How to Become Debt Free

In our world of instant gratification and “buy now, pay later,” debt has become a chronic problem for many consumers. It’s far too easy to rack up a mountain of debt—and can be far too difficult to get out from underneath it. However, “difficult” is not the same as “impossible,” and there are steps individuals can start taking now to end their frivolous spending and begin working toward freedom from debt.

If you’re ready to learn how to become debt free, then keep reading!

Sit down right now, today, and take honest stock of your debts, your bills, and your income.

Get Busy With a Budget

The most basic but also most important step in getting a handle on your debt is budgeting. Without a solid knowledge of how much you can afford to spend and where your money is going, guess what? You’ll keep spending yourself into a hole and then turning to credit cards to solve your money shortages—shortages that could have been prevented with a little honest self-evaluation and pre-planning.

List your debts and your monthly expenses, and then list all of your monthly income. Subtract all your expenses—including minimum payments on loans and credit cards—from your monthly cash flow. If the picture isn’t a pretty one, then don’t panic—there is a way out, and taking inventory is the first step on your road to financial recovery.

Once you know exactly how much spending money will be left over once the bills are taken care of, budget out how much you can afford to spend on necessities like groceries and gasoline. Allot yourself moderate funds for creature comforts, as well (completely depriving yourself will just lead to more binge spending), but make yourself stick to that amount.

Make sure you pay your minimum credit card and loan payments on time to avoid interest rate hikes and late fees. Pay extra whenever you can to whittle down those debt amounts—tackling the debts with the highest interest rates first.

Build Up Some Reserves

By building up an emergency savings fund, you’ll be prepared for unexpected expenses, like car breakdowns or veterinary bills. If you have the money saved up, then you won’t need to use a credit card to attend to emergencies when they happen.

Now, before you say you don’t have any extra money to put into savings, take a look at your bank ledger or receipts from previous months and be brutally honest with yourself about the areas in which you’ve been wasting money; for example, impulse spending on clothing you didn’t need, or eating out when it wasn’t necessary. How many hundreds of dollars are you unnecessarily spending each month that could have been put into a savings account?

A good rule of thumb is to put 10 percent of your paycheck into savings before you spend money on anything else. If you truly can’t afford to save that much, then make it a smaller percentage—but stick to it. If the money is left in your checking account, then guess what? You’ll probably spend it. If it’s out of sight and out of mind in savings, however, you’ll be amazed at just how fast it builds up into a healthy nest egg.

Now, we’re not saying you should lock yourself in spending purgatory forever—you are just getting control of your debt and your spending. Stick to your new budget with discipline and downsize for now, and the light at the end of the tunnel will come much sooner than you think!


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