Beating Broke

Personal Finance from the Broke Perspective

How to Get Out and Stay Out of Debt

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As a nation, we’re individually mired in debt.  Achieving financial freedom is strange to many people because they accept that they will always have a mortgage and a car payment, but many also accept that they will always have student loans and credit card balances.  They argue that life is just too expensive, and there is no way they can make it through without credit.  However, there is a simple way to get out and stay out of debt.

Why Gazelle Intensity Doesn’t Always Work

If you’re deep in debt, you may want to follow the Dave Ramsey approach and become gazelle intense, funneling all of your extra money into your debt snowball, even if it means that you’re neglecting other categories of your budget like your house and car repair fund and your retirement.

How to get out of debt and stay out of debt
Photo via flickr Mhorr Gazelle (Nanger dama mhorr) © by 5of7

While gazelle intensity works great if you only have a small amount to pay off, say $10,000 to $15,000, many people are far deeper in the whole than that, and it’s very difficult to remain gazelle intense for years.  Gazelle intensity is meant to be a sprint, ideally for less than a year, not several years if you’re heavily mired in debt.

In addition, while it’s easier to neglect certain categories in your budget for a year or less, doing so for longer will cause problems.  Your car will need repairs over the course of several years.  Your home will need repairs which may be minor, or unfortunately, major.  But because you’ve been funneling everything into your debt snowball, you may not have enough money to pay for a repair in full, so your only choice may be to pay on credit and negate your progress.  How discouraging is that?

A Simpler, Slower Way to Get Out of Debt

These days I’m all about moderation, even for those who have significant debt.  There is a simple way to achieve financial freedom—quit accruing new debt.

The only way to do this is to make sure that you have a realistic budget and money set aside for emergencies and irregular expenses.  Put away the credit cards so going further into debt isn’t an option.

Paying Down Debt

Then, pay the minimum on all of your debts and don’t reduce that number as the minimum payments go down.  Let’s say between all of your debts, your minimum monthly payment total is $1,365.  A year from now, since you haven’t accrued any new debt and the balances are going down, your minimum monthly payment might have dropped to $1,290.  Don’t reduce your minimum monthly debt repayment.  Instead, readjust your payments so that you’re paying the minimum payment on all bills except the smallest one.  On the smallest one, pay the additional $75 that is the difference between your minimum monthly payment last year and your minimum monthly payments this year.

Sure, it’s hard not to want to pay more than the minimum monthly payment that you started with in the beginning, but the idea isn’t too pay all the debt down immediately.  The idea is to continue to budget and fund all of the necessary categories so that you can achieve financial freedom.

Setting a Realistic Budget

So, you’ll take a realistic look at your expenses.  If you have a home worth $200,000, you’ll set aside at least 1% of that price a year in a repair fund (approximately $166 a month).

If your car is old, you’ll set aside a reasonable amount monthly for repairs and maintenance—maybe $200 a month.  And if your car has over 150,000 miles, it may be time to set aside a monthly amount to buy a new car in a few years—with cash.

How to Get Out of Debt
Photo via idpinthat.com

Determine an amount that you want to set aside monthly for an emergency fund, and then just keep adding to that fund whether you have an emergency or not.  Some time, you will have a major emergency, and you’ll be glad that you have a full funded emergency fund so you can pay in cash, not credit.

Getting and staying out of debt requires that you stop using credit and that you have a budget that considers all of your true expenses for the year.  While this process make take longer, it also assures that you will achieve financial freedom.

Which approach do you take to get out of debt?  What would you advise others who are deeply in debt?

How to Practice Self-Care When Paying Down Debt

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Dave Ramsey says that paying off debt is more of a sprint (especially when you’re gazelle intense), but if you have a lot of debt, the payoff journey may feel more like a marathon. If you keep your nose to the grindstone without a break, your physical and emotional health may suffer. Practicing self-care will help you not only remain in good health but also have the stamina to see your debt-free journey to the end. Here are some tips you may want to utilize to care for yourself while working hard on paying down debt:

Make Sure You Have a Fun Money Fund

I know, you may feel like all of your money should go on debt repayment, and, yes, almost all of it should. However, set aside a small amount for fun money for the month. When my husband and I were paying down debt, we each got $20 for the month. I used mine to buy treats at the grocery store that weren’t in my budget or we sometimes used the money to get a dessert at a restaurant together. This money should be yours to spend any way you see fit and to give you a little wiggle room in your budget so you don’t feel deprived.

Do Something Just for You Every Day

What do you enjoy doing? Some people enjoy spending time in their gardens, running, doing yoga–the choice is yours. When I was working three jobs in my 20s, I enjoyed nothing more than coming home after a 12 or 14-hour day and slipping into a bubble bath. That was the perfect way to destress and relax.

Start a Pinterest Dream Board

Do you have a major goal when your debt is paid off? Maybe you’ve always wanted to visit France, and that’s how you plan to celebrate being debt-free (after you’ve saved cash for the trip, of course). Why not start a Pinterest board of all the places you want to go and things you want to see? You can create this board for any dream you plan to realize when your money is no longer going toward debt. The best part about Pinterest is that you can make the board secret so only you see it.

Make Your Meals at Home

Let’s face it, paying off debt and working hard to make extra money can be stressful and exhausting. While you may be tempted to grab quick food, know that doing that regularly can have negative effects on your health. Take the time to make homemade food. You’ll feel better, be healthier, and have more energy.

Listen to an Audio Book


You may not have the free time to sit down and read a book, but when you’re driving to and from work, why not listen to an audiobook? It can be a fiction book you listen to just for fun, or it can be a non-fiction book that will help you in your career. Gazelle intensity is exhausting and stressful, so make sure you make time to relax and take care of yourself.

What are some of your favorite ways to practice self-care?

4 Ways to Make Sure Your Bills Get Paid On Time

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You’re busy.  I get it.  I’m busy, too, and sometimes I forget to sit down and pay my bills in a timely manner.  However, I don’t want a ding to my credit score.  Because I’m so busy with my kids and their many activities, and L.I.F.E., I use several strategies to make sure my bills get paid on time.

Here are some of my favorite strategies:

Set e-mail reminders.

For each of my credit cards, I have set up e-mail reminders.  Depending on the company, I’m sent an e-mail reminder six to 10 days before my payment is due.  I can’t tell you how many times these e-mail reminders have meant the difference between a late and on-time payment.  Everyone should set e-mail reminders for their bills, in my opinion, especially if you have a very busy schedule.

Set up recurring payments to your credit card.

While I generally avoid setting up recurring payments to my checking account, I do advocate setting up recurring payments to credit cards.  Why?  If a charge is fraudulently applied to your credit card, the credit card company protects you.  If the same thing happens to your checking account, your entire account could be emptied, and then you would miss other payments to other creditors and have to pay for bounced checks.

In addition, if you have a credit card with a rewards program, you could gain rewards simply for paying your monthly bills that you used to pay via check and snail mail.  Those points can add up quickly when you’re paying your monthly recurring bills with credit cards.  Just make sure to pay off your credit card each month.

Set up a special account for automatic payments from your savings or checking.

If you still prefer to set up automatic payments to your bank account, I’d suggest setting up a separate account just for automatic payments.  Then, if there is an error on the vendor’s part, you don’t risk paying overdraft fees on your regular checking account.

I have one account that is devoted solely to automatic payments for my husband’s student loans and our life insurance (the only two payments I have set to auto pay from our bank account).  These are both fixed expenses, so at the beginning of every month, I just schedule a transfer to that account so the payments can be deducted.  Since I don’t use this account for any other purpose, there is no worry about not being able to make other payments or bouncing checks.

Keep all of your bills in one place.

If you’re still receiving bills in the mail rather than electronically, keep all of your bills in one place.  If you use snail mail, also keep stamps there.  Then, when you’re ready to sit down to pay your bills, you have everything you need right in one place.

What are your strategies to make sure your bills get paid on time?  What suggestions would you add to this list?