How to Eliminate Debt

How to Become Debt Free Using the Debt Snowball Method

Do you want to know how to eliminate debt and how to become debt free entirely? The steps are actually very simple. It is the implementation that is the challenge!

Before following this debt free financial advice you need to get in the right state of mind. You need to understand how limiting your debt can be before you can learn how to start living debt free. Picture what it would be like to go from debt to financial freedom. Understand the importance of saving money.

Get Out of Debt Tips

  1. Commit to living within your means. Don’t spend more than you earn!
  2. Build up an emergency fund of $500 to $1000. This is absolutely essential to keep you from being derailed from your plan, due to unplanned expenses. Look for ways to fund this quickly, such as selling something or using a tax refund.
  3. Attempt to negotiate with your creditors to see if they will reduce the interest rates.
  4. If possible, transfer balances from credit cards with higher rates to credit cards with lower rates.
  5. Prioritize and pay what you owe using a debt snowball method. This is the real meat of how to eliminate debt. (The debt snowball calculator makes this task much easier.)
    • Make a list of all of your debts, including credit cards, car loans, student loans, etc. Include everything but your mortgage.
    • Include the outstanding balance, interest rate, and minimum payment for each debt.
    • Choose the order for paying them off. Either sort them in order from highest to lowest interest rate, or from lowest to highest balance. (Starting with the debt with the highest interest rate is the most efficient method and in theory, will allow all the debts to be paid more quickly. However, if you need some encouragement early on, start with the debt with the lowest balance.)
    • Make the minimum payment on all of the debts. In addition, pay as much extra as you can afford on the debt you chose to pay off first.
    • Once the first debt is paid off, move on to the next one and repeat the process.

  6. Make sure you make all of your payments on time without fail. Credit card companies thrive on charges for late and missed payments.
  7. Use every extra dollar available to speed up debt elimination.
  8. Consider these short term methods for extra ways to make money to pay your debts:
    • Sell what you don’t use.
    • Get a part time job.
    • Apply bonuses, tax refunds, and gifts to the debt.
    • Decrease the amount of taxes being withheld from your paycheck. Consider this option only if you expect to receive a refund on your tax return.
    • Tighten your belt a little more.

If you follow this advice about how to eliminate debt, you will put your financial life on solid ground and learn how to reduce financial stress in your life.

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