In pursuit of financial independence and personal fulfillment

My top tips for getting out of debt

I’ve started doing some pro bono calls to help people in debt understand their finances better and make a plan to put their debt behind them.

In just the few calls I’ve had, I’ve been surprised how many different ways there are to accrue debt that aren’t just the stereotypical splurging on consumer goods. Debt is a complex animal, and it burrows in, lunges out and breeds in unique ways for each family and situation.

There are, however, some universal suggestions to help anyone in debt move toward a better situation. Here are my top tips.

Track your finances

If you don’t know what you’re bringing in and where it’s going, it’s difficult to find the root cause of debt. It’s easy to look at things like a car payment or a big “mistake” as the source of debt because those tend to be the things still demanding loan payments. However, when you’re in debt, every purchase contributes to debt.

Let me emphasize that: Every purchase contributes to debt.

Use a program like Mint or Personal Capital to gather expenses in one place. These programs automatically import transactions from bank accounts, credit cards, loan providers, investment accounts, etc., and helps to organize them together. Over time, you can see the spending trends that emerge — things like how grocery bills have been changing over past four months, or how much small purchases like a drink at the gas station or the morning bagel from the café near the office add up.

People looking to get out of debt are often uneasy having this data come out. It’s scary to bring all these purchases together in one place for the first time because you don’t really know what it’s going to show, and once you do know you’re going to have to possibly face some uncomfortable ideas. Like maybe the $5.25 spent every morning on a delicious and convenient bagel and coffee is costing you more than $1,200 a year compared to buying a delicious bag of bagels at the store and bringing it in with a piping hot thermos of coffee you brewed at home.

Putting an extra $100 a month toward debt goes a long way to getting rid of it. You won’t really know where you might be able to find that extra $100 until you know where it’s all going.

Get a car insurance quote

This tip isn’t going to get you out of debt by itself, but it might quickly free up some money you can put toward your debt. I believe there is big value in quickly identifying places where you can save money on an ongoing basis. That’s a foundational habit that will help during and after debt payment.

If it’s been more than two years since you’ve shopped around for auto insurance, you’re probably paying too much.

For years, my wife and I were with the same highly rated, highly respected auto insurer known for being fairly priced. We assumed that our premiums were about as good as we were going to get. Then we wanted to add a teen driver.

Sticker shock.

So I called around and found another big-name insurer offering the same coverage for hundreds of dollars less per year. We stuck with them until two years later, when it was time to add another teen driver. Again, I called around. Again, I found another big-name insurer offering the same coverage for much less than I was paying.

Now I check around every two years to see which company’s pricing algorithm wants me more. I suggest everyone do the same, especially if money is tight.

Bonus tip: If you can pay the six-month premium up front vs. monthly, you will save even more money. Depending on how many cars and drivers are on your policy, it could be another few hundred dollars per term. Obviously this isn’t helpful if you pay the policy on a credit card with 20% interest and can’t pay it off right away, but it’s something to be aware of as you start to emerge from hair-on-fire debt to manageable debt.

Hang up the high-priced cell plan

I believe most people are paying far too much for their cell phones.

The vast majority use their phones to text, make calls, use maps and GPS, take pictures, watch videos, listen to music and play a few games. It doesn’t require a $600 or $800 device to do that. The average person won’t notice the difference in performance or image quality of a $300 smartphone vs. the newest model.

To top it off, they buy gobs of data to stream everything and end up paying upwards of $90 to $120 a month for a plan on top of whatever they paid for the phone at the time they signed the two-year contract.

There are a number of low-cost cellular carriers out there that offer an alternative. My carrier of choice is Republic Wireless. My carrier of choice is Republic Wireless. I’ve had Republic for more than a year now, and I’ve been every bit as happy — if not more — than when I was with Verizon. (Full disclosure: I have since become a Republic Wireless affiliate, so if you use that link and sign up for service I’ll get a small commission. I’m still a happy Republic customer of over two years.)

The best part? I pay almost a third of what I was paying before. For $25 per month I get unlimited talk and text and 1GB of data included. Each gig of data beyond that is $10.

If you’re interested in looking at your potential savings, go back over your last six months of data usage and price out what that would have cost you under Republic’s plan. (Even buying a new phone, my move paid for itself after six months.)

Next, think about where you use most of that data and what you use it on.

Are you streaming a Netflix show? Netflix lets you download to your device while on Wi-Fi so you can watch later without using data.

Streaming music? Can you put a bunch of songs on your device and play them when you’re not on Wi-Fi and save the streaming for Wi-Fi only playing?

Do you have your Dropbox or Google Drive set to only upload backups when you’re on Wi-Fi? Do you have your phone set to update apps only on Wi-Fi? These are all ways to cut down on data usage and significantly reduce your need for a high-level data plan.

Many people are within Wi-Fi range for most of their day. You probably have Wi-Fi at home and at the office. That means you really only need to be conscientious about your data usage 2-3 hours a day. That’s manageable.

Transfer your balance to a 0% interest credit card

Paying 15% or more in monthly interest charges takes a lot of steam out of your debt repayment efforts. That’s money you would like to be going to the principal rather than interest.

Fortunately, there are many credit cards that allow you to transfer debt to them shortly after opening the card and not pay any interest for an introductory period of 12 to 21 months.

After you open the card, you transfer the balance from your current card to the new card. Depending on the card you open, there could be a balance transfer fee of up to 3%. Ideally you open something like this Chase Slate card, which has 0% interest for 15 months on your initial balance transfer and no transfer fee.

Two things about this strategy:

First, depending on your credit score, you may not qualify for such an offer or you may not qualify for the most advantageous offer. Or you may not qualify for enough credit to transfer your full balance.

Second, if you see this as a stay from the executioner rather than a gift from above, this is going to end poorly. Use this as a springboard to get out of debt, not a way to delay it.

Over the ensuing however many months of interest-free credit, your job is to throw as much money at that debt as you possibly can. Did you save anything from any of the tips above? Good, put it toward this payment. Did you get a 2% raise at work this year? Great, take the difference between your new check and your old one and apply it to this balance. Did you find a lucky penny on your way to work today? You know what to do with it.

Keep chipping away at this balance, and don’t add to your overall debt. As you approach the last month of interest-free payments, find another card with a 0% introductory transfer offer and move the remainder of the balance to that card. Rinse and repeat until the debt is paid.

Revisit your student loans

If student loans are part of the debt payment scenario, consider whether they should be consolidated or refinanced. Go to a site like for a quote on what kind of loan you could get instead of what you have.

This doesn’t always make sense. If you have a large balance on a loan with a sub-5% rate, it may not be to your advantage to switch.

If you have multiple loans, it may make the most sense to strategically attack one after paying off your credit cards and then moving on to the next. When you consolidate, you may be locking yourself into a higher minimum payment for a longer term, whereas when you knock off one loan at a time you give yourself more flexibility with your minimum debt payment.

However, if a refinance or consolidation makes sense, go for it.

Understand the debt snowball vs. the debt avalanche methods

There are two main approaches to eliminating debt.

The debt snowball method tells you to focus on paying off the smallest debt by dollar amount first.

The idea is that you build confidence and momentum quickly by paying something off — you can see the results sooner. Then you “snowball” the payment you were making on that debt into the next smallest debt and so on.

Like rolling a snowball down the top of a large hill, as you pay down the debts the money you’re putting toward principal grows bigger and takes on more significance.

The downside to the snowball is that it typically takes longer to pay the total debt and you will likely pay more in interest.

The debt avalanche method, on the other hand, focuses on paying down the debt with the highest interest rate first, regardless of the dollar value.

Because you’re attacking the highest interest rate balance first, you’re minimizing the interest charges and keeping the growth of the balance in check. This means you’re paying the least amount in interest and paying off the overall debt faster.

The downside to the avalanche method is that if your highest interest rate debt is also among your higher dollar value debts, it may take a long time to really feel like your efforts are making a difference.

For a handy calculator that shows the difference between the cost of each method for your specific situation, visit this post on Keep Thrifty and use the free spreadsheet at the bottom.

Ultimately, there is no wrong approach here if you’re actually paying down your debt. If it’s important to you to get a quick win and knock off a smaller debt whose interest rate isn’t as high as another, do that. If you feel like you have the patience to pay off a high-interest, big-dollar debt and you want to pay as little in fees as possible, do that. If you want to throw darts at pieces of paper to decide which debt to focus on next, throw away. If the end result is you being debt-free, you’ve made a wise choice.

Sell stuff that can net you quick cash

If you’ve gotten yourself into big-time consumer debt, chances are you have some things around the house that you aren’t really using and could probably sell.

Seriously consider this. You won’t get out of it what you paid, but every day it sits around your house is a day it’s costing you more money.

Ask yourself, if my house caught fire and I lost everything, would I buy this again? If the answer is no, you’ve established the item’s worth in your life. Then you just need to settle on a value that someone else will pay to take it off your hands.

The first few sales might hurt a little, but push through. Go ahead, take less than you thought you would get just to make some space in your life. It’s incredibly cathartic, and it makes the next sale that much easier.

It should go without saying, but all the proceeds go directly to paying down debt.

Consider visual cues

Do you remember in elementary school when the school would hold a fundraiser and there would be a huge printed thermometer hanging on the wall showing how much progress had been made toward the goal?

What if you had that hanging on your refrigerator, or in your bedroom, or wrapped it around your money or your credit card in your wallet? Each line on the thermometer could be $1,000 or $3,000 or $5,000 in debt paid off. As you make payments, you fill in the thermometer until you reach your debt-free goal.

If debt freedom isn’t the motivating force behind your action, make your visual cue tied to your real goal — a house, a wedding, a once-in-a-lifetime trip.

Don’t make yourself miserable, and don’t forget to celebrate

Chances are it took you a while to get into the level of debt you’re in, and it’s going to take you a while to get out of it.

Don’t put your entire life on hold while you’re catching up to past spending. If you back away from spending any money on discretionary things or special occasions, you’ll resent the process and associate it with negative feelings. That isn’t good for a long-term healthy financial mindset.

Instead, be mindful and intentional about what you cut back on and what you maintain. Plan your spending around the things that are important to you. And when you reach a milestone in your debt payment that feels meaningful, celebrate it! Go out for a drink with friends, go to a dinner, have a fun evening, or take a modest weekend trip. Feel good about paying your debt down, and start to build those powerful money habits that will keep you from getting back into debt in the future.

Good luck!


  1. Michelle | Operation Husband Rescue

    I highly recommend selling your stuff! It can take some time to learn how to use some of the common selling platforms, like eBay, especially if you are concerned with optimizing your listings to get the most money out of your items. You can get really far down the rabbit hole into templates and SEO and the like. There’s a TON of great resources on YouTube though for people who want to do this. You can go on there and just search selling on eBay and it brings up a whole bunch of channels of people who are killing it on eBay and offering free advice on YouTube to help you sell as well. It’s an awesome resource. I use it a lot.

  2. Ken Hwan

    I was concerned about reducing my data to save money, but I really appreciated your advice to download music and movies on your devices so you don’t have to stream them! My wife and I have been trying to refinance, since we are expecting a baby in a couple of months. I will be sure to let my wife know that we should take a look at our cell phone plan again for any unnecessary payments!

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