How to Get Out of Debt (the fastest way)

^{Read time - 4 minutes / Disclosure} 

Today let's review the fastest way to get out of debt.

Having no debt can:

- Lower your stress.

- Grow your savings.

- Make it easier to invest.

Unfortunately, debt can be hard to avoid.

The Offers

After graduating high school, the offers to take on debt roll in:

- A car loan.

- A credit card.

- A student loan.

- A personal loan.

And while doing these things often feels normal.

Especially early on in life.

Things many people do.

It can become a trap.

Like most people, I was excited to graduate high school and start my life.

Getting a loan helped me buy my first new car.

Opening a credit card helped me start building credit.

Opening a 2nd credit card helped build more credit.

But somewhere along the way, everything went sideways.

And by age 29, I found myself drowning in debt.

$50,000 on credit cards.

Plus a $30,000 car loan.

The $80,000 Problem

Most people suffering from debt resort to:

- Paying the minimum.

- Taking out more loans.

- Using one credit card to cover another.

Things I also did.

Things I eventually realized just made everything worse.

As I ate a pint of Ben and Jerry's ice cream almost every night.

Gaining 15+ pounds while worrying about the huge mess I'd accidentally created.

Thinking that filing for bankruptcy was my only way out of $80,000 in debt.

I got an offer to work at Chase Bank as a banker.

Ironic right?

The guy with money problems helping other people with their money.

The Debt Snowball

Working in banking for 10 years forced me to get my money right.

And taught me tips, tools and money hacks I wish I knew sooner.

The tool that helped me get rid of $80,000 of debt fast is called the Debt Snowball.

Here's how it works in 4-steps.

Let's dive in.

1. List Your Debts from Smallest to Largest

Include everything except the house payment (if you have one).

The goal of the Debt Snowball is to pay off high-interest debt and house payments are considered low-interest debt.

Your list may look something like this:

 

Listing out your debt helps you get ready to get rid of it.

2. Make Minimum Payments on Everything But the Smallest One

After finding your smallest debt.

Make minimum payments on everything else but attack the smallest debt fiercely.

Example:

 

Paying the minimum gives you extra firepower to get rid of your smallest debt.

3. When the Smallest is Paid Off—Roll that Payment Into the Next Debt

Once the smallest debt is gone for good.

Continue making minimum payments on all other debts but attack the next smallest debt fiercely.

Example:

 

Getting rid of the smallest debt gives you extra money to attack the next smallest one.

4. Repeat Until You're Debt Free

Keep running the Debt Snowball system.

And as each debt is paid off, you'll have more money to attack the next one until they're all gone and you're debt free.

 

The Debt Snowball will help you pay off your debts in an organized way fast.

The bottom line

My biggest mistake when I was $80,000 in debt was that I didn't have a system to get rid of the debt.

So the debt just hung around.

Affecting my mood.

Affecting my relationships.

Affecting my general quality of life.

Finally, having a step-by-step plan to get rid of it changed everything.

If you're struggling with debt.

I feel your pain. It's a tough place to be in.

And I hope the Debt Snowball helps you get rid of it for good.

If you have no debt, or maybe you learned things the hard way like me.

Congrats on making it to the other side.

The journey is a rough one, but so worth it once you cross the finish line.

That's all for today.

See you next Saturday.