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The No-Nonsense Guide to Getting Out of Debt

Avatar for Gaye Levy Gaye Levy  |  Updated: August 1, 2022
The No-Nonsense Guide to Getting Out of Debt

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Let’s face it.  We live in a world fueled by debt and for many, having debt is an ordinary part of life,  For them, racking up the credit cards at Christmas and slowing paying them off while collecting massive interest is a way of life.  Many never pay them off.

From where I sit, it is understandable when people owe money for extremely large purchases like real estate or a reliable vehicle.  That makes sense, but these days, a great deal of consumer debt is lifestyle debt. Lifestyle debt is credit used to purchase clothing, go on vacations, and buy electronics. It is also debt incurred while keeping up with the Joneses, even when the Joneses are both doctors or lawyers with huge incomes while the rest of us work at far lower paying jobs or are retired.

No-Nonsense Guide to Getting Out of Debt| Backdoor Survival

You may be wondering why all of this talk about debt is on a preparedness website. Shouldn’t we be discussing beans, bullets, and band-aids?  Not always.  It is my belief that getting out of debt should actually be one of the top priorities for anyone interested in self-reliance.  And isn’t self-reliance what prepping is all about?

Becoming debt-free requires a lot of determination and stamina. It is my hope that this no-nonsense guide to getting out of debt will help you reach a whole new level of financial security.  Shall we begin?

How bad is it?

A 2013 report stated that the average American household was in debt to the tune of more than $225,000.  It gets worse – the average family also has less than $500 in savings. And worse still, 1 in 3 households have at least one debt in collections.

Add to this our floundering economy. Businesses are failing left and right, companies are downsizing, and hours are being cut. So not only do many Americans owe a vast amount of money, their income is on shaky ground as well.  According to Michael Snyder, the founder of The Economic Collapse Blog and the author of The Beginning Of The End and Get Prepared Now, an alarming 102.6 million Americans of working age do not have jobs right now.

With so much debt and so little savings, a job loss would not be an inconvenience for most families. Instead, it would be absolutely catastrophic.

How being debt-free can help

In a buy now, pay later society, most people don’t understand how precariously close to the edge they are with their finances. Every time you purchase something using credit instead of cash, you are increasing your monthly financial obligations. If something goes wrong, then suddenly your family will be in survival mode. The lower your monthly obligations are, the longer you will be able to survive.

If the primary earner in the household were to suffer a job loss or a a reduction in hours, chances are they would receive unemployment benefits while looking for a new position. But these benefits are only a fraction of what the person was earning before. If they were to suffer a debilitating illness, even those meager benefits would be unavailable.

At this point you are in survival mode.

In these situations, it is vital to be able to cut back spending to cover the absolute necessities, things like: shelter, food, medication, insurance, and utilities. What you have left over after those necessities is all you will have remaining to pay for things like debt. The lower your debt, the lower your financial requirements are when you get into survival mode.

If you are deeply in debt when such a situation occurs, it may be impossible to keep up with your payments. The next thing you know, bill collectors will be phoning and property will be getting foreclosed on or repossessed.  This is not a pretty situation and for all intents and purposes, can be a major life-changer that will take years to dig out of.

That is why next to remaining healthy and fit, there is nothing more important than debt reduction or debt elimination for a person who is concerned with preparing for the unforeseen.

Find out where you are

You might be saying “Okay, I get it.  What do I do now?”  The answer is that you need to figure out where you stand.  What are your expenses?

Compiling this information is not fun.  It actually can be downright painful. But, if you don’t know exactly where you stand financially, you cannot make a plan to bail yourself out (unless you are the US Government but that is another story).

What you need to do is is gather up all of your bills, bank account statements, and checkbook register.  On a piece of paper, track where your money is going.  List the following:

Car payments
Vehicle operating expenses (fuel, repairs)
Credit card and other debt payments
Telephone/Cell phone
Extracurricular activities for the kids or grandkids
Extracurricular activities for the adults
Dining out
School expenses
Recreational spending
Miscellaneous (anything that doesn’t fall into the above categories gets its own category or goes here)

Now, separate all of these into the following categories:

Essential expenses: These are the basics that nearly every family must pay for, like shelter, food, insurance, utilities, taxes.

Secondary expenses: These are the things that are nice to have, but not absolutely necessary, like cable, the internet, cell phones, a second vehicle – and they will not be the same for every family. For example, a friend of mine home schools and the program she uses requires the internet, making that payment an essential one.

Debt expenses: These are monthly payments that can be paid off altogether, removing them from the budget equation: credit cards, car payments, house payments, loans, lines of credit.

This will give you a clear picture of where you are and your family’s bare minimum for “operating expenses” – the essential expenses in the first category.  In a truly desperate scenario, that is the amount of money you must have to survive.

A quick guide to getting out of debt

Getting out of debt requires dedication and determination. You have to make a firm decision to limit your spending and to make some budgetary changes to dig yourself out of the hole.

The best method for getting out of debt that I know of is the “snowball method,” a technique promoted by debt-free living guru Dave Ramsey in his book The Total Money Makeover.

Here is the general idea:

1.) Write down a list of your monthly payments on debt, then organize them from lowest monthly payment to highest monthly payment.

2.) Take any extra money you might have on hand and pay off the debt with the lowest payment as quickly as possible. Just pay the minimum on all other debts.

3.) Once the lowest-payment debt is paid off, take all of the money you were paying on that debt and apply it additionally to the debt with the next lowest payment. For example, if your lowest payment debt was $18 a month, take that $18 a month and add it to the minimum payment on the next lowest debt.

4.) Once the next debt is paid off, take that payment and the first payment, and combine those as an additional payment on the next lowest debt.

5.) Rinse and repeat until you are debt-free.

As I mentioned above, you can learn about this in detail in Dave’s book, The Total Money Makeover.  I highly recommend it as a way to get control of your finances.

How to reduce your cost of living

Meanwhile, as you are digging your way out of debt, why not take a look at the secondary expenses on your list?  Perhaps you could free up some more money to apply to debt by ridding yourself of some unnecessary expenses.

In her article Personal Austerity: 12 Ways to Radically Cut Expenses, Daisy Luther wrote about seeing the writing on the wall when her company began to downsize. She moved to a cheaper house, got a cheaper car, and dropped her family’s expenses dramatically. Sure enough, her position was cut a few months later, but because her expenses were so low, it wasn’t catastrophic as it would be for many families. Here are her suggestions for cutting your expenses.

Ask yourself these questions:

What can you change about your life?
Where can you reduce expenditures by several hundred dollars monthly?

This is the point at which most people say, “I can’t.”  Most people don’t want to move to a smaller house, get an old car, or go without premium cable.  But this is where you can truly dig in and change your life.

As I have said before, everyone’s situation is different.  You may be locked into a mortgage on a huge house in a market that won’t even cover the balance of what you owe.  It could be the same with your vehicle.  Explore all of your options, though, because paying a few thousand dollars to get out from under it could be worthwhile.

Some people may have reached the point where they must begin to default on payments. In the most dire of situations, that too must be considered.  Of course I am not recommending that you blow off your obligations, but if you do, it is a personal choice.  (However, do consider the fact that large banks get bailed out by the government, and everyday people do not.)

Before making such a serious decision, be smart about it and be sure to discover all of the potential ramifications, such as repossessions, garnishing of bank accounts, and ruined credit.

Here are some cuts to consider:

1.  Move to a smaller house.  Contrary to popular belief, no child ever died because he or she had to share a room with a sibling.

2.  Relocate to a small town.  Is it worthwhile to commute to a job in the city from a smaller, less expensive location? This can give you the added opportunity of homesteading and providing for many of your own needs.  Click HERE to read about what you need to know before making such a move.

3.  Get rid of your late model year vehicle.  Look for a decent used vehicle that you can purchase with cash.

4.  Cut back to one vehicle or even no vehicles.  Sometimes public transit and your own two feet can provide all of the transportation you really need at a fraction of the price of owning a vehicle.  This varies by location.

5.  Stop using credit cards.  This goes for any type of lending system that requires you to pay interest.  Stop accumulating debt.

6.  Don’t eat out.  Limit meals out to no more than once a month or special occasions.  Even better, don’t eat out at all.  Dining out, even at a fast food place, is at minimum 4 times more expensive than the same meal prepared from scratch at home. (And far less healthy!)

7.  Look for free or low cost entertainment.  Consider a family YMCA or community center membership instead of gymnastics clubs or private tennis lessons if you need to enroll your kids in some activities. Go hiking, have picnics, explore parks, go to the library, and find out what’s offered for free in your home town. Learn to enjoy productive hobbies like canning, carving and needlework. Switch from cable to Netflix.

8.  Use the envelope method to budget for shopping trips.  For back-to-school shopping or Christmas shopping, decide how much you want to spend.  Put that money in an envelope.  As you shop, place each receipt in the envelope.  When the money is gone, it’s gone.  If there’s something else your child desperately wants, then they need to decide what item they’d like to take back to get it.  Be firm and stick to your guns.  This has the added benefit of teaching your children to budget.

9.  Reduce your monthly payments by cutting things like cable, cell phones, home phones, and/or gym memberships.  Look at every single monthly payment that comes out of your bank account and slash relentlessly.

10.  Shop using the stockpile method.  Shop only the sales and simply replenish your stockpile. Keep shelf-stable food on hand for unexpected financial crunches.

11.  Eat leftovers.  Have you ever stopped to think about how much food you throw out every month?  You can often provide a few “freebies” every month by carefully repurposing your leftovers.

12.  Stay home.  By spending more time at home, you will spend less money.  You won’t be grabbing a bottle of water, going through drive-thru for lunch or putting fuel in the car.  Learn to treasure you time at home with loved ones – it’s worth more than money.

This is not a comprehensive list – when you look at your personal expenditures,  other ideas will present themselves.

If you are being completely honest with yourself, what expenses could you cut? Just imagine the difference if you moved all of that money into reducing your debt.

Now, don’t get into this situation again

Once you have paid off your debt, it’s all too easy to get yourself into trouble again. For one thing, your credit score will improve dramatically, and those tempting offers will come rolling in.

Instead of buying things on credit, put away the monthly payment you would use to pay off your debt for those items (which will include interest) and sock that money away. Make it a personal rule to pay cash for everything. Squelch your desire for instant gratification and channel it into a desire to be debt-free instead.

Exceptions to the rule

As with most rules, there are a couple of exceptions.

Most of us do not have the wherewithal to buy property using 100% cash. Property can be a good investment, and often the payments are lower than rent.  You might even be lucky enough to purchase property with very little cash.

Even if you need to take on mortgage debt, property can be a good investment, and often the payments are lower than rent.  That means that if you find a great deal on real estate, this would be a reasonable exception to debt-free living. Of course, you should also be certain to pay it off as quickly as possible!

Another exception in certain situations is an automotive loan, but this is not a valid exception in all cases. If you live near work and school, and other transportation is available, you don’t have to have an expensive new vehicle. On the other hand, if you are a commuter and the primary breadwinner, a reliable vehicle is very important to have.

Weigh the pros and cons carefully before going into debt for transportation, and realize that in some cases it is worthwhile. Again, pay the loan off as soon as you can, to reduce the amount of interest you pay and to relieve you from having that debt hanging over your head.

The Final Word

Debt-free living can change your life. I know because I have been debt-free for over twenty years.  It is what I imagine it is like to get out of prison. Debt freedom, as I like to call it.

Instead of sticking your head in the sand or feeling stressed every time you check your bank account, by working toward becoming debt-free, you can begin to save money for a rainy day.  By living frugally, purchasing things only when they are within your means, and turning your back on debt, you will create a peace of mind that no brand new “whatchamacallit” purchased on credit can ever match.

This is the year to embrace frugality, one step at a time.  Let working toward becoming debt-free be the very first step.

Enjoy your next adventure through common sense and thoughtful preparation!

If you enjoyed this article, consider subscribing to email updates.  When you do, you will receive a free, downloadable copy of my e-Book, The Emergency Food Buyer’s Guide.

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Below you will find the items related to today’s article as well as some budget-friendly preps that really do work.

The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness:  This is the simplest, most straightforward game plan for completely making over your money habits. It is based on results, not pie-in-the-sky fantasies.  I personally know a number of people who have conquered debt by using Dave Ramsey’s plan.

The Prepper’s Financial Guide: Written by Jim Cobb, this is the book you want to learn about a  disaster-proof investment strategy to ensure stability and security before, during and beyond a marketplace meltdown.  Read more in the Book Festival article Prepper Book Festival 8: Preppers Financial Guide.

The Pantry Primer: A Prepper’s Guide to Whole Food on a Half-Price BudgetWritten by my friend and colleague, Daisy Luther, Pantry Primer is a detailed compendium of all things food storage. It is written by a prepper, for a prepper.

Penny Pinching Prepper | Backdoor Survival

The Penny-Pinching Prepper: Save More, Spend Less and Get Prepared for Any Disaster :  There is nothing not to like about this book.  Written by Bernie Carr, is packed with inexpensive DIY projects for keeping your family safe in any worst-case scenario.

Emergency Mylar Thermal Blankets (Pack of 10): I do believe in helping my neighbors in the community so a supply of these will be handy to hand out to those in need. You will be surprised at how warm these will keep you. Be sure to test one out in advance so that you have the confidence to trust the blanket in an emergency.

iRonsnow Dynamo Emergency Solar Hand Crank Self Powered AM/FM/NOAA Weather Radio, LED Flashlight, Smart Phone Charger & Power Bank: This unit has it all in one portable package.  It can be also be powered using 3 AAA batteries.  This is a great value.

Maximal Power FC999 Universal Battery Charger: This nicely built charger will charge charge AA, AAA, C, D, N, 9V, Ni-MH, Ni-CD, and Alkaline batteries. It has an LED display so that when you first put a battery in the charging bay, you know whether it is viable for charging or simply bad and ready to go back to the recycle box.

Maximal Power battery charger from Amazon

Yes it really works, even under solar power.  Read about in this article: How to Recharge Alkaline Batteries.

LifeStraw Personal Water Filter:  The LifeStraw is considered the most advanced, compact, ultra light personal water filter available. It contains no chemicals or iodinated resin, no batteries and no moving parts to break or wear out. It weighs only 2 oz.  making it perfect for the prepper. For more information, see my LifeStraw review.

4 Inch Premium Glow Sticks – Assorted: These 4” glow sticks are fantastic!  Each stick glows for 8-12 hours, and comes with a pre-attached hook and lanyard.  They are well priced and hold up well when packed around in a pocket or handbag.  For more information about glow sticks and chemical lighting, read 10 Reasons to Add Glow Sticks to Your Survival Kit.


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17 Responses to “The No-Nonsense Guide to Getting Out of Debt”

  1. I was so glad when we were able to go through Dave Ramsey’s Financial Peace University, and paid for our 2 daughters and sons-in-law to do the same. We’ve had no debt but our mortgage for years, and paid off that mortgage this past fall. WE’RE DEBT-FREE! I just wish we had learned all that stuff 20 years ago!

  2. One of the best articles on this topic that I’ve read lately; I also agree with the commenter who recommends Thanks to Ben Jones and his commenters, my eyes were opened to what was going on ten years ago. So in 2007, we sold our paid-off McMansion and rented for several years before buying something much smaller and cheaper in a different state, downsizing our lives in the process. BTW our old house is now worth half of what it was worth when we sold it!

    Please, everyone, teach these principles of debt-free living to your children, too. They may not listen at first, but you must plant that seed.

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