3 Steps to Begin Your Debt-Free Journey


In recent years, many households have been tempted to take out loans for various purposes (vacation, home renovation, house building, and sometimes to pay off debt). Many households wishing to get rid of their debts are looking for a magic formula to make debt disappear instantly. Sadly, there is no such magic formula. Instead, we offer a guide that explains in simple steps how to get out of debt.

Step One: Stop everything and prioritize your debt

Take a deep breath, decide that you are starting a process that will change your life, prepare all the necessary documents, and look at your financial statements.

If you are now at a stage where you are dealing only with consumer debt and not debt collectors, you can stop everything and look for the right way to cover the debts.

Step Two - Rate Your Debts

If you've arrived here, you're already making significant progress. Now that you have stopped, you need to list all your debt. Make sure of the following details and write them down in a table or in a spreadsheet:

  • cost -- It is essential to check the interest cost of these debts.

  • Final payment date -- How long do you have to repay the debts? Remember that unpaid debt can result in fines and may affect credit score.

  • Payment for credit card debt, if any -- If you are paying interest on your credit card debt, you must check how much you are paying for it.

  • Loans -- If your debt includes loans, you must find out how much interest you are paying for these loans and how much more you need to pay.

  • Unpaid bills -- Utility bills are a most. Failing to pay off these bills can cause damage to your credit score, and even worse, the utility company can cut you off from service. It is essential to check if there are any property tax/gas/water/electricity bills that you have not yet paid and to concentrate the payments to avoid arrears and fines.

In addition to all these utilities, check if there are checks you have given, purchases you have made and distributed for payments, and more.

Once you have compiled a neat list of debts and loans, you can move on to the next step.

The third stage: the stage of action to reduce and pay off debt and loans

If you have reached there, you are moving towards the final stage that will let you know how to get out of debt. You probably know that to pay off your debts, you need money. These additional funds can flow into debt payoff in 2 main ways:

Increasing the source of income

For employees, this is the opportunity to approach the employer and request a pay rise. Regardless of the answer, don't miss the chance to join the gig economy. You can generate extra cash from driving your car or office skills. You must decide that the amount you will receive from this work will be transferred solely to closing your debts.

Reducing expenses

Now is the time to decide that you are reducing your spending. "A small leak will sink a great ship." this can be reflected in large expenses like shopping for clothes you do not plan to wear later. It is important to note that these are not only large expenses but also small expenses that seem insignificant to you.

Here are 2 sample expenses to reduce expenses:

Travel to work by car

If your workplace is within walking/driving distance of public transportation, you should consider leaving your vehicle home and saving on fuel and parking expenses.

Phone and cable TV packages

It's time to cut the cord from your TV and landline. You should consider how you can discount them and still enjoy internet and TV at lower prices.


All the free money you have saved from cutting current expenses will be used to pay off debt and loans. Beyond that, if you have liquid savings that yield a lower return than the interest you pay on the debt, it is advisable to direct that money to pay debt and loans.

To understand your expenses, income, and cash flow, it is recommended to use a spreadsheet for managing expenses. The spreadsheet will allow you to clearly see the expenses and will allow you to choose the ones that can be waived.

How to get out of large debt

It is essential to understand that if you are in a situation where you are in significant debt and you have reached a state of insolvency where you can not pay all the debt, it is time to stop for a moment and breathe.

There is a difference between debt to a grocery store and a debt to a bank. There are accounts that, no matter what, it is better not to fall behind in payment to them. Those accounts include, among others: mortgage, credit card, and taxes.

Delay or non-payment to these institutions can lead to enforcement processes that will be difficult to get out of. Late payment of the mortgage can cause the bank to evict you from your home. Therefore, any available dollar you have is recommended to be referred to the closure of these debts first and only then transfer money to other creditors. In such cases, it is better to consult a lawyer.

What not to do to get out of debt

Now you know how to get out of debt, but some things are vital that you know not to do before you start the procedure. Here are some of them:

Do not pay with a credit card

Leave the credit card at home and try to pay in cash. Limiting your cash spending to purchase only the things you need is more manageable.

Do not take a payday loan

Regardless of your situation and debt, do not give up and ask for a payday loan. Interest rates are very high, and collection methods are unpleasant, to say the least.

In summary, Do not be left alone in the situation. We at Savings Jar provide access to financial coaches that guide you to be more accountable with money, acquire healthy money skills, and reach your financial goals.



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