Debt can be like this large dark cloud looming over your head. At least that is how we felt when we were in debt.  It felt like we were just getting by and it was hard to see the light at the end of the tunnel.

We decided that we needed to get a handle on our finances and developed a plan to eliminate our debt. Here is what we did to pay off $52,000 in debt in 18 months which makes us debt-free except our home.

1. Develop a Financial Gameplan

If you have read anything that I have written, you have probably heard of this before. It is basically a form that has your entire financial picture on one piece of paper.

This will tell you ultimately how much money you have to work with every month to pay down debt. It will also reveal to you areas where you can cut back to get more money with which you can tackle your debt.

When you’re are looking to accomplish something, it is a lot easier to make progress when you have some steps to take. Otherwise, it can be challenging to even figure out where to start.

You also don’t want to have too many steps, you want to keep it simple so that you don’t get frustrated in the process. These steps will help you formulate a system that will allow you to get out of debt fast.

2. Organize Your Debt

If you want to pay off your debt quickly, then this step is crucial.

We used the Debt Snowball method where we listed all of our debt on one piece of paper from smallest to largest. Then we started paying minimum payments on everything except the smallest debt.

In your case, take the money you have after paying all your bills and throw that at your smallest debt. For instance, if you have a $100 surplus and the minimum payment on the first debt is $25, now you will pay $125 per month until that debt is gone.

What if one of my debts has a higher interest rate than the smallest one?

This is a question that people ask a lot. The higher interest rate does factor into the equation but I wouldn’t focus on that much. It is more about feeling like your getting ahead so that you stay on course.

The idea is to develop a system to pay off all your debt fast. Once you begin paying off some of the small debts, you feel like you are making progress and momentum will build. Keep at it and soon enough you will be debt free!

If you would rather use an Excel spreadsheet rather than a piece of paper you can use the Debt Snowball form.

See the example below for more details on how to fill it out.

Debt Elimination form Example

3. Track Your Finances Monthly

You have to be intentional about your finances. You can’t just spend money that is unaccounted for and then wonder at the end of the month where all of your money went. The best thing to do is to create a budget that tracks your income on the top and your expenses on the bottom.

Then subtract your total expenses from your total income and this will show you if you have either a surplus or a deficit. A surplus means that you have money left over to use to pay down your debt.

A deficit means that you are spending more than is coming in and that you need to make some drastic budget cuts if you want to get ahead. I have created a Starter Budget form to help you with this process. In addition, below is a video that will walk you through filling out the form.

4. Put All Extra Cash Toward Paying Off Your Debt

This is one of the steps that can be very easily overlooked. When you get a bonus or a tax refund, it can be tempting to want to go out and celebrate. However, if you really want to get out of debt and make progress toward your financial goals, you need to create the discipline of putting any extra cash that you get towards paying down your debt.

This is key to getting out of debt quickly since it is these windfalls of cash that you didn’t normally expect that give you the progress you need to build momentum.

5. Sell What You Don’t Need

First, we need to address the word “need”. You don’t need a $50,000 BMW but perhaps you do need a vehicle to get you to and from work. If you want to get out of debt bad enough, you need to make sacrifices now so that you will be better off in the long run.

Maybe you don’t have a BMW and a car is not something that you have to sell. No worries. Go through every cabinet, closet, drawer, etc. and find items that you can sell on Craigslist, Ebay, or Amazon to earn some extra cash.

The 1 Year Rule

When we were getting out of debt, I was shocked at how much stuff we had to sell. Go through every area of your house and pull out everything you don’t need or don’t use.

I used the 1 Year Rule to help determine what to sell. If I hadn’t used it in the past year than I probably didn’t need it. Besides, when you are debt free, you can buy it again if you find that you do actually need it.

Make a point of selling things that you no longer need to get out of debt.

6. Scrutinize Your Expenses

Go through your Financial Gameplan or budget, look at each line and say, “How can I make this number smaller?”

We were able to decrease a lot of our expenses by simply doing this one thing. I called our cell phone company, insurance agency, internet provider and was able to cut the monthly cost for each one. Consider replacing your cable with SlingTV which has plans as low as $20 per month.

Shop your insurance to see if you can get a better rate. Esurance has a great tool to see if you can save money on your auto insurance. Do whatever it takes to get your expenses as low as possible.

7. Consider Refinancing Your Debt

I do think that the Debt Snowball is the way to go when paying off debt, however, sometimes it makes sense to refinance your debt when you have multiple high-interest credit cards. If you are paying over 15% in interest on multiple cards, then refinancing to something much lower can make sense.

For instance, Credible will show you multiple lenders and help you refinance with rates as low as 4.99% APR.

I would much rather pay 5% than 15%, wouldn’t you?

8. Increase Your Income

This is the most important step that most people overlook. You need to find as many ways as possible to make extra money on the side so that you can pay off your debt quickly.

Apply for a second job at a pizza joint, serve at a restaurant, deliver papers, do anything you can to bring in more income. I did this and I was able to get a second job in 8 days as a pizza delivery driver. There are many other ways in which you can increase the money you bring in.

For more ideas see 20 Creative Ways to Earn Extra Cash.

9. Be All-In

Give it all you got. Once you make a commitment, stick to it. In poker, you go all-in if you are confident you have what it takes to win the hand. You can’t have one foot in the “I want to buy new clothes” boat and the other in the “I want to become debt-free” boat.

If you want to get out of debt fast, then you need to be All-in.

Focus is key

I felt like I was spinning my wheels for so many years, however, when I focused intently on paying off my debt, the results were amazing. It is easy to get distracted on a daily basis, so it is important to remind yourself why you are doing this. You want a better life for you and your family. You want to be able to put your kids through college. You want to be in a financial position where you can give to worthy causes.

Whatever your “why,’ make sure you keep that at the top of mind while you pay off your debt. We used a debt tracker on our fridge to keep us reminded daily of our goal. Every time we paid down our debt, we would fill in the graph. This was a huge motivator and made the process fun at the same time.

Do you have debt that you are trying to get rid of quickly? Share your experience in the comments below.

Refinance Your Student Loans or Credit Cards

With the average credit card interest rate around 15%, this could save you a ton of money over the long haul. Check out Credible who will help you refinance your credit card debt to as low as 4.99%. Use this link to get a $50 bonus if you get approved.

Want to refinance your student loans? Credible can help you get as low as 2.78% APR. Use this link to get $150 cash back if you get approved for refinancing your student loan. The average graduate who refinances through Credible saves $18,668!

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