How to Escape Debt Fast : A Step-by-step guide

In crafting a strategy to eliminate your debt, you must first determine how much you owe.

Living a debt-free life is the greatest gift you can give to yourself and your family. The best day of my life was the day I made the last payment on my student loans.


My goal is to help our readers achieve this same level of joy, which is why I am writing this post, to provide a detailed guide on how to get out of debt fast.


Why?

One of the first steps to getting out of debt is to ask yourself why you want to get out of debt and why you are in debt in the first place. It is super important to clearly map out the reasons why you want to be debt free in order to keep moving forward and build some sustainable healthy debt management habits.


How much?

In crafting a strategy to eliminate your debt, you must first determine how much you owe. 

Gather the following;


  • The type of debt

  • The amount of each debt

  • The interest rate on each debt

  • The minimum monthly payment required

Contact each creditor to get the right figures.

You can store this in a simple Excel file, or you can use a free Excel calculator to document your debts and associated information.


Monitor your cash flow

Try your best to speed-up the rate at which you are paying down your debts.


First, figure out how much money you have available for debt repayment each month. The easiest way to do that is by registering for an account at Bank Sherpa, where you can track your income and expenses for free. You can also opt for an old school method or tracking your expenses using Microsoft Excel.


It is important to be able to accurately track how much income earned each month and expenses. Equipped with this information, you can now proceed to streamline your budget, cutting out unnecessary expenses.


Build an emergency fund

An emergency fund is a cash reserve, often set aside in a checking or savings account. Having some money set aside is crucial, because it prevents you from falling further in debt if an emergency occurs. Setting aside at least six months in bills is an ideal starting point.


Knock down your debt.

How do you decide which debt to pay first if you have several different types of debt?

Here are two options:


  • Debt layering – Pay your debt with the highest interest rate first, then tackle the next debt with the second highest rate. Continue to do so till all debts are paid.


  • Debt Snowball – Pay your smallest debt first. When that’s eliminated, tackle the next smallest debt.


From a rational perspective, the debt avalanche method always makes more sense. By paying off your highest interest rate debt first, you minimize the amount of interest paid across all debts.


From a behavioral perspective, the snowball method can make sense. You will pay more interest each month during the repayment process, but the motivation provided by paying off those smaller debts encourages you to keep going.


Conclusion- Do not be discouraged or depressed because you are in debt. Try your best to enjoy your life with family and friends and make debt repayment part of your daily, monthly and even yearly routine.

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