Eliminating Debt Step by Step

Here are the steps you need to eliminate debt.

In our current economy the problem of debt has taken center stage, as people struggle to get out or even stay on top of it. Eliminating debt is possible for anyone, as long as they are willing to make the necessary sacrifices to do so. It requires a lot of work, a lot of patience, and most importantly, a lot of dedication. The purpose of this article is to assist you in starting this process by explaining to you the steps I have taken to get rid of my debt. I know that as you work hard, you will be able to do the same.

The first step in eliminating debt is to choose a goal to become debt free. It is easy to say that the goal is to get rid of debt but it is easier to stay on track when we have a greater, more specific purpose behind our ultimate goal. For example, I wanted to eliminate my debt so that I can purchase new home for my little family. This specific goal has helped keep me on track when I feel tempted to cheat. Write your goal down, or take a picture of it, if it is something tangible. Then put it somewhere you will see it every day; so in your bathroom, bedroom, office or in your purse (to curb temptation when shopping). Make sure your goal is specific and attainable so that you do not become discouraged.

Figure out where you are

Now, this next step is probably the least fun but it is very essential. In order to reach any destination you need to know where you are. When it comes to debt elimination this means evaluating your current debt. Pull all your bills out and calculate how much you spend each month. Do not guesstimate how much each bill is or how much you spend each month. You will need to calculate the exact amount you are spending in order to be realistic about how your money is flowing and what you need to change. Do not forget to include any bills that are paid automatically out of your bank accounts. You need to know exactly how much these cost you and how much you are paying in fees to have it automatically withdrawn. You may be surprised at how much you actually spend or how high your debt really is but do not panic. You will get through this.

In order to see what you can do with your money, you also need to know how much money is coming in. Look at your household’s total net income. This is the income you actually get to keep after taxes and group insurance or other immediate payments are taken out. Then subtract the amount you spend every month from the amount you make. A very important step in this process is figuring out how much extra money you have to play with after all your bills are paid at the end of the month.

Once these two numbers are calculated and in front of you, you’ll need to ask yourself a few questions. These may be difficult because you need to be painfully honest with yourself but if you are, you will able to take the steps necessary to eliminate your debt and move on with your life. Here are the questions you need to answer:

· Am I spending more or less money than I currently make each month?

· How much money am I putting away to save every month?

· How often am I using credit cards to pay regular bills?

· Where does most of my money go every month?

· Are there any immediate changes I can make to improve my situation?

Time to Scrimp and Save!

So what is everyone’s favorite part of remodeling a home or a garden? The demolition! We love purging things from our lives that are ugly or not functional. So why is it difficult to do that when it comes to finances? It is the same idea; you are just eliminating those things in your budget that do not work for you; and as you do that, you will have a lot less to worry about. Look at your monthly expenses. Separate them based on what bills are essential, like your mortgage payment or energy bill and what is not essential, like your daily lunch take out. As you look over these bills, decide what you can get rid of and get it out of your life. This is what I call scrimping. It may seem a little painful at first but once you see how much money it will save you every month, you will breathe a sigh of relief. I promise!

Once you have scrimped, recalculate how much extra money you have at the end of the month. It will give you a little boost to see more money coming to you. Just remember, you cannot spend this money! You will need to use it to pay off your debt, so keep your ultimate goal in mind and make sure that “new” money stays in your bank account for now.

Now that you’ve asked yourself the questions above and you have a better idea of where you stand financially, it is time to “save” yourself. You need to look at what else you can do in order to eliminate your debt. My first piece of advice is to stop using your credit cards. Most of our debt comes from credit cards. This type of debt has some of the highest interest rates and the more you put on your cards, the harder it is to pay off, so it is essential to stop using them all together. You then want to call the credit card companies to find out if you can lower your interest rate or if there are any balance transfer options available. When looking at balance transfers, you will need to consider the promotional interest rate, the length of time that rate is going to last, and the fees involved in transferring your balance to that card. Then decide if it is a good option for you.

While calculating your debt and your income you may discover that you need more income. Now is the time to consider how to gain it. Do you need a better job? Maybe you need a second job. If you are a homemaker, it might be time to consider going back to work, at least part time. Maybe is it just time to talk to your boss about that promotion you’ve been working for. This is also a great time to consider your talents and abilities. If you have a talent or skill that you are not currently using, find out if it is needed. You could start your own business from home, using these skills or talents, to bring in that needed money.

As you look at the things you can do in order to get out of debt, remember that there is no shame in asking for help, if needed. You may discover, as many have in this economy, that you need some state aid. There is no shame in asking for such aid, especially because the need for it will be temporary. Depending on your situation, you may have family or friends that can help you out a little as well, so do not be afraid of asking.


Now that you have your finances in order, on paper and you’ve made necessary changes to them, it is time to start paying you bills!

Take your bills and divide them. In one pile you will want to put the bills that you pay every month; your mortgage, utilities, etc. In the other pile place your “debt” bills, so, student loans, credit cards, anything that is collecting interest and creating debt. Once you have done that look through the “debt” bills and place them in order from those that have the highest interest rate to the lowest interest rate.

Next, look at the bill that collects the highest interest and find out what the minimum payment is every month. Looking at your extra income and other bills, figure out how much extra money you can put toward this bill every month. An ideal goal is to be able to pay two to three times the minimum payment. If you can do that, you will stay ahead of the rate and therefore will pay it off in no time! Obviously you’ll need to continue to make regular monthly payments on your other interest bearing bills as well, but you want the majority of you money going toward the bill with the highest interest. You then want to continue this process until your debt is eliminated! This is not something that will happen overnight but as you are diligent and careful about your money, it will happen. Paying off your debt this way will get rid of it a lot faster than paying the minimums. Depending on the amount of debt you have, these steps could eliminate all your debt in as little as three or four years.


I have found that I reach my goals a lot faster if I celebrate milestones along the way. So, as you eliminate your debt, congratulate yourself with a little celebration; it does not have to be huge or expensive but give yourself a pat on the back. You can do this with your favorite dessert or a little get together with friends (you don’t have to tell them why you are celebrating), or with a trip to your favorite local spot; just have fun! You have earned it!

The process of eliminating debt is not always fun or easy but it is worth it. As I work on getting rid of mine, I have seen a change in my stress level and I have the excitement of knowing that I am a little closer to my goals every day. The thing I love about this process is that anyone can do it. You do not have to be a math wizard, or an accountant. You just need to have a goal and the drive to reach it.

As you pay off more debt, you have more money you can save for yourself and your family!
As you pay off more debt, you have more money you can save for yourself and your family! | Source

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Comments 14 comments

JanHeath profile image

JanHeath 5 years ago from Australia

Good thoughts Katya and useful, on a subject lots of people are thinking about and experiencing at the moment.

Hope you're on the way to getting that new home...

carcamping profile image

carcamping 5 years ago

Important advice. Good hub.

Katya Drake profile image

Katya Drake 5 years ago from Wisconsin Author

JanHeath thank you so much for your comments. I wrote this because I know it is on people's minds. We are getting closer to our goal little by little

Katya Drake profile image

Katya Drake 5 years ago from Wisconsin Author

carcamping, thank you so much for your comment. I appreciate it.

Simone Smith profile image

Simone Smith 5 years ago from San Francisco

What a fabulous plan of action! Thanks for sharing your sound advice, Katya Drake!

Katya Drake profile image

Katya Drake 5 years ago from Wisconsin Author

Thank you for reading my hub Simone Smith. This is advice that works. I promise!

ripplemaker profile image

ripplemaker 5 years ago from Cebu, Philippines

Sometimes when one is in debt, it is hard to see that there are solutions. Your plan could help things put in perspective and give hope that one can eliminate this problem.

Congratulations on your Hubnuggets nomination! To read and vote and enjoy the Hubnuggets festivities, this way please: http://pattyinglishms.hubpages.com/hubnuggets6/hub...

Katya Drake profile image

Katya Drake 5 years ago from Wisconsin Author

Thank you ripplemaker so much for reading my hub and for your great comments. I'm so shocked that I've been nominated for Hubnuggets and so excited at the same time!

limph3215 profile image

limph3215 5 years ago from Malaysia

Debt is like nightmare for many. If we can eliminate our debt step by step, life will be more fun. Good article and thanks for sharing.

crochet48 5 years ago

I am doing something similar with my own debts. My own addition is that, when I have additional money, I'll go make an extra payment so the debt comes down even faster.

Thanks and congrats on your Hubnugget nomination!

findout profile image

findout 5 years ago from San Antonio

Yes eliminating debt is a tough process that requires sacrifice. Many of us do not want to give up all the nice things we have which makes it hard to accomplish these steps. Nice hub.

Katya Drake profile image

Katya Drake 5 years ago from Wisconsin Author

Limph3215. Thank you for taking the time to read my hub and thank you for your comments. I've been a part of the debt nightmare. Mine never got really bad but it is still not fun. I wanted people to know there is a way out.

Katya Drake profile image

Katya Drake 5 years ago from Wisconsin Author

Thank you crochet48 for taking interest in my article! The advice in your comment is great too. I think I mentioned that in my article but I will go back and check. Thanks!

Katya Drake profile image

Katya Drake 5 years ago from Wisconsin Author

Findout thanks for the great comments! A big reason I wrote this article is because I know it is hard to make sacrifices and I wanted to share that it is tough but worth it. I'm glad you were able to see that in my writing.

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