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How to Eliminate Debt for Good

This is a guest post by Richard of Simple Living Australia, a personal finance blog out of Sydney Australia. They provide a range of information covering everything finance with an emphasis on getting out of debt and savings.

Extraneous spending and poor money management can result in personal loan and credit card debt. Unsecure debt can be a huge burden on families. The good news is that there are lots of changes you can make to get out of debt and stay out. Here are some tactics to accelerate the reduction of debt and take back financial control. These personal finance tips will help create positive financial habits.


  1. Create a Budget. This is the most important one right here. List all your monthly bills and necessities and make sure they are covered by your income. The remaining money can be spent as long as you stay within budget. Make sure to put part of your extra money into savings each month. A good rule of thumb is to save 10% of your income every month.
  2. Pay Off Your High Interest Card First. High interest credit cards cost you so much money. Pay off these accounts then close them. As long as you still have four accounts open you can establish a positive credit history.
  3. Switch to Cash. Use cash for your everyday spending and have the credit card for true emergencies. Cash will help you keep track of your spending. Don’t keep the card in your wallet, because it will be too tempting to use it.
  4. Cut Your Spending. Spend less money on dining out and entertainment while you are paying off your debt. Skip the vacation this year to save even more money. Treat yourself to something nice as a reward when your debt is paid off.
  5. Reduce Your Bills. You might be able to find a way to lower your monthly bills if you refinance a loan, shop for a better interest rate, and try to save money on your utilities. You can also downgrade your cable TV service or get rid of any monthly services you don’t use very often.
  6. Become a Bargain Hunter. Use coupons and deal websites to save money on your purchases. With a little extra effort, you would be surprised at how much you can save.
  7. Increase Your Income. Ask for a raise, get a part time job, or do some side projects to earn extra money.
  8. Pay More Than The Minimum Payment. If you want to pay off your debt, you’ll have to pay more than the minimum payment. Set a realistic goal so that you still have enough money left over for your regular expenses.
  9. Get Educated. Go to the library and check out some books about personal finance and getting out of debt. There are also many great resources on the Internet.
  10. Sell Items You Don’t Need. Everyone has items they don’t need just sitting around. Sell that treadmill you don’t use on Craigslist for some extra cash and put the money towards your debt.

If you follow some of these tips, you will be headed in the right direction and on your way to debt free living and be able to enjoy a simple living. Be patient and stick with it. You didn’t get into debt in one day, so it’s going to take more than one day to get out. Once you’re out of debt, invest, invest and invest!


Editorial note: There is nothing much I would add to this list. I like the idea saving money even during paying off the debt, because in my opinion this would start creating a cushion for your emergency so if something happens, you do not have to borrow money again. If you wait for you debt to be paid off and then start saving, you may be waiting for several years. The only thing I would say is try to save first before you touch the rest of the cash and make it a rule.

Reducing bills is another great option by evaluating what services you really need, such as a magazine subscription, extended cable subscription and so on. If you review your current situation you will be able to find some reductions. I did it a few years ago and found tremendous savings.

I still have problems switching into cash, because at the end of the month or two weeks I do not have much left, since a lot of my money goes currently towards the debt. A good strategy can be trying to create a one month salary reserve on your account and then start using cash, but you will always be spending last month (or bi-week) paycheck, not the current one.

And the last note is about investing. I have my own experience with that. My current interest I pay to creditors could easily completely fund my ROTH IRA account, so why paying it to the creditors when I can save it for my future? Isn’t that a great reason for eliminating the debt as quickly as possible?

How are you managing your cash to reduce your debt?


10 responses to “How to Eliminate Debt for Good”

  1. Weekly Recap – June 21st, 2013 | Common Cents Wealth says:

    […] Hello Suckers: How to Eliminate Debt for Good […]

  2. I like the tips number 3. Buying things using cash will think you twice before to purchase any stuffs. There is a psychological pain every time you hand over cash to the cashier if you purchase any items. This will limit you of overspending and will help you also to get out from debt.

  3. Jake @ Common Cents Wealth says:

    I think this is a great list. My wife and I have used many of these to help us get out of debt. I think the main thing that will keep us out of debt for good is to have a sizable emergency fund so that we’ll never have to go into debt to pay for an emergency again. Then we just won’t buy an item unless we have the money for it.

  4. Little House says:

    I like all of these tips except the paying off the higher interest credit card first. I think when it comes to paying off credit cards, sometimes paying off the smaller balance cards is more rewarding and motivates people to pay off the rest. Baby steps, baby steps.

  5. I always laugh when I see “switching to cash” as a solution for getting out of debt. Cash isn’t a cure-all, and there are certainly plenty of ways to get into financial trouble even with a cash-only lifestyle. It’ll take way too much space to cover it, so just read my thoughts here http://www.dollarversity.com/does-cash-really-kee

    Besides that, people need to realize that getting into debt or any other financial trouble isn’t about following a few simple tips. It’s about changing a mindset and learning how to makes changes to the way people live. Getting out of debt shouldn’t be a goal, learning to manage money money should be, with the debt elimination just a small step to that end.

    • Martin says:

      Eric, you are right. It is about changing the mindset and behavior, but in my opinion, if you use cash only, you cannot spend what you do not have (unlike with plastic, meaning the credit card). To spend more cash you have to willingly go and borrow it and that is the case when it can help you to change your mindset.

      • Someone didn’t do their assigned reading. It is very possible to get behind on obligations and into debt even with cash. My reference supports those claims and people’s comments substantiate it as well. See for yourself!

        • Martin says:

          Well, I didn’t have time yet to read your reference and I think I understand what you mean, but using cash is mostly referenced to spending when you spend money on what you want instead of what you need. Obviously if your bills such as mortgage, utilities and others get you behind, cash will not help you at all. But if after you spend your mandatory expenses and you have 800 left for the month for example for food and other discretionary expenses, then it is better to use cash rather than credit card, because it is then easy to go over that 800 limit with plastic than with cash. I am not advocating this method at all cost, I am aware that there are situations when this will not work. Some expenses have to be paid no matter what if you want to have a roof over your head and it doesn’t matter whether it is done with cash or online. However, it still shouldn’t be done with a credit card, because that can lure you into thinking that you have money to pay your bill while you don’t and should be looking at solution such as downsizing your house, refinancing, eliminating commuting in a car and walk or ride bike instead, etc.

  6. I like the keep it simple model! Hard to rack up debt when you are using cash.

    • I wouldn’t mind your input on my referenced article too Paul. Not to be argumentative, but just to show that debt & financial difficulty can occur to cash-only people as well

      • Martin says:

        It can occur and no one is arguing it. I like your original input that cash-only is not a cure all method and it won’t work all the time. I 100% agree with you that it is about a mind set of the person in debt (I have my own experience on that). I believe that some situations this method can help you to change it and this method definitely isn’t a stand alone method. Nobody says that when you switch into cash only, you suddenly will have no debt problem and become debt free.

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