3 Steps To A Debt-Free Life

Nowadays, more people are in debt than those who are not.

This means that people increasingly are seeking debt relief for the following reasons:

  • To reduce financial stress
  • To become debt-free without affecting savings
  • To improve family relationships
  • To set up a bright future for their families

If you are in debt, I suggest that you get out of debt as quickly as possible. One way to do it is to follow these three steps to living a debt-free life:

Clear your Debt

The first step to living a life free of debt is starting to pay off your debts. You cannot live comfortably until you finish paying off your creditors and lenders. Below are two potential methods you can use to clear your debt (perhaps in combination):

Debt snowball method

People have been using the debt snowball method to get out of debt for a long time. The concept is based on ranking your debts from loans with the highest interest rate to lowest.

You should start paying off your debt with the highest rate of interest while making minimum payments on the other ones.

Continue paying off this loan until you clear it and move onto the one with the next highest rate of interest.

Additionally, you should start by cutting the excess expenses such as vacations, eating out, and coffee, and then spend the money saved on getting out of debt. The higher payments you make, the faster you will be debt-free – nothing beats the feeling of being debt-free.

Pros: If you follow this plan, you will dig yourself out of debt in the most cost-effective way and in time achieve a debt-free lifestyle.

Cons: Things will get worse before they get better because you may need to sacrifice some things to achieve a debt-free life. Most people are not willing to give up the best things in life for more than seven years.

Debt consolidation

Debt consolidation involves the borrowing of a larger loan to pay off smaller ones.

For instance, if you have three loans of 2,000, 3,000, and 5,000 dollars with different interest rates, you can take out a 10,000-dollar loan to pay them off (of course with a lower interest rate than the weighted average of the three other loans). Once you do this, you will be left with a single payment, which (at least psychologically) is much easier to pay off.

Pros: You might be able to take out a loan with a lower interest rate than all your other ones combined. Instead of making multiple payments each month, you will only have to pay one creditor, which might be easier.

Cons: If you have a bad credit history, you might not qualify for debt consolidation. Moreover, this option might not even reduce your interest rate and you could end up with a higher rate of interest than you had before.

Set realistic goals

After structuring your debt, you should start setting realistic goals.

You should start with writing down all your current outstanding loans as well as minimum monthly payments for all of these in an Excel spreadsheet.

In the same spreadsheet, you should jot down your income and monthly expenses. You should use what is left of your money each month to pay off your debts starting with the highest interest rate loans.

If you already save a good amount of money each month, you will most likely be able to meet your debt obligations.

However, if you are really deep into debt and cannot meet your payments, you should take action now. For example, if you cannot afford to cover your home payments, it is time to move to a cheaper apartment or sell your apartment. You should not keep paying for something that the bank will take from you in a few months.

The same goes for things that you might not need such as your car. You should ask yourself whether you really need your car. If you find that you cannot live without it, you could try to sell it and buy a more affordable one.

When you have done everything you can to decrease your monthly expenses, you should call your creditors to make affordable arrangements with them. Most creditors are willing to work with you to avoid losing money.

Once you have the overview of your income and expenses, and have set up agreements with your creditors, you should set realistic goals for how much you will repay on your loans each month – and stick to them religiously!


Once you have decided to kill your debt monster, you will feel more motivated start saving and increasing your income further. If you need motivation, I can highly recommend sharing your journey on a blog or social media such as Twitter or Instagram. This will boost your journey towards a debt-free life:

Start saving more every month

Most people spend a lot of money on things that they do not need. You need to start tracking your expenses to become aware of your spending habits. You will be surprised to find out how much money you are actually wasting.

Start setting goals for your savings rate each month and try to cut your spending to increase your savings. Successfully saving more money and using them to pay off your debt will have a very positive impact on the time it takes to become debt-free.

Increase your income

While starting to saving more, you should also increase your income to boost your journey towards a debt-free life. You can increase your income in a wide variety of ways, including:

  • Asking your employer for a raise
  • Working overtime
  • Getting a second (or third) job
  • Learning new skills and start selling your services
  • Switching jobs

The above tips and tricks are examples of how you could start a journey towards a debt-free life, but only if you start spending money wisely and stay committed to your goals.

Your turn: Have you been in debt? Are you still in debt, or how did you manage to get out of debt?