Six Steps to Get Out of Debt

Six Steps to Get Out of Debt

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Being in debt can be a scary, lonely ordeal and it’s a stressful place to be, especially when you’ve got to the stage of having debt-collectors knocking on your door to ‘reconnect’ with you and arrange a payment plan. When you’re at this stage it’s difficult to know where to start, but there’s an easier option than the Ostrich approach. Here are six steps to get out of debt that you can take now.

Disclaimer – I am not a financial advisor, and these recommendations are based on my own experience. Please also do further research and get additional advice. Charitable organisations such as and are there to help you in times of difficulty. 

1. Draw up a budget

In the first instance, the absolute best place to start is by putting together a budget plan. Sit down and work out what your income is, what your outgoings are, and begin to document your spending habits to avoid any oversight – as this is where the problem may lie, especially if you’re overspending.

Write everything down, so you can see where your money is going, where you need to cut back, where you need to make extra money, and what you can afford to pay towards debt. For help in creating a budget (including a spreadsheet template), see this post.

2. Make a list of your debts

By listing everything you owe, your financial situation becomes much clearer and you can begin to create a plan of action. List it all, including credit cards, loans, finance agreements (such as hire purchase for cars or furniture), and any credit agreements you might have for items such as a mobile phone plan. Once you’ve done this, move on to the next step.

3. Outline your debt snowball

I first came across the debt snowball method when I read Dave Ramsey’s book, The Total Money Makeover. The idea is that you take all of your debts, and list them from smallest to largest, beginning with paying off the smallest first in order to gain momentum. Whilst you are paying off the smallest debt, you continue to pay the minimum payments on the rest.

Once you have paid off your smallest debt, the payments you would have been making on that debt are then added to the minimum payment on the next debt, and so on.

The exception to this is those debts that are attracting interest, in which case you would list them in order of interest and pay off the one with the highest interest rate first, otherwise you’ll be paying more in the long run.

The idea is all about the momentum; your debt snowball gets bigger and faster as you go.

It’s also highly recommended that you build an emergency fund prior to focusing on your debts (but continue to pay the minimum payments). That way if anything urgent crops up such as your washing machine breaking, or your car needing some emergency repairs, you’re covered and won’t need to resort to credit to pay for it. £1,000 is a good amount, but if that’s too high, aim for £500, or £300 to begin with.

4. Talk to your creditors

Have you ever done something that you thought would be really scary, but once you’d done it, you didn’t know what all the fuss had been about?

The same applies with talking to the companies you owe money to. There are real people on the end of the phone, and people are sympathetic when you’re in a bit of a pickle.

Once you pick up the phone and speak to them to sort out your problems, you’ll realise that it is entirely possible to come to an arrangement with them to get yourself out of said pickle.

You can set up a payment plan with them while you focus on the rest of your journey to become debt-free, and once you’ve done that, the relief is enormous. Not to mention to sheer feeling of total empowerment in taking charge of your situation.

5. Save in as many ways as possible

There are so many ways to cut back. You can cut back on your household bills, and your grocery shopping.

You can shop around for cheaper insurance. Downshift on your usual brands. Stop spending money on a whim. Take packed lunch. Stop buying takeaways.

Save your pennies into a jar and then cash them in at the bank at the end of the week or month. Place your sinking funds into an easy-access, high-interest account.

If necessary, sell as much as you can that isn’t a NEED (a basic human requirement for survival). If things are really bad, you can live with basics. As Dave Ramsey said: “You can’t get out of debt while keeping the same lifestyle that you got there. Cut out everything except the basics.”

6. Make extra money

With a little research and some forward planning, it’s entirely possible to earn some extra money alongside any income you already have (or don’t!). Selling your personal possessions (as mentioned above) is a great place to start to get some additional funds to go towards your debt repayments. You could even ask friends and family if they have anything you could sell on their behalf, in return for a percentage of the profit.

You can get paid for your opinion by taking paid surveys or completing tasks through a mobile phone app. Perhaps you’d love to get paid as a mystery shopper?

Or start up a freelance business using your existing skills (perhaps you could be a virtual assistant, or offer digital marketing or book-keeping services?). There are plenty of job boards available such as and to get you started.

What about a dog-walking, or a pet-sitting business if you’re a stay-at-home parent? Think about what you do in your daily life, that you enjoy or love to do. Then grab a pen and paper and jot down some ideas; you’ll be surprised at what you might come up with that you could turn into a money-earner.

If confidence is an issue in getting started with extra income ideas, then start small and work your way up. The more you work at it, the more your confidence will grow. Check out 5 Easy Ways to Make Money on some ways to get you going.

In summary

The most important thing of all to remember is that your debt-free journey won’t start without you, and it also won’t go away by itself. It’s up to you to make the commitment to yourself to get out of debt, and it starts now. Take these 6 steps to get out of debt now – the fact you have started will empower you to see it through.

Six Steps to Get Out of Debt PIN