4 Simple Steps to Debt Elimination

Plan to Get Out of Debt

For many people, the concept of debt elimination can be scary. Most of that fear stems from not even knowing where to start. For the majority of us, having some debt is unavoidable. 

Though some financial experts would encourage you to avoid debt at all costs, I believe there are circumstances in all of our lives that make that concept impossible. So, understanding how to manage debt becomes even more critical.

But before we even go that far, I’d like to acknowledge that having debt can be a severe financial inconvenience or an outright disaster depending on how much you have. This is because it’s so easy to get into debt without realizing how far you’ve gone. 

Most people don’t sit and watch a running total of how much they owe or even frequently calculate their total debt to income ratio. Most aren’t thinking about every little credit card transaction leading to a larger and larger financial obligation. And many don’t even realize how many sources of debt they have.  

If either of these situations fits you, guess what, you are certainly not alone. And once again, I’ve got you covered. The following 4 step plan to eliminate debt will have you knocking down those balances faster than you can say financial freedom!

Stress from Debt

Step 1: Identify all your sources of debt

Identifying your sources of debt is the first and the most critical step in this plan. As I mentioned above, many people don’t even realize how far into debt they are until it’s unmanageable simply because they don’t have visibility to all they owe. 

This step enables you to truly understand and acknowledge your debt and ultimately help you figure out how aggressive your debt elimination plan needs to be. 

Your credit report is the one resource available to help determine how much debt you owe that I believe to be invaluable. 

There are some misconceptions about credit reports, and I’d like to quickly clear some of those up before we move on.

1 – You do not have to pay to see your credit report. Annualcreditreport.com allows you to check your credit report from all three credit bureaus for free each year. That’s right, FREE! You can use these reports to see most, if not all, of the debt in your name. 

2 – Your credit report is a great resource to get a pretty holistic picture of your debt obligations; however, some balances may not be reflected simply because some companies don’t report to the credit bureaus. However, most of the major lenders and creditors will.

3 – Also, some agencies don’t report debt obligations until they are grossly overdue. By that time, the debt may be challenging to manage. Examples of this could be medical bills, outstanding cell phone bills, payments to utility companies, etc. The best thing to do is to consistently pull your credit reports at annualcreditreport.com every year to stay on top of things.

In addition to checking your credit report, you can call places you’ve done business with, such as healthcare providers and utility companies, to check balances with them. I mention utility companies and healthcare providers specifically because they typically take a very long time to report delinquencies on your credit report. 

To be on the safe side, if you believe you owe someone, just call them up and find out.

Step 2: Avoid Increasing your debt

Once you know what you owe, don’t keep adding to the pile. This may seem like an obvious step, but you’d be surprised how easy it is to add $1000 to a credit card balance in a matter of weeks.

A lot of consumer debt is driven by people living beyond their means. When that happens, those consumers tend to pay for that lifestyle with more debt. 

Don’t be that consumer. Create and follow a budget that has a detailed savings plan. Doing so will help you stay on track with all of your finances and help eliminate the need for debt.

Keep in mind, if you can avoid getting “in debt,” then you’ll never have to get “out of debt.” It’s much easier to avoid debt initially than it is to pay it off once it’s gotten out of control.
For more details on avoiding debt check out these 10 tips.

Plan to Eliminate Debt

Step 3: Create a Debt elimination Plan

Mapping out a debt elimination plan can be intimidating, especially if you feel overwhelmed by your debt. It requires discipline and an honest commitment to your end game.

When creating this plan, you’ll need to first look at your budget. If you haven’t done so already, create a line on your budget that covers debt repayment. Specifically, you need to list exactly how much money you can contribute each month toward paying off debt. 

Keep in mind; this number should include the total of all your minimum payments and some extra to put toward debt.

Be sure to set realistic goals for your plan. By that, I mean, don’t add a line to your budget claiming you’ll put an extra $500 toward paying off debt, but you can really only afford an extra $200. 

Not setting the right targets and goals can be discouraging and take you longer to reach your goal. Just remember to be mindful of how you can continue to work through your debt elimination plan in a way that best supports your entire financial journey.

To figure out which methods to use for paying off debt, check out these 9 tips on paying off debt for savvy ways to reduce those balances.

Change Mindset About Debt

Step 4: Change the way you think about debt

This last step shouldn’t actually seem like a step at all, but a lifestyle change. Once you’ve managed to eliminate or even significantly reduce your debt, your focus needs to shift. 

At this point, the worst possible thing you could do is to get into more debt. This is where you’ll need to change the way you think about debt. This can take a lot of effort from a psychological standpoint and require a lot of willpower. 

The biggest issue is understanding why you were in debt in the first place. 

Ask yourself these questions:

  1. Was there an emergency you needed to pay for?
  2. Do you overspend?
  3. Do you live beyond your means?

If you find yourself using debt to cover emergency expenses, then you’ll need to be sure to create an emergency fund. If you’re an overspender, you’ll need to be hyperfocused on tracking expenses within your budget. If you live beyond your means, you’ll likely need to make some tough choices on downsizing or maybe you’ll need to work toward earning more money. 

Whatever the case may be, answers to these questions can help you determine how to change your mindset about debt.

Final Thoughts on Debt Elimination

Understanding how to manage debt and creating a plan to eliminate it can significantly impact your financial and mental health. When you know how to avoid debt, keep debt low if you have to have it, and ultimately eliminate it, you can effectively manage your obligations.

Debt can be a significant source of pain and shame, but don’t let it be! MOST people have debt, and many are drowning in it. Shame will put you in a position to hide from your situation, making it impossible to follow your plan. And trust me, the pain associated with having too much debt will go away the minute you start knocking out that debt. 

Ultimately, you’ll need to stay vigilant and make conscious financial choices that align with your goal of paying off debt. The key to achieving any goal is always to be aware of how your choices will impact that goal.

Take control of your debt before it can take control of you.

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Krystal Norwood-Morales, MBA, CFEI

Krystal is a Certified Financial Education Instructor and founder of Wild About Wealth, LLC. As a financial literacy advocate, she writes posts geared toward helping others improve their financial education and build generational wealth.


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Krystal Norwood-Morales, MBA, CFEI

Personal finance blogger

As a certified financial education instructor and financial literacy advocate, my mission is to teach young adults how to build generational through financial education. So let’s get WILD about WEALTH!

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