How to Get Out of Debt
Let’s talk about being broke and in debt—just you and me. Allow me to explain in rough, simple terms exactly how to get out of debt. This ain’t going to be pretty so prepare yourself.
I’m writing from the viewpoint of a person who was once broke and in a lot of debt myself. I’m still broke actually, but I owe very little. That makes me rich from my perspective!
Here is the simple formula for those of you who think you’re too good to read the entire page:
- Recognize and accept the fact that you’re in financial trouble
- Stop the leaks
That’s it. If you can make sense of that then by all means, carry on. For the rest of you, keep reading.
This article is my personal opinion on what you can do to improve your life. I’m not a tax attorney, accountant, nor do I have an MBA from Harvard. So, what do I know about money and getting out of debt?
I know the same as you but I have a different mindset.
Up until about a decade ago I was living the “American Dream” like everyone else. You know, I bought stuff that I really didn’t need via credit cards, financed new cars that I didn’t need, and then had to rob Peter to pay Paul.
It took an extreme mindset change for me to deal with the typical debt game in the United States. I now live in Southeast Asia and travel the world. You can’t do things like that or live out your dreams if you’re under a mountain of debt and monthly payments.
I can’t actually say that I’m 100% debt free right now because of some investments. However, I have ZERO credit card debt. Can you say the same? That fact alone should qualify me enough to write this article since I’m way ahead of you and the majority of Americans. The average American has around $5,000 worth of credit card debt. The average household debt is around $16,000. That’s just in credit cards! Add the car payments, mortgage, and student loans and suddenly you’re a slave to the machine for life.
Let’s dig into my theory on how you can become debt free. I’ll use metrics that a typical middle-class family living in the suburbs might incur on a monthly basis. Adjust the numbers to fit your income and situation.
Step # 1 – Recognize and Accept the Fact that You Are in Financial Trouble!
I’ll use the analogy that we’re on the Titanic. Everyone on board is having a great time but due to carelessness, the ship hits an iceberg. It’s taking on water even though the ship is supposed to be unsinkable.
Now back to you.
You’ve been on cruise control, living life, buying stuff on credit, dining out, going to the mall, riding in your new car, and having a good old time. Due to your reckless use of the credit card and financing, you suddenly can’t pay your bills.
You’ve struck the iceberg. You’re taking on water faster than you can bail it out. Due to all the leaks, your ship is going down, my friend.
Stop trying to rationalize the situation into being under control. It’s not. Your habits have caused your spending to be greater than your income. You are in trouble!
Accept the fact that if you do not take immediate action, you’ll never get out of debt and you’ll eventually lose everything—bankrupt with no house and bad credit.
To summarize the first step: stop making excuses and realize that you’re in over your head. Your mindset needs to shift from impressing the neighbors to survival mode.
Now that you understand where you’re at it’s time to move forward to the next step.
Step # 2 – Stop the Leaks
Before you can save a sinking ship, you have to plug the holes. If you don’t do that first, you are just wasting your time. You need to get to neutral buoyancy. Then, you can concentrate on bailing out the excess water.
I’ll refer to any bill or expenditure as a leak, because that’s what it is. Every time you spend money your bank account goes down. Now, I realize that some leaks are necessary for every day life. Got it. We all need to eat and have a place to live. I’m not referring to life’s basic needs.
However, I’ll bet there are enough unnecessary leaks in your life due to wants that you could save a few hundred dollars a month by making simple changes.
I’m going to give you a controversial list of things to do, in order for your bank account to get back to being neutral—not gaining money but not going further into debt. You can effect these changes immediately with little physical effort. You may struggle psychologically with some of the suggestions. Call me an asshole if you wish, but you’re the one who’s in trouble. Take my advice or don’t. It’s up to you.
Eliminate these unnecessary leaks that are merely wants.
Cancel the Cable TV, Satellite, and NetFlix – $113.09 SAVED PER MONTH
According to most articles I’ve read, the average cable bill in the United States is $103.10 per month! Netflix comes in around $9.99 per month.
You don’t need any of this. You are broke so you shouldn’t have time to watch tv anyway. Ever heard of a website called YouTube? There’s plenty enough content to watch on YouTube, I promise. And guess what, it’s free!
Keep your Internet service. That’s a need these days. Dump the HBO and Showtime.
Damn. That was the easiest one-hundred-dollar bill you’ve ever put in your pocket.
Stop Dining Out – $220.00 SAVED PER MONTH
Dinner for two with drinks and a tip? What’s that come to these days in the States? I’d say around $50 or so? If I’m wrong, drop a comment below and correct me. But for now, we’ll use fifty bucks as the metric.
You. Are. Broke.
Do you or your wife really deserve to go out on Friday night to relax from the stressful week you just had? Hell no. You don’t deserve it. The two of you living beyond your means is what’s got you into a financial mess in the first place.
If you want to do something special for your wife, get your butt in the kitchen and cook her something. It doesn’t cost fifty bucks and she’ll be impressed. Here’s my personal recipe for Heineken Beer Biscuits. They are delicious and you get to drink beer while you’re making them.
Let’s say you go out one night a week at $50 a pop. You just saved $200 per month by eliminating this leak.
But wait, we forgot to factor in gas money to get to the damn restaurant. We’ll say a gallon there and a gallon back. Let’s just estimate $5 in gas money round trip. Multiply that times four and there’s another $20 saved!
The upside to this is that you and your wife will make some good memories right there in your kitchen. You can reflect on these hard times when you get to better days.
“Remember when you tried to make those beer biscuits back when we were broke? Man those things were awful. I can’t believe you listened to that guy.”
Stop Going to the Movies – $32.60 SAVED PER MONTH
It looks like the average price of a ticket to see a movie in America is around $8.65.
I’ll stay on the conservative side here and estimate that you take your wife to the movies only once a month. That’s $17.30 just to get in. Popcorn, drinks, and candy has to be at least another $10 these days.
Don’t forget the $5 in gas to get there and back.
Hey, you don’t need to go to the movies! If you insist on watching tv, curl up on the couch and search YouTube. It’s free! There are plenty of old Western movies on there. YouTube has great documentaries as well. Be careful or you might learn something.
Pop some popcorn in the microwave and enjoy movie night with your wife.
Cancel any Magazine Subscriptions – $5 SAVED PER MONTH
I don’t care if the only reason you buy a magazine subscription is to support the Boy Scouts or a youth group. Cancel that junk. Need something to read? I’ve got plenty of articles for you to read right here on this blog.
Cancel the Lawn Care / Grass Spraying Service – $100 SAVED PER MONTH
Cut the grass yourself. You have more time than you have money. That should save at least $50 per month if you’re paying someone.
If you have a lawn spraying service, cancel those guys right now. You think the bank or the credit card companies care about how green your lawn is? No. They want money. That’s the only green they care about. It’s a shade of color called Benjamin Green.
By cancelling the lawn treatment you just put at least $50 back in your pocket per month. You’re also saving the environment by not pumping a hundred gallons of poison down the sewer each month.
Here’s how to take care of a lawn: Mow it and water it.
If it’s full of weeds, then mow the damn weeds.
Stop Going to Church – $308 SAVED PER MONTH
I know that hurts. How could I even go there. Why oh why would I suggest that you stop going to church? This guy must be crazy.
Well, I am a little bit crazy. But, I’m not the one who’s in debt over my head. That would be you, my friend. I’m writing and you are reading.
I’m not saying to give up on religion. I am saying that you don’t need to drive your gas-guzzling Suburban to church and back three times a week when you’re struggling financially. If we go with the conservative estimate of one gallon there and one gallon back, thats two gallons per trip.
Now, when I was growing up we went to church on Sunday morning, Sunday night, and Wednesday night at least! So, three trips to the old church per week racks up six gallons of gas. That’s roughly $12 per week (average $2 per gallon) or $48 per month!
That’s not to mention the other expenditures incurred by going to church. You’ve got to have some good clothes and look presentable at most churches. That costs money.
You’re always running late to Sunday school. A quick stop at McDonald’s drive thru to feed the kids takes you for $15 a trip. That’s another $60 per month.
And last but not least, let’s not forget the old collection plate coming around! Some people think that they have to give percentages of what they earn to the church.
That just does not make any sense to me. It especially doesn’t make sense when you are broke.
What’s 10 percent of $15,000 in credit card debt? That’s a negative number. Think about it. You have to come up with $15,000 before you can reach ZERO. In reality, you have no income. You can’t argue with the math.
Therefore, theoretically, you should be getting money back from the collection plate. That’s a great idea as a matter of fact. Just grab a handful of cash when no one is looking and put that money in your pocket.
Let’s say you give $50 every Sunday to the church. There you go again leaking another $200 per month.
Here is the better situation for you right now if you are devoted to your religion: gather your family and hold a worship in your living room. God can hear you from your living room just as well as he can hear you at the church building. He’ll be thankful that you didn’t drive all the way there and further pollute the environment he created with emissions from your car.
Stop Giving Money to Charity – $10 SAVED PER MONTH
This may sound a bit hypocritical because I’ve been involved with charity work for years. However, this article is here to help you so let me say it.
You need to stop giving money away to charity.
There comes a time where you have to help yourself first. Once you’re in control of your own life, then you are in a better position to help others. If you are about to default on your bills, then you are the one who needs help right now. You are in no position to be donating to the United Way via a payroll deduction.
Go to your H.R. department and cancel any payroll deductions to charity, the cancer research fund, the save the whales fund, etc.
Once you get back on your feet you can go back to giving to others. Right now, you need to focus on your own family’s welfare.
There’s at least $10 per month saved.
Stop Purchasing ANYTHING via Credit Cards! – HUGE AMOUNT SAVED PER MONTH
This one will be tough for most American men because you are weak when it comes to governing your family. Yep, you are. Your weakness is what has caused you to get so far into debt in the first place.
This is what you need to do.
Call the credit card companies and tell them to immediately send out new cards with new card numbers. Make sure they send new cards for you, your wife, your teenage daughter, and anyone else who has a credit card on your account. Make sure they cancel the old card numbers. Once the cards arrive, you take them to the bank and secure them in a safety deposit box. Let your family know that their cards no longer work and that there will be no more credit card use in your household.
Why do it like this?
Well, if you merely collect everyone’s credit cards, that doesn’t solve the problem. All of the accounts they have connected to their card, such as Amazon, Walmart, iTunes, etc., will still work. Your wife and kids can still shop on amazon all day long because the card number is already saved in there.
Don’t cancel your credit card account altogether. You need to keep the credit card account open because it affects your credit score. Even if you reach a zero balance you shouldn’t cancel the account. Keep it open but with the cards secured and out of reach.
“But I get 1% cash back on all my purchases.”
That concept only works out in your favor when you pay off your balance in full every month. If you’re still reading this article, you’re not in that group of people. You’re getting 1% cash back so Chase can charge you 18% (or more) on everything you rack up.
Stop thinking like a redneck.
It’s difficult to calculate how much you will save per month just by getting control of the credit cards. You’ll have to plug in your own numbers here after you make the change.
Find Your Pet a Good Home – $76.65 SAVED PER MONTH
I bet this suggestion hurts more than me telling you not to go to church on Sunday.
“What? I can’t get rid of old Blue!
I’d give my life for that dog!”
Pets are a huge expense. If you have plenty of money, then by all means you should own some pets.
If you are about to lose your house over not being able to pay your bills, get rid of the damn dog.
A fifty pound bag of Ol’ Roy dog food at Walmart (the cheap stuff) costs $19.98. If your dog eats anything better, the cost obviously goes up from there. Let’s just say you only go through one bag of food per month.
Add dog treats, biscuits, chews, etc., and you’re out another $10 per month.
Veterinary care for your pet ain’t cheap and immunizations are mandatory in most places. Let’s say that you take Rover to the vet once every six months at $100 per visit. That’s $200 per year or $16.67 per month.
Pet grooming is another area of leakage. How much does it cost to get a dog groomed? I have no idea but I’ll estimate it to be $30.
Listen, I know you love your pet. I know you consider him/her to be a “member” of your family. But, when you’re in survival mode financially, hard decisions have to be made.
Your wife and kids’ welfare comes first.
The pet is a luxury item. Find it a good home.
Get Rid of Your Teenager’s Car Unless He/She Has a Job – $175 SAVED PER MONTH
This is a huge, unnecessary expense that Americans believe to be a necessity. Your teenager having a car is one of the biggest money losers I can think of. It’s worse than owning an old boat.
Gas, maintenance, tires, crashes, lawsuits, etc. add up. The worst thing is having to put a teen driver on your car insurance policy.
If your teenager has a job, then they need the car. Allow them to keep the car as long as they undertake all financial responsibility for it. That means they pay everything including the insurance premiums.
If they don’t have a job, sell the car. Use the proceeds to pay down your credit card debt.
“But how will my daughter get to school and to the mall?”
Your teenager has a plethora of friends. Not all of them have parents who are broke at the moment. Let your kid bum some rides to school with his/her friends. It’s ok.
If that’s not an option, there’s this thing that’s paid for with your tax money. It’s called a school bus. It’s bright orange or yellow and comes right by your house every morning. Put your kid on it.
When you are trying to make a living, there’s no such thing as pride. Your teen riding that damn bus will teach him/her some character and to be tough.
Here are the numbers on your teenager having a car:
- $50 per month fuel
- $50 per month maintenance
- $75 per month additional insurance premiums
That’s being conservative. Let’s just say that you’ll save $175 per month by getting rid of this leak.
Total Amount Saved Monthly by Stopping the Leaks? – $1,040.34
- Cancel the Cable TV, Satellite, and NetFlix – $113.09
- Stop Dining Out – $220.00
- Stop Going to the Movies – $32.60
- Cancel any Magazine Subscriptions – $5
- Cancel the Lawn Care / Grass Spraying Service – $100
- Stop Going to Church – $308
- Stop Giving Money to Charity – $10
- Stop Purchasing via Credit Cards
- Find Your Pet a Good Home – $76.65
- Get Rid of Your Teenager’s Car Unless He/She Has a Job – $175
Step # 3 – Hustle – It’s Time for Action
Once you plug the leaks to stop going further into debt, it’s time to move on to the next step.
You’ve got to hustle.
That means doing whatever it takes to make extra money and pay down the debt. Now, I’m not talking about dealing drugs or robbing banks. I’m talking about part-time jobs on the weekend, working overtime, and being entrepreneurial.
When you don’t have resources, you become resourceful.
The discipline is that once you start generating extra funds, the money has to be paid direct toward the debt. If you use the extra money to dine out and go to the movies, you’re wasting your time on this whole thing.
Take any extra money you get your hands on and throw it toward the credit card bill first. That’s just my opinion. The sky-high interest rates are killing you. If you don’t get it paid down quickly, you’ll be paying the credit card company until the day you die. Then your wife will have to keep paying them until she kicks the bucket.
Here is a quick equation for you:
$10,000 in credit card debt at 20% APR: By paying only $200 per month, it will take you over 9 years to pay off the balance!
Here are a few ways you can generate extra money:
- Work overtime and on Saturdays at your current job.
- Volunteer to work holidays at your current job
- Part-time job delivering pizzas. Don’t laugh. Pizza delivery drivers make good money. and most of it is in the form of cash.
- Part-time job at Home Depot or Lowes on the weekend.
- Babysit some kids for cash money.
- Have a yard sale and thin out your junk.
- Mow grass on the weekends for cash.
- Handy man work on the weekends. Painting ain’t rocket science.
- Got a pressure washer in your garage? Put it to work at night and on the weekends. Plenty of gas stations need their parking lots pressure washed regularly.
- Rent out your house and move in with your parents for a year. It won’t be easy because we Americans aren’t real cool with that idea. Hey, the rest of the world welcomes family into their homes with open arms. Tough it out, take the $15K or so you’ll save and pay off the credit cards. Then, you can go back to your own place debt free and resume your independence. It will take a real man with some balls to make this hard decision. It’s a much better option than having the bank put your furniture on the curb when they foreclose on your happy home. Which is more embarrassing? Living with your parents or getting evicted? They publish foreclosure notices in the newspaper. Living with your parents is your own private business. Make a decision.
If you live in America, there are plenty of ways to make money. If you try to tell me that you can’t make extra money, I’ll call you a liar. You’re just making excuses and being lazy.
Get to hustling. Take that money and throw it at your debt. Simple. It’s like bailing water out of the ship.
Seek Professional Help
Listen, this article is designed to invoke thought. That’s my main objective here. Hopefully I’ve at least accomplished that one objective. You may think I’m joking on some of the content but I’m not. I’m dead serious.
Maybe you can implement a few of the suggestions to suit your own situation. You probably think that if you do some of these things then your wife will divorce you. Guess what, my friend? Most couples get divorced over financial issues. If you go broke, your wife is leaving you anyway. Man up and take some action. Save your ship.
Talk to some of the professionals in the business of debt relief and financial planning. See what they have to say. It can’t hurt. National Debt Relief is one agency you could check into. They don’t charge anything up front so see if they can assist you. They specialize in dealing with credit card debt.
One Last Tip
For the love of humanity, do not buy another new car. Ever.
I have nightmares about this. I sometimes dream that I’ve gotten roped into buying a new car with 66 months of payments. It’s the only bad dream I have these days. When I do wake up and realize it was just a nightmare, I feel like I just cheated death.
If your vehicle finally quits and has to be scrapped, buy yourself a used Toyota Camry or Corolla. That thing will last forever, it won’t break down, and it holds its value. You could drive a Toyota for five years and sell it for what you paid for it.
If you stumble into a dealership and roll out with a new car, you’re a slave for six more long years to the worst purchase imaginable.