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Are you ready to pay off your debt for 2021? Getting out of debt is one of the most rewarding financial feelings you’ll ever experience in your lifetime. That might sound dramatic but it’s true. I’ve been able to become debt-free two times before the age of 30.

The first time, I sold my first house & used the profit to pay off my student loan and become debt-free. The second time, I cashed in Facebook stock I’d purchased during their IPO to pay off my house & two cars which freed up enough money to start buying rental properties and other passive income assets.

Imagine coming up to the end of the month knowing you don’t owe money to anyone. That feeling plus seeing your income grow at the end of the month is a “secure” feeling. I love that feeling!

Now, since you’re reading this, you probably have some type of debt. Those credit cards you have to pay monthly. The student loans that have been hanging over your head for years. The car payment for the car you need to get to and from your job.

Now, imagine all those bills are gone. You don’t have to make a payment on any of them ever again. Sounds great, right? Let this guide show you how to pay everything off and get out of debt.

If you’re ready to become debt-free, let’s get started.

How to Get Out of Debt

First, if you haven’t asked your family if they have set aside money, do that first. Hopefully, a relative or an aunt comes through for you. If that’s the case, kudos to them for being in a position to help out so graciously. For the rest of us, that isn’t an option.

Second, I’ll never tell you to skip a latte or skip a movie night unless you’re spending $200,000 a year on that. Then, we need to dial that back. I recently saw a TikTok where the guy spends over $200,000 on Starbucks and Target runs.

Let’s go through the exact steps I took to become debt-free.

Create a Budget

Budgeting is one of the best ways to save money and see exactly where your money is going. If you have a good job and are making decent money yet seem to constantly be in debt, you need to create a simple budget and stick to it.

With a budget, you can decide how much money you’re able to spend on various items such as rent, car, food, entertainment, and more.

The envelope system can help you get out of debt by staying on budget

The envelope system is a budget system that forces you to accurately budget expenses every month because each envelope represents the maximum amount you can spend on a particular item.

Here’s how the envelope system works:

Every month, you have fixed costs and you have variable (changing) expenses. Bills like car payments, mortgage/rent, cell phone, and electric bills are fixed expenses. You’ll set those up on autopay because they’re the same amount every month.

Variable expenses, which can go up or down each month, are where you can cut back and save money. Here are some categories of variable expenses:

  • Groceries
  • Gas
  • Eating Out at Restaurants
  • Movies
  • Hobbies
  • Grooming & Beauty

An Envelope Budgeting Example…

Let’s start with your salary. Let’s say your take-home pay is $3,000 a month.

With the envelope system, you would put $500 cash in an envelope and mark “Groceries” on the envelope.

You would put $300 cash in an envelope and mark “Dining Out” on the envelope.

And you would put $300 cash in an envelope and mark “Gas” on the envelope.

The amount you put into each envelope is the maximum you’re allowing yourself to spend each month on those items.

The envelope system makes it easier for you to manage your spending because it keeps you from overspending and wasting money. For example, when it’s time for groceries, you would use what’s in the grocery envelope. Since you see there’s a limited amount of money in the envelope, it wakes you up to make better choices on how you spend that money each month.

After all, you would spend money on lobster and steak at the first of the month if you saw that would cause you to run out of money for food weeks before the end of the month.

Earn More Money

Another way to get out of debt is to earn more money. Yes, this may seem incredibly obvious, but it’s true. The fastest and easiest way to get yourself out of debt is to simply make extra money. (click this link for 80+ ways to make extra money)

With more income, you’ll have more money that you can use to pay down your debt faster and become debt-free. Now if you’re thinking you already have a full-time job and can’t make more money without putting in a lot more time, think again.

Ways to Earn Extra Money

Side hustles you can work from home are quickly becoming a key way people are increasing their incomes. Second jobs are also an option. A few great ways to increase your income through side hustles or additional work are below:

  • Pick up a “work from home” second job. Many people get in the mindset that they already work a full-time job and don’t want to work a part-time job that may pay them less than a full-time job.

    However, even if you find a part-time job that pays $10/hour and you put in 20 extra hours per week, that’s $800/month. That’s enough to pay your car payment, insurance, utilities, and more. And you only have to do this second job until you’ve paid off your debts. Check out the best freelancing platforms to find work at home jobs.

  • Freelance. Doing freelance work (being a freelancer) is one of the best ways to increase your income on your own time, in your own home. While freelancing, you can work how much you want, when you want, and set your own prices.

    With the Internet and a global economy, there are so many opportunities to freelance. You can market almost any skill you have and get paid to do it. We’ve put together a “find a freelance job” series to help you make money as a freelancer.

  • Sell your old stuff. This is one of the easiest ways to get extra money to put towards your debt. Most people have things they never use anymore which could bring in quick cash. Take a few photos of items you’re not using, throw them up on Craigslist, Facebook Marketplace, eBay, or Letgo and get some quick extra cash! Here are the most profitable products and platforms that make the most money.

I recently started listing stuff on eBay and made over $3,000 in the last ten days. I have over 50 listings now. What I love about eBay is that when you list your stuff on a 7-day auction on a Saturday, then NEXT Saturday – you can ship out what sells. What a great way to spend an hour every Saturday making $3,000 a week!

If you boost the amount of extra income you have streaming into your bank account consistently, you’ll speed up the process of paying off your debts.

Use the Snowball Effect to Pay Down Debt

This is one of the best ways to get out of debt fast. If you have credit card debt, a personal loan, or student loans that you’re trying to get paid off as fast as possible, you’ll have to pay more than the minimum.

I recommend using a system known as the “snowball effect” where you pay off the lowest balance debt first which frees up more money to pay off the next largest debt. Once one balance is paid off, use that additional money to apply to the next balance until all loans are paid off.

If you have too much credit card debt and feel like you’re getting nowhere fast, then try consolidating the credit cards into one payment. That’ll free up cash to apply to the principle of the loan.

You can use Payoff by Happy Money to take control of your credit card debt. Just get a Payoff Loan to combine your high payments into one low-rate monthly payment.

Click here to check their rates.

How to Calculate the Minimum Credit Card Payment

When your credit card balance starts to grow, the worst feeling is getting the credit card bill and wondering “How much is the minimum payment this month?”

The minimum payment is calculated by whichever is the greater of these 2 items:

  1. Fixed Dollar Amount
  2. Percentage Amount of the Balance

Here’s a quick guide to help you figure out your minimum payment:

  • If you have very little debt: If your balance is below $25, then the minimum payment will be the balance. For example, if you own $15, your minimum payment will likely be $15 – the full balance.
  • If you have some, but not too much debt: If your balance is between a certain amount (usually $25 to $1,000), then the minimum payment will be a fixed amount. For example, if you owe $750, your credit card’s minimum payment may be $20 to $25. This minimum varies from card to card, so you’ll want to check your card’s terms to see what they charge.
  • If you have a lot of debt: If your balance is over $1,000, then the minimum payment will be 2% percentage of the balance. For example, if you owe $2,000 on your credit card, your minimum payment will be $40.
  • Each card follows this standard calculation with a slight variation.

How do Credit Cards Make Money

The whole time you’re working on paying off debt through minimum payments, you’re paying more and more interest. This is exactly what lenders and creditors want.

The longer you only pay the minimum monthly payment, the more you end up paying for your debt. That’s why you want to pay more than the minimum payment. Even paying a little bit more can easily cut months off the payback period over the life of your debt.

Credit Cards make their money three ways:

  • Interest
  • Fees Charged to the Cardholder
  • Transaction Fees Paid by the Business

Pay Off Debt With the Highest Interest Rate First

Credit cards typically have some of the highest interest rates of any debt. The higher the interest rate, the more you’ll be paying back. When you pay off the highest interest debts first, you’re actually paying less total interest overall. This method is known as the Debt Avalanche Method.

Debt Avalanche Example

Here’s an example of paying off the highest interest rate debt. For this, I’ll be using examples based on my own experience.

  • Student Loan $4,000 at 5% Interest
  • Credit Card Balance $3,500 at 22% Interest
  • Synchrony Air Conditioning Balance $7,000 at 0% Interest
  • Personal Line of Credit $6,000 at 7% Interest

Using the Debt Avalanche method, which one will you attack first? The one with the highest interest rate. In this example, we’ll start paying extra on the credit card balance (with a 22% interest rate) until it’s paid off.

Once that’s paid off, you’ll use the entire amount you were paying on your credit card bill to attack the next highest interest rate debt. In this case, it would be the personal line of credit (with a 7% interest rate). Once that’s paid off, you’ll apply the extra money to the next balance which is the student loan (with a 5% interest rate). That speeds up the debt payoff.

It’s called the avalanche method because as you start paying off debts, you stack up more money to pay offer your remaining debts.

Why does this work so well? Because it’s the opposite of what most people do. When most people pay off one debt, they use that additional money on their lifestyle, not on paying down their debt. So there’s no additional money available to pay down these remaining debts.

Instead, if you look at the money you were using to pay off paid-off debts as a tool to pay down your higher interest rate debts faster, you’ll see the power of this method.

Balance Transfer Your Debt

If you’re suffering from a large amount of credit card debt, one of the best ways to help get out of it faster is to transfer that debt to a new credit card through a balance transfer.

This works because credit card companies want to entice new customers to join their credit cards, so they will offer a promotional period where you don’t pay any interest (usually 12-18 months).

Pro Tip: Look for credit cards with the highest reward points in addition to zero interest rate promotions.

Once you transfer your debt to this new credit card — and pay the balance transfer fee — you will have several months to pay it off where you aren’t paying any interest.

This is huge because interest is often the worst part about paying off debt. The key here is to either pay that balance off before the interest kicks in or transfer it to another promotional card. Once the promotional period ends you’ll get hit with some high-interest rates.

Scratch the New Car for a Used Car

New cars are undoubtedly amazing to own. They look great, require little to no maintenance, and everything on them always seems to work perfectly when you get in. However, all of that convenience certainly doesn’t come cheap. You’re paying a premium for all of that new car smell.

Lose 20% of New Car Purchases During First 12 Months

Buying a brand new car is one of the worst investments you can make. As soon as you drive it off the car lot, you start to lose money. In fact, you lose 20% of the car’s value during the first 12 months of owning a new car.

How Much Do New Cars Depreciate

CarFax: According to current depreciation rates, the value of a new vehicle can drop by more than 20 percent after the first 12 months of ownership. Then, for the next four years, you can expect your car to lose roughly 10 percent of its value annually. This means that a new car can be worth as little as 40 percent of its original purchase price after five years.

Instead of buying a brand new car, buy a good-quality used car from a reputable used car dealer or someone that you know. Be careful buying one from private parties as some people can be sneaky trying to hide vehicular issues. (I speak from personal experience.)

If you can get a nice used car at a good price, you can save thousands or even tens of thousands of dollars. This will allow you to not only get rid of your auto loan but you can put that extra money you would have spent on a newer car to pay down other remaining debt you may still have.

Debt Consolidation

If you’re at the point where you have a bunch of different types of debt with varying interest rates and terms, debt consolidation might be the best option for you. Debt consolidation loans are loans from your bank or credit union that you can use to pay off the rest of your debts, Then you can just make one single monthly payment to pay off that larger consolidated loan.

If you have more than $20,000 in debt, then try consolidating it with Super Money. It takes less than 5 minutes and you can compare rates and get the payment you’re looking for.

Related: Guide to Debt Consolidation

Now you would only consolidate your debt if the consolidation loan has better terms — interest rates, payback period, etc. — than the debt you already have. You wouldn’t want to consolidate your debts and pay a higher interest rate. The point of debt consolidation is to save you money.

If most of your debt is in credit card debt, getting better interest rates should be easy through consolidation which can save you a bunch of money over time.

Secondly, debt consolidation makes it easier to pay off your debt mentally. When you have a lot of different types of debt, you need to keep on top of what your monthly payments are, the different interest rates you’re paying, when the payments are due, and more.

After all, if you miss a payment, not only will you be charged a late fee, but it’s possible that your overall interest rate will increase as well.

Debt consolidation loans make paying off your debt easier by giving you just one debt payment to make each month. With less to keep track of, you’re more likely to stay on top of paying it off.


When you start to see there are actions you can take to pay down your debt, faster and easier, you start to see yourself in control of your money instead of it controlling you.

That’s important, because not knowing how money and debt works is how many people get themselves into trouble, overwhelmed with growing bills that look like they never go away.

I really want to help you change your mindset regarding money & debt. After all, the way we create money is by exchanging value for money. The more value you put in the world, the more money you’ll make.

Since we can create unlimited value, we can create unlimited money. Instead of thinking that money is scarce, ask yourself how you can CREATE more of it to get out of debt & create your lifestyle. Click To Tweet

If you have the mindset that the pursuit of money makes us greedy and makes us treat people terribly, I want you to listen to The Life Coach School’s podcast about money & mindset. This will help you change your mindset about YOUR relationship with money, and it will allow you to kick this scarcity mindset which will help you make more money.

The mind will play so many tricks on us.

Frequently Asked Questions About Getting Out of Debt

Should I just jump straight into debt consolidation loans?

Not necessarily. If you don’t have any money saved up and the amount of your monthly payments on the debt is more than you can afford, you may end up worse off than you are now. Try instead to increase your income and make sure you’re bringing in more than what goes out first.

Should I stop my 401(k) contributions to pay off my debt?

This is a controversial question and many people don’t agree on one particular answer. The truth is this is different for everyone. If you’re receiving an employer match, you should try to keep contributing at least the minimum to get the match. That’s 100% return on your money, which is more than any of your debt is charging you. If, however, your debts are costing you more than you’re bringing home and pausing your contributions will prevent you from getting deeper into debt, then you should stop contributing and pay off your debt.

Should I refinance my student loans?

Refinancing student loans has been getting more and more popular in recent years and for good reason. Most student loans will vary in interest but they’ll charge somewhere in the neighborhood of 4% – 8% in interest. These are super high-interest rates when refinancing can get you a loan with interest between 2% – 4%. This will differ from person to person, but it’s worth a shot to look into.

Make sure you bookmark this page as I’ll be updating it as often as I can to keep you informed on how to get out of debt.

If you know anyone looking to get out of debt, please share this page with them.

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