rate hooked to that specific debt.
If we take the same items above and list the interest rates next to them, it could look like this.
| Bill Name | Minimum Payment | Total Due | Interest Rate |
| Credit Card #2 | 50 | 2000 | 26 |
| Credit Card #3 | 50 | 4000 | 24 |
| Credit Card #1 | 25 | 1000 | 20 |
| Car Payment #2 | 350 | 15,000 | 6.50 |
| Car Payment #1 | 400 | 20,000 | 5.25 |
This way you pay off the debt with the highest interest rate first so you save the most money. This is the calculator I normally use to see which one would be better for me. It says debt snowball, but you can list out the debts how you want and see which one works best for you.
Step 3: What’s the plan to get debt-free??
Next, you need to figure out how you are going to pay off your debt. Are you going to sell some things you don’t want or need anymore? Host a yard sale? Facebook Marketplace? Get a side job? Or squeeze out existing funds from your budget?
I like the last one the best because it is probably the easiest! You need to figure out how much you spend in certain categories and see if you can scale back on it. My family of 5 used to go out to eat pretty regularly; at least once a week. This adds up! On average, we were spending $50-$60 a pop. This was a no-brainer for us. Limit the number of times we go out to eat to once a month, we were saving about $150 a month right there!
Hosting a yard sale or posting things on Facebook or Craigslist (do people do that anymore?) is another way to get some extra cash, but it probably won’t result in a steady income stream depending on what you have for sale!
Step 4: Cash is King
It’s proven that people who use cash spend less money than those who use a card. Our regular bills are automatically deducted from our checking account, so the only cash categories I use right now are groceries and fun money. I used to use cash for gas but where I live, the gas stations offer 5 cents off a gallon if you use the app and it’s just easier to use my debit card for this!
Our grocery bill was typically where we would always overspend. Our bi-monthly trips to Costco were enough to blow our whole month’s worth! When I started taking our grocery money out of the bank and dividing it up by the week, that is when I finally noticed a difference. I am determined to live off $100 a week for our family of 5 and after months of trial and error, I can finally say we are there.
Step 5: Shop your local thrift stores
There will come a time in your debt-free journey when you will need something! Or your kids will need something. You don’t have to buy brand-new items to get them through school. Thrift stores are a great way to find gently used clothing for your growing kiddos! I’ve bought shoes several times at the start of the year just for my kids to grow out of them a couple of months later!
You may not find everything on your list at a thrift store, but once you are living this life and paying off debt, things you “need” might not be a need when you think about it.
Is debt-free living for me?
Not everyone will want to commit to these steps and be debt-free their whole life, and that’s okay. But think about all the payments that you are putting toward your debt now and how much you will be able to put towards savings or investing down the road after you’re debt-free.
These tips above have helped my family and I attain our goal of living on one income. Like I said in the beginning, I still have debt so I am still on this journey like many of you. I am so excited for the day that we can say “We’re debt-free!”
