5 Steps on Debt Management

How to Get Out Of Debt

In this article I will explain the 5 simple steps you can take to become debt free. These are very easy but it could take you a while to achieve you goal depending on how determined you are, how focused you are and how much you currently owe.

A great book on how to get out of debt is Dave Ramsey’s Total Money MakeoverHe gives you a blunt step-by-step process of how you can completely become debt free.

The 5 Steps

Stop Borrowing Money

It seems simple to say and simple to think. “Yes, I will stop borrowing money” but there’s a reason you’re in debt, right? Personally I’ve never been in any real debt for this very reason. I don’t really borrow money because I know the pitfalls. The only money I have borrowed is for my mortgage and for my college tuition (which is only around £6000 anyway and is easily payable through the student loans scheme we have in the UK). If I ever use my credit card to pay for anything, I IMMEDIATELY pay the credit card off. I will never become a slave to debt because I will never borrow unless absolutely necessary (i.e. house or small tuition fee with easy payable student scheme). This step is the first one and is absolutely CRUCIAL.

Build Up An Emergency Fund

By building up an emergency fund you are making sure you don’t have to borrow any money if an emergency does come around, therefore you don’t get into any more debt. In my opinion, you should build up an emergency fund of at least $1,000 or £750. This depends on your situation however – if you own a car, a house, have a pet, don’t have health insurance, have children etc. etc. this becomes more and more complex. You need to establish a fund that you think suits you. NEVER delve into that fund unless it is specifically for an emergency. Never take out any money from the emergency fund for an “emergency holiday” – if you do that, you deserve to be in debt.

Set a Budget

Write down all your in-comings and outgoings, assets and liabilities and set yourself a budget of money you can set aside a month for you emergency fund, and how much you can set aside a month to pay off you debts. You may have to sacrifice a few pleasures in your life, but if your desire is to be debt free then you will understand that sacrifices have to be made… for now. If you need to earn some more money (therefore open up more assets), check out my passive income article here.

List Your Debts From Small To Large

List everyone debt that you have from the smallest to largest. Your goal now is to pay off the smallest debt, then the smallest one after that, the smallest one after that and so on. This method makes you feel like you are progressing at an alarming rate at eradicating your debts. Once you notice each debt disappear you will be very satisfied. If you want to set goals for the elimination of each debt, you can use my goal setting form which can be found at this link.

Use Any Excess Money On Debt

If you have any leftover money, you should use it all on eliminating any debts you have. The small amounts of money add up over time – if you can found even $10 a month to pay off your debt, that’s $120 a year more than you would have if you hadn’t done it.


Paying off debt can be a long road of sacrifice and anxiety, but in the long haul you are doing yourself a favour. You will soon become debt free and you will no longer be a slave to debt.