The 7-Step Plan to Get Out of Debt (on Any Income)

How to Get out of Debt on Any Income

I know what it feels like to have a dark cloud of debt hanging over your head. You may feel stressed, anxious, overwhelmed, or even depressed. You may feel angry and disappointed with yourself because you let things spiral out of control. You may feel that your life is on hold because of your debt.

I get it. It’s tough. I spent years pretending my financial problems didn’t exist. I know it can take years to build up the courage to face your fears and start working your way out of debt. If you are in debt and reading this article, you are on the right track!

The decision to get out of debt is one of the most important decisions you’ll ever make. It’s life changing! But what’s next? You may be wondering how you can make your dream of becoming debt free come true. Below are the steps that I took to make my way out of debt. I paid off just under £14k worth of debt in 18 months on a single salary. Back then, my income was just above average.

1. Stop Getting into More Debt

First things first, you should stop getting into more debt. It’s easy to apply for more credit and continue your mindless spending, but you have to remember that there is no easy way to get out of debt. So, the sooner you stop getting into more debt and start making your way out of it, the sooner you will have paid it off.

2. Calculate and Prioritise Your Debt

You need to know the exact amount of your debts, the interest rates, and the minimum payments due on each of your debts. If you are not sure, look through your bank statements or call your creditors to get these details. Once you know the amount of your debts and the interest rates attached to them, you can decide which of your debts takes priority.

It is up to you which debt you want to tackle first. There isn’t one right answer. From the financial perspective, it makes more sense to pay off your high-interest debt first, but you may decide to tackle your smallest debt first for other reasons. Personally, I wanted to get rid of my smallest debt simply because it annoyed me more. I also knew that paying it off would encourage me to keep going.

3. Create a Monthly Budget

Write down your salary and any additional sources of income. Take a note of your monthly expenses, both fixed and variable. These include, but are not limited to, your rent or mortgage payments, credit card and loan payments, utility bills, transportation, food, and entertainment. If you do not know how much you spend each month, look through your bank statements for the past three months and calculate a monthly average.

You should account for every penny and ideally your income should cover all of your expenses. If you find yourself in a situation where your outgoings are higher than your income, you should look at your variable expenses and make necessary adjustments.

4. Reduce Your Spending

Look at your variable expenses again. Can you make any further cuts? You may have read my articles 12 Easy Things to Do Today to Save Money and 50 Effective Ways to Cut Your Spending and Start Saving and put some of these money-saving ideas into action. You may have come up with even more ways to save money. Awesome!

I took it one step further and made cuts to my fixed expenses, too. I moved out of my expensive flat and rented a room at my friends’ house, saving over £400 each month! I reduced the cost of my travelcard when I started to use overground trains, saving over £60 each month. I moved my credit card debt from a high-interest credit card to a 0% credit card, saving over £80 each month.

5. Map Out Your Debt Repayment Plan

You have made cuts to your spending. You freed up as much cash as you could. It is now time to decide how much extra money you will be allocating towards you debts. You will not get out of debt fast if you carry on making minimum payments. It will take you years and years to pay off your debt if you choose only to pay the bare minimum.

Instead, you should set a goal to become debt free faster and assign a timeframe to complete your goal by. Pay off as much debt as you can each month and you will be debt free before you know it.

6. Make Extra Money

You may find yourself in a situation, where you cannot make any further cuts to your spending because your spending is low as it is. If this is the case, try earning extra money on the side. There are many different ways to make extra money which include teaching a foreign language, becoming a childminder or a dog walker, getting a weekend or an evening job. There are also ways to earn money online. I told you from the start that getting out of debt will not be easy, didn’t I?

Personally, I made some money by selling unwanted clutter. It didn’t make me rich, but it sure helped me pay off my debts faster. Also, I got a promotion at work and a pay rise of 19%.

7. Keep at It

Getting out of debt will take time – sad, but true. It can take you years to reach debt freedom. At one point or another, you may start to feel that you are burning out and getting dangerously close to giving up. Don’t! Take a break, buy yourself something nice (without stretching your budget too much) and carry on. Keep your eyes on the prize and remind yourself every now and again why you want to be debt free and how amazing it would be!

Consider setting up a small emergency fund. Back then, I had £500 sitting in my savings account. Life happens. You may need access to money to cover those unexpected expenses. Don’t let it interfere with your debt repayment plan.

Celebrate milestones. Treat yourself to something nice when you hit one of your smaller goals. Do you remember I told you about choosing to tackle my smallest debt first? When I did it, I was over the moon and had a little celebration. It motivated me to destroy the rest of my debt. It took me 18 months to pay off my debt instead of two and half years as per my original debt payoff plan. When I made my last payment, I felt such a relief. I was finally debt free!

To Conclude

As you can see, it is possible to free yourself of debt fast. You just have to really want it and fight for it. You don’t have to earn much to start making your way out of debt, so if your salary is low, don’t use it as an excuse to stay in debt. Any overpayment – however big or small – will get you out of debt faster.

It goes without saying, but whatever you do, try to stay debt free. Remind yourself of all the hard work that you had to put in to become debt free. No one knows what the future holds, but it is always a good idea to start building up savings as soon as you have paid off your debt. Personally, I don’t want to rely on my credit card ever again.

Your situation may be different to mine, so if you feel hopeless and think you will fail because too much of your income goes towards paying back your creditors, you should seek professional advice. You can get in touch with National Debtline for free debt advice.

How to Get out of Debt on Any Income

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5 Comments

  1. I like your closing reminder about giving it your all to stay out of debt. It’s something I often think about, what it would be like once I am actually out of debt. I wonder would it actually spur me on to achieve greater goals that I couldn’t have fathomed happening while still in debt. You have provided very sound wisdom for anyone (including me) who is in debt. I appreciate your point of view and advice because it’s nice hearing it from someone who’s already achieved what I’m working toward.

  2. This advice is excellent. It’s hard sometimes to stop accumulating more debt, especially if it has become a habit. Committing to these 7 steps will makes such a difference in your finances! Great job! Thanks for sharing!

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