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How To Get Out Of Debt In 5 Steps

by Rob and Edy

Being in debt is no fun and trying to get out of debt definitely ain’t no walk in the park either. It’s stressful and can make life miserable.

You’re working you backside off and thinking, “How the *!@&?!# am I ever going to dig myself out of this hole?

How you got to be in this position is not important right now. It could be that you’ve been managing your money badly or it could be that it was brought about by unfortunate and uncontrollable circumstances.

As I say, it doesn’t matter how it happened. It’s not important, so just put that to one side for now.

What is important is to get you back on track as soon as possible. But the benefit of taking care of the debts, is that it creates the perfect opportunity to implement new budgeting habits that will hopefully prevent a recurrence in the future.

Right now, it may seem like an impossible task to clear your debts. I know – I’ve been there myself. But many people have pulled themselves out of debt successfully and SO CAN YOU!

I’m not going to lie to you – it is not always easy.

And it takes some commitment on your part.

It’s like getting fit.

Or learning a new skill.

Or dieting.

It takes time, patience and commitment.

There’s pain at the beginning, but in the end it will be worth it.

You need a plan and you need to stick to it.

Plan – execute – review – repeat. That’s the cycle you need to succeed.

Here I have compiled what I believe to be the best tips and strategies around to help you get through this as fast and with as little pain as possible and I have broken things down into 5 key steps.

** This post may contain affiliate links, so if you click through and make a purchase, we may earn a commission. This is at no additional cost to you. Opinions are entirely our own. **

Step One – Acknowledge Your Position

The first part is really all about mentality. You need to want to do this and you need to make a conscious decision that you are going to do this!

You need to acknowledge the problem. Don’t deny it. Face it head on.

Tell this bad boy you’re gonna kick its ass, no matter what it takes.

You won’t be beaten.

You’re going to do whatever it takes to get your finances and your life back on track. Once your head is in this place, you’re ready to move to Step Two.

Step Two – Plan Your Attack

Ok, you admit there’s a job to be done, a battle to be won. But how are we going to attack this?

Before you can plan the route to your destination, you need to know exactly where you are now.

There are 3 parts to this:

1) Know your monthly income vs monthly expenses

2) Identify exactly how you are spending your money each month

3) Prioritize your spending and debts

When it comes to cutting expenses, you need to remove the necessities from the equation (see Step Three) and then reduce or remove spending in all other areas. Examples of places where expenses can usually be cut:

  • Ask for restructuring of credit card payments/loans
  • Transfer your credit card balances
  • Stop using the credit card altogether
  • Drop expensive habits
  • Cut the cable – most TV sucks (the life out of you) anyway
  • Don’t dine out (so much)
  • Reduce or stop buying coffee out
  • Plan your meals for each week in advance
  • Drop expensive hobbies

Identifying your spending habits is a crucial element to getting this done properly.

To do this, you need to audit and track all money coming in and going out. To make this easier, we have put together a free spreadsheet template you can use and you can download it by clicking on the image below.

Budget Tracker 5

Recording income and expenditure should make it obvious where you are spending too much and will help you to prioritize your spending each month.

If you have a partner, you should get them involved with this process, particularly when you have identified any spending habits that are creating added stress to your financial situation.

Related ~ Money Habits of Happy Couples

Step Three – Allocate Your Income

Exactly how you allocate your net income should be appropriate to your own personal circumstances. There are no hard and fast rules and you can find different recommendations for allocating your salary online, but if you need some guidelines, you can use the ratios suggested below.

There is a commonly used method, creatively named as the “50/30/20 Rule”, which recommends that you allocate 50% of your after-tax income to essentials, 30% to personal expenses and 20% to savings and/or debt, so you can use this as a rough guide.

You can adapt this to your needs, but generally, it serves as a very good framework.

For example, I would allocate the first 50% to necessities, which includes:

  • Rent/mortgage payments
  • Food
  • Utilities
  • Transportation
  • Insurance
  • Child care
  • Loan/credit card minimum balances

If your necessities come in above 50%, you should review how the money is being spent and identify where you can cut costs.

The next 10%, you put towards saving for an emergency fund, if you don’t have one.

You need to have a buffer, regardless of what debts you are currently paying off. Aim for $1,000 initially, but the ideal amount recommended by financial planning experts is 3-6 months’ living expenses.

The remaining allocation should to be split between paying off debt and discretionary/luxury expenses. Obviously, you may need to implement some “austerity” measures to clear debts as quickly as possible, but you also need to set a little aside for some treats or you’re going to go craaaaazy.

Like anything that is essentially about forming habits, the lifestyle needs to be sustainable, otherwise you will most likely fail.

Step Four – Build Your Income Streams

If you can, you need to look for ways to increase your income, since income is the other part of the equation.

There are all kinds of ways to do this. For example:

  • Ask for a raise (if you don’t ask, you don’t get!)
  • Find one or more side hustles
  • Sell anything you don’t need
  • Get a part-time job

Do not sign up for get-rich-quick schemes, MLMs, etc. The only people who make money from these are the people selling them to those desperate enough to want to believe they actually work. Don’t be one of those suckers.

Step Five – Track Income and Expenditure

To keep on top of progress and to help maintain the habit, you need to track your finances.

You can use the All Sussed spending tracker mentioned earlier or you could try one of the many budgeting apps out there available on iOS and Android. We use one called HomeBudget, which is really clear and simple to use, but there are loads of others to pick from. Frankly. it doesn’t matter, as long as you have something in place to track what is going on.


I hope that provides you with a clear plan of attack when it comes to eliminating your debts. It doesn’t have to be complicated and it is really more about discipline and habit than anything else, but if you have a clear picture of where you are now, where you need to be and exactly what you need to do to get there, everything becomes a lot easier.

If you have any questions or comments, feel free to get in touch.

Helpful sites for debt advice:

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