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If you need a plan to start your journey to become debt-free, then please read below as I give you a step by step plan of the best way to become debt-free.

Before I go over each step, I want to ensure you have the right mindset before starting your journey. When you begin this journey, there are going to be hard days, and there are days that you will slip up and go off budget. It is important to find ways to motivate yourself when things don’t go as plan. Writing and saying affirmations daily will keep you motivated, and having an accountability partner will help as well. Hold yourself accountable and discipline yourself to push through the tough times, and you will succeed at your plan.

Now that we got that out the way let’s get to the six steps of the best way to become debt-free plan.

We will discuss:

  1. Track Spending From The Last 30 Days
  2. Make A List Of All Debts
  3. Methods Of Tackling Debt
  4. Create A Budget
  5. Emergency Funds
  6. Putting Your Plan Into Action

Step 1: Track Spending From The Last 30 Days

The first thing you want to do is go over your spending of that last 30 days. You can do this by using your bank statements or logging in to your bank and filtering your transactions to show what you spent in the last 30 days. You are checking your spending for things you spent money on that was unnecessary, and you are determining if there are any bills that you need to cut out or go without until you reach your financial goal.

Tracking your spending is a task you want to do daily to help you control your spending, stay within your budget, and help you meet your financial obligations. There are a couple of ways to track your spending:

  • You can manually track your spending by writing down your expenses every time you make a purchase. The things you would want to write down is the date you made the purchase, what the purchase was, and how much money you spent. You can either manage this spending on paper or transfer your expenses to an excel spreadsheet.
  • You can use an expense tracker app or software online by entering your bank details, and the app or software will automatically track your spending.

Staying on top of your spending will help you develop better spending habits and tell you where most of your money is going.

Step 2: Make A List Of All Debts

The second thing you want to do is list all your debts. A debt is money you borrow and owe back to a company or someone. This can be a car loan, student loan, credit card bills, personal loans, collections, etc. If you don’t know exactly everything, you owe, you can get a list of all your debts on your credit report. Annual Credit Report will give you a free copy of your Experian, Equifax, and Trans Union credit reports yearly.

Once you have all the debts you owe, you will list them by balance, smallest to highest balance. An easy way to do this is by using an Excel Spreadsheet and filtering your balances from smallest to largest. Once you have your debts listed and filtered, you are going to determine a method of tackling your debt, which brings us to step three.

Step 3: Methods Of Tackling Debt

There are many methods to tackling debt: debt consolidation loans, bankruptcy, or tackling your debt yourself. I do not recommend the first two options, and here’s why. A debt consolidation loan can actually prolong your time in debt. Although you are consolidating your debt into one payment, your interest rate may be high, and you are starting a new loan over which adds more years to achieve your financial goal. Bankruptcy hurts your credit, and if you are trying to purchase a home in the near future, this is not the route to go. The best way to tackle your debt is by taking care of your debt yourself, and the best way to get out of debt fast is by using the Debt Snowball Method.

If you have completed step two, then you have already completed the first step of the Debt Snowball Method. Which is list all your debts from smallest balance to highest balance. The next step is each month you will pay the minimum payment on all your debts, and if you have extra money, you will put it towards the smallest balance of your debts.

So let’s say your first smallest debt balance is $300, and your minimum monthly payment is $50 each month. After creating your budget, you realized you have an extra $100 leftover after taking care of all your bills. You will take that $100 and add it to your minimum monthly payment of $50, making the payment for that month $150, leaving a balance of $150. 

You will repeat this process for the next month, so your new balance is $150, and you already budget the minimum payment of $50, and you are going to add the extra $100 again, bringing it to $150. This will now pay off that debt within two months instead of four months by just paying the minimum balance

Once the first smallest debt balance is paid off, you will use the minimum payment of that debt, which was $50 and add it to your second smallest debt payment each month until that balance is paid off.

So let’s say your second smallest debt balance is $500, and your minimum monthly payment is $100. You will then add the minimum payment of your first debt, which was $50 and the $100 of extra money, which makes your extra money $150 and add it to the second debt. This makes the payment for that second debt $250 ($100 minimum payment + $150 extra money) and leaving you a balance of $250 ($500 second month balance – $250 payment for the month). You will repeat this process for the next month, which will pay the debt off in two months instead of five months.

You will repeat this process for all of your debts until all your debts are paid off.

Step 4: Create A Budget

Now that you know how you are going to tackle your debt, the next step is to create your budget. The kind of budget you want to create is a zero-based budget. A zero-based budget is a budget you plan before the month starts by using your expected income, subtracting all your expenses for the month, and tell your money where to go, until you have a balance of zero.

For example, let’s say you get paid $1300 on the 1st of the month and $1400 on the 15th, which will equal to $2700 monthly income coming in for your household. (If your spouse has income coming in as well, you should add his income as well.) Then you will subtract all your monthly expenses; this will include: groceries, cable, rent, car payment, tithing & giving, saving, etc. Once you have subtracted all your monthly expenses and if you have a zero balance, then you have an equal balance of income and monthly expenses. If you end up with a negative balance, then you are overspending, and you need to find ways to cut some expenses. If you end up with money left over, then you can use this money to put towards your emergency fund or paying down your debt. This may sound complicated, but it’s not that hard to do. The hardest part is following your plan; I fell off my budget a couple of months before I got the hang of it.

There are a couple of ways that you can start your zero-based budget; you can use an Excel spreadsheet or a budgeting software online. If you need an excel template to get started, click here to use the one I created to use every month. You can also use an app called EveryDollar to create your budget as well.

Step 5: Emergency Funds

After you have created your budget, the next step is to determine if you have enough money in savings that you can use as an emergency fund for unexpected expenses. You want to ensure you have at least $1000 or more saved up to take care of these expenses. If you have more than that, then you are good to go, and you will just use your extra money left after all your monthly expenses and put it towards your debt. If you do not have at least $1000, you need to start saving until you get to that amount before you tackle your debt. The reason for this is so you can put your full focus on paying off your debt, and if unexpected expenses arise, you have the money to take care of them while still tackling your debt.

If you take money out of your emergency funds, you need to ensure you start saving again to get your funds back to at least $1000, just in case the unexpected happens again.

Step 6: Putting Your Plan Into Action

The last step is to put your plan into action. In my opinion, this is the hardest step because although you have a plan, things will come up that will have you tempted to decide if you need to fall off your plan. This is when you have to remember why you started, motivate, and discipline yourself to stay strong. The best thing to do is set reminders in your phone to remind you to create your budget for each month and have an accountability partner that is paying off their debt with you. You can help each other stay on track by holding each other accountable. You should also let your family members and friends know that you are cutting back on things so you can meet your financial goals. This way, they will understand your priorities, and maybe they will join you on your journey. It may be hard at the beginning, but in the end, it will be well worth it.

Lastly, I want to remind you to celebrate your small wins; they will help motivate you to stay on track and want to finish through with your goals. All six of these steps will help reach your financial goals. If you have any questions about any of these steps, please reach out to me below or by my contact page. I look forward to talking to you.


“It doesn’t matter how slowly you go, as long as you do not stop.” ­ Confucius

“We may encounter many defeats, but we must not be defeated.” ­Maya Angelou



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