Four years ago, I was totally clueless and felt completely powerless when it came to my finances.  I was in nearly $30,000 worth of credit card debt.  Creditors were calling and my self-esteem was at an all time low.  However, I did eventually dig myself out of credit debt and go on to amass an abundant savings account!

Then I achieved what I once thought was impossible for me: I had a stock portfolio with growing investments!


Here are the steps I took to make debt-free living a reality in my life. I share these with you to let you know that IS POSSIBLE to get out debt, stay out of debt and amass abundant savings!


1.  Recognize that change is a process.  Look back on things you changed before in the past.  How did you get through it?  If you believe in the beginning that you cannot do it, you will fail.  If you understand that change is a process and that willpower alone is not enough, you will be able to succeed.


2.  Get crystal clear on where you are.   Before you can figure out where you are going, you must know exactly where you are.  Pull out all of your bills, and I mean all of them. If they’re stashed in drawers, if you’ve thrown them away, open up your accounts online, if you don’t have access, call the number on the back of your cards.


  • Total up ALL the balances on every credit card or loan accounts.  Know what you owe.  This is the most courageous act you can take right now, staring that number in the face. It may sting a little bit (the room started to spin and then I panicked after totaling all my bills to find that I was nearly $30,000  in debt).  This is okay and all a part of the process.  This is, for many, the exact moment we’ve been dreading and avoiding for so long.  So today I give you permission to total it all up, take a deep breath and feel comfort in the fact that clarity is power.  You can’t move forward if you have no clue where you are.
  • Request a free copy of your credit report from all three agencies.  You are legally allowed one free copy once a year from all three credit agencies if you send them a letter.  Take advantage of this little know fact.  This will help you to figure out which accounts are still open, if there are some you forgot about.
  • Clean up your financial home. Create an area of your home that is outside of your bedroom that is designated for your finances.  Shred old bills, organize all relevant bills, organize your tax returns and create labeled folders for each category.  A decluttered financial home will help you move forward faster towards getting out of debt and staying out of debt.
  • Total up ALL the balances on every savings, checking and investment accounts.  Know what your have.   This includes trusts, 401K accounts or any passive income you may receive.  Know the exact value of your current assets.
  • Calculate your net worth.   Here is the simple formula.  Take all of your cash assets and from that number subtract what you owe.  Is that number positive or negative or roughly zero.  Net worth is one of those tricky numbers that we reserve for the very wealthy. But I believe that it’s important, even if you’re in debt to keep that number in mind.  Eventually you will become one of those people that has a healthy positive net worth if you keep this figure in your mind frequently.



3.  Create a hypothetical “freedom date.”  So you’ve looked at your total debt.  Now, ask yourself the following questions:


1.  If I want to be debt free in a year how much money per month would I have to pay?

2.  If I want to be debt in two years, how much would I have to pay?

3.  If I want to be debt free in three years how much would I have to pay?


You see, when you start asking yourself these questions, your mind will begin to create a freedom date for you.   An estimated time frame for how long it will take you to ultimately live debt free.   Now look at your date.  Does it feel possible? Does it feel like too long? Sooner than you expected? How does this make you feel?

I know for me, it was a very exciting feeling to begin to see the end of the tunnel. I thought: well if I put aside an extra amount per month, I can be debt free in 18 months. The fact that there was an end in sight made me motivated to begin the journey.

4.  Make a commitment to yourself to make financial health your #1 priority.  No personal finance blog, book or expert will advise you to try to get out of debt while still using your credit cards.  Unfortunately, when you use your credit cards while you are trying to get out debt it’s like taking the dirt you’ve shoveled out of the ground and placing it right back into the hole you’re trying to dig.  You will not get anywhere.    For some, this is the toughest step to master, the commitment to live on all cash (also known as living within your means) while you’re getting yourself out of debt.

The good news is, as you begin to pay down your debt using cash only, you will learn a valuable life skill that will prevent you from going into debt again. Think about it.  If takes you two years to pay down all of your debt, that’s two years that you’ve learned the habit of living within you means.  It will be difficult to go back to your old ways after living credit free for so long.

In fact, you may find yourself very cautious or even turned off by the credit industry as I did, once you find yourself  living debt free.    Learning more about the nature of money, turned my beliefs about credit around dramatically.

5.  Create a spending plan and use it before you get paid consistently.
Once you’ve completed the first four steps, you are now ready to begin creating a spending plan. Notice I didn’t use the word budget. That’s because budgets are evil, even for me, someone who lives within her means and is total control of her finances.    So I try not to use the dreaded B word from my vocabulary unless I’m talking to a newbie who hasn’t learned a better term for it yet 🙂

Creating a spending plan that looks forward instead of backward is one of the most powerful tools you can used to get out of debt and ensure that you stay of debt.

Here’s what I mean.  Before you get paid (this works especially well if you are paid on a regular schedule with a set amount every paycheck), sit down and plan out how you’re going to distribute those funds so that you can pay off your debts and still have some money left over to play with.

Planning your finances this way allows you to make revised your plan as many times as it takes until you find a plan you can realistically stick to — before the first dollar is even spent!  Remember, the past is over.  Look forward not backwards when you’re creating your spending plan.

Changes Happen When You Take Action

When you take these five steps,  you will begin to see what was once out of reach: the possibility that you too can get out of debt and stay out of debt!  Not all of these steps are easy or comfortable, but if you understand first that change is a process and be patient with yourself as you change your money habits, victory will be yours!

You can do this!