Articles, Borrow, Credit Cards, Finance, Getting Out of Debt

How To Get Out of Debt Fast in 2024 in [3] Simple Ways

Written By: Rick Orford
Reviewed by: Mike Reyes
Last Updated December 30, 2021

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Rick Orford displaying ways to get out of debt by cutting credit cards

Are you looking for ways how to get out of debt fast? In this article, I’m going to talk about the 3 steps on how you can pay off your debt fast, starting today. For sure, becoming debt-free is a significant part of becoming financially independent.

Also, I’m going to show the #1 thing about debt that is sure to keep you poor. Further, I’ll give you a bonus method to turbocharge your plan. I promise if you skip through it, paying off your debt will take longer. By the end of the article, you’ll have a clear, easy to follow plan to get out of debt. And, you can start it today.

The fastest way to get out of debt is to first, increase your monthly surplus of income. You do this by cutting expenses and increasing your income. Then, use the monthly surplus of income to pay off your debt using the debt avalanche method.

Getting Serious About Getting out of Debt

You might be wondering, what do I know about paying off debt? Well, let me tell you. When I was younger, I had what felt to me, an endless amount of debt. I got my first credit card at 18, then another came, and another. And I’d get automatic limit increases, and sometimes I’d call in to get more increases. 

And despite working harder, and making more money, my credit card balances seemed to never go away. It’s true! Every time I got a raise, I’d go shopping and come home with stuff I hardly ever used or went on expensive vacations. Once I even bought a new truck! I always spent more than what I made, bought things I couldn’t afford, and started being late paying my credit cards. Indeed, it turned in to financial stress that I had to learn to live with.

US Household Debt

Are you in an imperfect financial situation? Do you feel like your credit card balances are never going down? Or you’re always trying to catch up? If so, you’re in good company. In the US, consumers aged 35-44 are carrying an average of $133,100 in debt, including cars, credit cards, mortgages, and other forms of debt. It is no wonder Americans are looking for how to get out of debt fast. But, it is possible! 

Step 1: Make a Budget

The first step to paying off your debt fast is to learn how to make a budget. It doesn’t have to be difficult. Rather, a budget is a plan that gives each dollar you make a “job”. Yes, every dollar you make should have a job. Whether it’s to pay the rent, pay down debt, or put it into savings, it needs a job.

You can download my budget spreadsheet for you to follow along with.

The Different Parts of a Budget

a millennial making a budget

So, as you can see on the “Start Here” tab, the budget is divided into three parts. Income, Needs expenses and wants expenses.

Income is the money you earn, and expenses is the money you spend.

Needs expenses are things that you need to survive, like paying the rent, utilities, food (not restaurants), etc.

Wants expenses are things that you want. Like shopping for new shoes, or going out to restaurants, or expensive vacations.

I’m not saying you can’t have any of it. But, if you’re wondering how to get out of debt fast, you’ll first need to have a hard look at your budget. 

I pre-filled three months of Income & Expenses, in Columns C, D, and E. For income, list all your income sources. If you have a day job, or money coming in each month, this is where you put it. Even if the amounts are different each month, no problem. List the amounts for each month, and what they’re for.

Then, do the same for the expenses. You can find your expenses by looking at your bank account for your debit card purchases. Oh, and don’t forget, you’ll find other expenses on your credit cards. And, perhaps even on your line of credit, if you use it for day to day spending. So go ahead and open up all those statements and start adding things up!

Then, as you enter the numbers, you’ll see the averages in column B. For ease, I set it to round up the amounts. Remember, these three months should be the last whole months of your income and expenses. So, if you’re watching this article in mid-April, start with January, February, and March.

A little more about needs and wants expenses

Now, when it comes to structured loan payments, you’ll list the monthly payment in the needs section. Structured loans are loans like a mortgage, a student loan, or a car payment. And, with credit cards and lines of credit, those that have variable monthly payments, include the MINIMUM payment in the needs section. You might have to estimate it, or round it up. But that’s okay. For instance, if you paid $400 on your credit card, but the minimum payment was $50, count the $50 – not the $400.

Then, if you spent $300 on clothes, write $300 in the clothes section. And if you spent $200 on restaurants – well, you get the idea. Do this for the past three complete months. And, when you’re done, you’ll have an average for each expense in the average column. At then, at the bottom of the spreadsheet, you’ll find your monthly income surplus – or, if it’s a negative number, a deficit. Then, look at column B. These are your averages that become your target. Copy and paste the amounts to the family budget tab, and give yourself a pat on the back, because you now have a budget!

By the way, what was the category you spent the most on? Was it travel? Or shopping? Let me know in the comments below.

Step 2: Increase your Monthly Surplus of Income

Now that you have your budget set up, we need to look at ways to increase your monthly surplus. You see, the easiest way to get out of debt fast is to increase your monthly surplus of income. Then, use that surplus to pay off your debt. Remember, your monthly surplus is the money that’s left over at the end of the month. It’s as simple as that. And increasing your monthly surplus is something you can start working on right now!

Go for the low hanging fruit

So, let’s go back to the spreadsheet, and take a closer look at your family budget tab. The easiest way to increase your monthly surplus, let’s call it the low hanging fruit, is to cut the wants side of your expenses.

Remember, needs are things like food, the rent or the mortgage, and utilities like electricity. And wants are all the things that you don’t need, like restaurants, clothing, or holidays. These are things that will keep you in debt. And, the whole purpose of this article is learning how to get out of debt fast!

My favorite way to start cutting expenses is to dive right in and slash the “wants” side. Start with Shopping and Restaurants. Start by slashing those expenses by 50%. So, if you budgeted $300 for clothes, make it $150. And if you budgeted $200 for restaurants, put in $100.

For instance, in this example, someone spent nearly $675 in one month on restaurants. Take the average, and cut it in half. And keep going through each expense category. Now, there’ll be some you can’t cut, like your Netflix subscription. So, keep it. But, take the $16 out from another category.

Related read: How to Sell a Structured Settlement

Ways to be successful cutting the budget

Then, think about ways you’ll be successful in cutting your budget. For example, could you bring food to work, or make your coffee at home, and bring it with you outside? And could you not go shopping for the next little while? If you find it difficult, ask yourself a couple of questions the next time you go shopping. “Do I REALLY need this?” and “Can I live without it?”

Adding things up

millennial counts his money at the end of the month

So, what does your surplus look like now? Far better than the “Start here” tab, right? This is the money you get to use to get out of debt fast! Are you getting excited yet? I know I was when I started learning about it!

So, let’s build on that excitement. Let’s get you even more money at the end of the month, so you can get out of debt even faster! Here’s what you do.

After you’ve entered your income, expenses, and cut your budget, look at ways to increase your income. Yes, now it’s time to make more money. And, instead of spending it on things you don’t need, now you can use that money to pay off your debt even faster.

For example, you can ask for a raise, or look for a better job. Or, you can start a side hustle? A side hustle is a part-time job that you can do in your spare time to make more money. It’s not forever. It’s temporary, until you get your debts paid off because remember, this article is about how to get out of debt fast.

Related Read: The best side hustles that can add an extra $1000 a month to your surplus.

All Debt is not Equal

Now, remember earlier, I told you about the #1 thing about debt that’ll keep you poor? Well, here it is. Let me be the first to tell you, it’s so important to know the difference between good debt, and bad debt. So, if you have bad debt, you have to get rid of it, as fast as possible. I mean, debt on its own isn’t terrible. When used correctly, good debt can be an incredible wealth-generating tool that pays you back for a lifetime.

Bad Debt vs Good Debt

High-interest debt, for example from credit cards with 20, 25% interest, works against you. High-interest debt needs to get paid off as fast as possible if you’ll ever get ahead. Remember, High-interest debt keeps you poor.

Low-interest debt, however, like debt that’s secured by an asset, such as your home, or an investment, isn’t as bad. It’s not as bad because you can sell the asset to pay the debt. Of course, if the asset is worthless, the loan is bad debt, not good debt.

For example, lets say you have a car and a car loan. If you owe more than your car is worth, the loan is bad debt. And the same can happen with a home or an investment. If you borrow to buy something of value, it’s important to protect its value, as much as you can.

Step 3: Give your Surplus of Income a Job

Now, so far, in this article, you’ve learned the first two major steps to paying off your debt fast. Step 1 was creating a budget and, and step 2 is increasing your monthly surplus of income. Now, remember I mentioned we need to give that surplus income a job? I’ll get into that now because there are two ways to use your monthly surplus to pay off that debt as fast as possible.

In the example on my spreadsheet, you can see I’ve listed a mortgage, a car loan, a line of credit, and two credit cards. Now, pay close attention to the balances and interest rates. You see, credit card #1 has a $6,000 balance at 20%, and credit card #2 has an $8,000 balance at 26%. Now, we need a plan to pay them off because the interest rate is so high. But which one do you pick first?

By the way, what is the craziest interest rate you’ve seen? I’ve seen some crazy interest rates, but, I’d love to know what you’ve seen. Let me know in the comments below.

The two fastest ways to pay off debt

When it comes to learning how to get out of debt fast, there are two schools of thought. One is the debt snowball method, and the other is the debt avalanche method. I’ll explain both, and you can decide what version works best for you. With the debt snowball method, the goal is to pay the debt with the lowest balance. As for the other accounts like cards, and lines of credit, make the minimum payment. Don’t forget, the minimum payment gets listed in the needs section of the budget.

Debt Snowball Method
debt snowball method

With the debt snowball method, you’d start paying down credit card #1 with your monthly surplus because Credit card #1 has the lowest balance. Paying off this $6,000 debt would give you the quickest win. Then, after that debt is paid off, I’d move on to credit card #2, because it has the next lowest balance. And for sure, your surplus will increase. Then, you can use all the extra money you’d be using to pay off the first credit card, to pay off the second.

Paying off the account with the lowest balance means you get a quick win, and will get out of debt faster. It builds confidence, and I think you’ll more than likely stick with the program. Why not give yourself a quick win?

Now, you might be asking yourself, wouldn’t it make better sense to pay off the debt with the highest interest rate first? I know I did when I was first learning about this. Well, if you did, you’re not wrong! If the debt snowball method isn’t right for you, my bonus tip is to use the avalanche method to get out of debt. The debt avalanche method provides a mathematical, faster way to pay off your debt.

Debt Avalanche Method

Now, the debt avalanche method is similar to the debt snowball method. With the debt avalanche method, you pay off the debts starting from the one with the highest interest rate. Then, after the first one is paid off, you move to the next account. So, in this case, you’d focus all your attention by paying off credit card #2 with all your available surplus. Indeed, it’s because it has the highest interest rate. And like the debt snowball method, you make minimum payments on all your other debts.

Whichever way you choose, before you know it, you’ll be on top of your game, and debt-free. But, what do you do about low-interest debt, like under 6 or 7%? Well, if it’s a structured loan like a mortgage or a car loan, you can pay it monthly as the loan requires. The loan payment becomes an expense on the needs side of your budget. And, you can focus on those after you’ve paid off all your high-interest debt. Or, you can use the extra money to fill up your emergency fund, or use it on something fun.

Final thoughts: How to Get Out of Debt Fast

So, we’re coming to the end of this article. I guess we’ve covered pretty much everything we need about paying off debt. And the faster you start, the faster you’ll be on top of your game, and sleep better at night because you’ll be debt-free.

You’ll need to keep following the program if you’re going to be successful in getting out of debt in 2024. If you make up excuses and get lazy, you’ll fail. As a result, stick with the program. And, if you need any help or a nudge along the way, feel free to drop me an email.

By the way, in this article, “How to get out of debt fast in 2024“, which tip did you like the most? And how are you going to put it in to play? Let me know in the comments below, and I’ll get back to you! 


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