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Eliminating Debt: 5 Things You Need To Do Right Now If You Have Debt

If you owe money you need to work on eliminating debt.

Eliminating Debt

Having debt looming over you does you no good, costs you money and adds unnecessary stress to your life.

Before we go further I want to address the whole “I need a good credit score” fear that most people have.  You only need a good credit score if you are looking to gain debt.  Think of your credit score as the key to being in debt.

Credit scores are used for everything from getting loans and mortgages to jobs and utilities.  If you have a low score because you have little to no debt that is a much better place to be than being $50,000 in debt and paying $200,000 in interest because you can only make minimum monthly payments.  If you know your scores are being checked for something other than securing a debt, tell them upfront (speak to management if you have to) that you have little or no debt….ask them to look at your debt to income ratio and not just your FICO score.  For more on not worrying about your FICO score read this post on credit score importance.

Now, where were we….oh yes! Key actions to take to start eliminating debt.

#1 – Create a Working Budget

You can’t start the process of eliminating debt if you don’t have a working budget.  Often times we use credit cards because we don’t have cash to pay for unexpected expenses.  We also reach for them because we failed to plan ahead for expenses that we should have planned for.  New tires for the van is not an unexpected expense.  Every person with a car will eventually need tires and that can be accounted for in  budget.  The 2-year old refrigerator that dies days after the extended warranty – that is an unexpected expense but it can still be accounted for in a budget.  For more in depth information on setting up a budget you can read Part 1: In the Beginning and Part 2: Establishing Budget Categories.

If you need help budgeting Money4LifeCenter is an awesome resource.  We use the Mvelopes budgeting program is a free online software that can help you budget and monthly coaching is available.   We are former coaching clients and I am now a financial coach.  I can’t tell the difference having a budget and accountability has made in our lives.  We went from over $28,000 in debt in January 2011 to $4,500 as of June 2013.  Best decision ever!

#2 – Make a Family Commitment to Pay Cash

Getting out of debt is so much easier when the whole family is on board.  Children who are used to getting whatever they ask for (even if it’s not unreasonable) need to see you saying no and making sacrifices to get out of debt.  They need good stewardship to be modeled to them not just told to them.

A note to the lopsided couples – If you are on board but your spouse isn’t you can still work toward eliminating debt.  It took probably 6 months of me making changes that I could control before my husband got on board with budgeting and eliminating debt. Prayer is your biggest ally in this department.

#3 – Make Necessary Cuts, Even the Hard Ones

I often talk about the seasons of life we go through.  If you owe money and are committed to eliminating debt you may be headed to a season of sacrifice.  This is not bad place.  This is a season where you can grow and gain true freedom from things.  Cutting cable or satellite might mean memorable family game nights.  Not going on an expensive vacation might mean three days unplugged at a local campground.  Trust me, you will not regret it.

As I mentioned in step number two, your children need to see you living out good stewardship and that includes hard choices.  It doesn’t mean you’ll never have cable again or will never go to the beach it is just a season. Eliminating debt is like having a newborn baby.  The season of sleepless nights with the baby seem like they will never end but when they do you’ll realize how quickly it went and how good it feels to be on the other side of that season.

# 4 – Cancel Your Cards

I have seen some people struggle so much with this step.  Even once they have made the commitment to not use them they just can’t let them go.  For most people this is a security thing.  It’s like your child’s favorite bear or blankie.  At a certain age they know they really don’t need it but they can’t part with it for security. They talk about getting rid of it but when that moment comes they can’t.  I’ve coached clients that have had a hard time getting rid of credit cards but believe me, you can do without them.

Once you’ve got a budget and made the cash commitment actually getting rid of the cards is much easier.

If you just can’t cut them up give them to a trusted friend or family member to keep in their lock box.  Someone who has the right to interrogate you when you ask for them.  Remember your goal is eliminating debt not getting a new patio set so give your credit card holder the right to make you explain, in detail, why you need your card back.

#5 – Remove Credit Card Numbers from Online Merchant Sites

Paypal linked to your checking account is your friend. This way you are still spending real money you actually have and not extending more credit.  Unlink Paypal from an actual credit card and link it to you Visa check card if you must. This is how ours is set up.  Also remove any actual credit cards from sites you purchase from frequently.  It’s too easy to select it without thinking about it.

Are you still using credit cards? What is holding you back from getting rid of them?


A note about Money4Life Coaching: I am not compensated for the links to Mvelopes in this post.  Coaching is available and if you would choose to ask for me as your coach I would then be compensated. If you’d like to receive coaching from me please request Danielle Tate as your coach.

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  1. Riversana says:

    These are excellent words of advice, thank you.

  2. I am one of those who can’t let the card go. We pay it off at the beginning of the month but at the end when the money starts to run out, out comes the card. It is a vicious cycle, but I can’t let my kids go without food or some item they need for school. It has gotten worse since my sons father stopped sending support ($534/mo) and right before that I quit my job ($675/mo). We were in a good spot, I thought for sure I would keep getting support and my kids needed me at home more than that place needed me. My husband still likes to spend like we are living on three incomes! Lets say we need help now! And that is an understatement! I will keep working toward the goal (a farm), even if not everyone is on board with cutting expenses! I am teaching my children about money too! Here is a fine example, they wanted pet rabbits. I told them if they wanted them, they had to use their own money. So my 9 year old daughter bought stuff to make cookies and she sold them at Farmers Market! She make enough to buy 3 rabbits, cages, water containers, 50# of food and a small bale of hay! She made a sign with how much the cookies cost and the reason she was selling cookies! People love to help children! She will make all the money back at the fair next year!

  3. Will you please contact me with more information on becoming a financial coach? Helping others with their finances is my passion. I am working on my Masters in Family Financial Planning. But I discovered that I don’t want to do financial planning as much as I want to do coaching and counseling in finances. How did you get involved with Mvelopes and how may I receive more information?
    Thank you!!


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  2. […] over you does you no good, costs you money and adds unnecessary stress to your life. There are 5 Things You Must Do If You Have Debt. ~Danielle from More Than Four […]

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