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Get out of debt now! 3 powerful strategies
Are you using credit cards to make ends meet?
Are you living paycheck to paycheck? Get out of debt now!
You’re not alone. In today’s economy, managing money can feel like a constant uphill battle. Rising costs for groceries, rent, and utilities are squeezing budgets tighter than ever. According to a recent survey by Debt.com1, nearly 69% of Americans say they’re living paycheck to paycheck. That kind of financial stress doesn’t just affect your wallet, it impacts your mental health, your relationships, and your ability to plan for the future. You need to get out of debt now!
One of the biggest culprits? A lack of budgeting.
Without a clear plan for your money, it’s easy to fall into the trap of overspending, relying on credit cards, and watching your debt pile up. In fact, according to CardRates.com2, credit card balances have surged by 61% over the past decade, with the average individual balance now sitting at $6,473, up from $5,589 in 2021.
You need a plan for your money, otherwise it disappears
When you don’t have a plan for your money, it can disappear quickly. Bills, unexpected expenses, and impulse purchases can add up faster than you realize. Without a clear strategy, it’s easy to lose track of where your money is going, leaving you feeling stressed and uncertain. A budget helps you take back control. It’s not about saying “no” to everything, it’s about understanding your priorities and making sure your spending aligns with what truly matters to you.
Most people say they have a budget, and they report using it regularly. However, just based on the increases in credit usage it’s apparent that many people aren’t sticking to their budget. A survey conducted by NerdWallet3 showed that around 74% of people said they have a budget, but an astounding 84% of people reported that they often exceed their budget. That’s backed up by a survey conducted by Debt.com4. Their data determined that less than 25% of people actually stick to their budget.
Key Take Aways
But here’s the good news: you can take back control. Create a budget and get out of debt.
A budget isn’t about restriction, it’s about empowerment. It gives you clarity, confidence, and a roadmap for reaching your financial goals. Whether you’re trying to pay off debt, build an emergency fund, or simply stop feeling anxious every time a bill arrives, budgeting is the key.
In this blog, I’ll walk you through three powerful strategies to get out of debt and start saving money. These strategies are simple to implement and proven to work:
- The Create a Balanced Budget – Create a budget that helps you plan every dollar for success.
- The Set achievable Financial Goals – Set Financial Goals using the Smart Goal Framework.
- The Debt Snowball – Learn how to pay off debt quickly using the Debt Snowball Strategy.
Get the Monthly Bill Payment Checklist now!
To help you take action, I’ve created a practical tool to help you get started: the Monthly Bill Payment Checklist book. These easy-to-use budget books include everything you need to stay on track and include the following:
✅ Financial Goals Worksheet
✅ Annual Spending Tracker
✅ Monthly Budget Tracker
✅ Monthly Spending Tracker
✅ Debt Tracker
✅ Savings Tracker
✅ Debt Snowball Spreadsheet
The Monthly Bill Payment Checklist contains everything you need to stay organized, create a budget, build an emergency fund and get out of debt. The examples used in this blog are from The Monthly Bill Payment Checklist.
Let’s dive in and start building the financial freedom you deserve.
- Monthly Bill Payment Checklist Color $10.99
- Monthly Bill Payment Checklist B&W $7.99
The Story…
Several years ago, I worked with a driven entrepreneur, let’s call him Max (not his real name), who owned a growing chain of quick service restaurants (QSRs). His business was booming. He was opening two to four new locations every year, fueled by a mix of term loans and a sizable line of credit. On paper, it looked like a textbook success story.
But behind the scenes, cracks were forming.
Max had broken key terms of his loan agreement, technical stuff involving collateral and cash flow requirements that banks use to manage risk. In short, he was expanding too fast without paying down debt, and the bank took notice.
The real issue, though, was Max’s lifestyle.
He liked to live large: a sprawling new home, luxury cars, a sleek office building, and first-class travel. He couldn’t understand why the bank was capping his compensation and putting the brakes on his restaurant growth. After all, the QSRs were popular and profitable. But Max was spending more than the business was earning, both professionally and personally, he was a slave to his debt and didn’t even realize it. And when it comes to managing money, Cash is King.
Max had big dreams. He wanted to franchise his brand and scale nationwide. But he refused to bring on partners or investors. He expected the bank to fund his expansion and his lifestyle with no questions asked.
Eventually, the bank drew a hard line. They demanded repayment on his $2 million line of credit and froze further expansion until his cash flow met the terms of the loan agreement. Max was furious. He saw it as punishment, not a wake-up call.
The truth? Max didn’t have a growth problem. He had a budgeting problem.
He wasn’t managing cash flow, not for the business, nor for himself. After many heated conversations, I finally convinced Max to hear me out. I asked him to consider a different path: one built on budgeting, discipline, and long-term financial freedom.
Stay tuned for the rest of the story (continued below)…
Three powerful strategies to getting out of debt.
As a former banker, I understand the good and bad types of debt. Good debt is the type that is used to finance business operations with the goal of increasing profitability. The idea is that you can increase your wealth by using a combination of bank debt and cash flow from your operations. The net effect is positive because the loan allows your business to buy additional equipment or open new locations, thereby increasing revenue and profitability. Individuals can utilize this same tactic, as long as their investment earns more than the cost of funds. The key is managing your cashflow through a balanced budget.
Bad debt is pretty obvious; it’s credit card debt from taking luxury vacation that you really couldn’t afford to pay for in cash. Bad debt is any type of loan, that stresses your personal cashflow. It can be a combination of little things, like getting the newest iPhone on a payment plan from your mobile company. Big ticket items like buying a car can also be good or bad debt. How much are you spending as a percentage of your income?
Let’s discuss three strategies to getting out of debt.
- Set Financial Goals. I recommend utilizing the SMART Goals framework: Specific, Measurable, Achievable, Relevant, and Time Bound.
- Create a Budget. There are many types of budgets, like the Zero-Based Budget, or the 50/30/20 Budget or the Cash Envelope Budget. They all have different approaches to the same thing: The amount of money you spend cannot exceed the amount of money you earn.
- Pay Off Debt. Once you know your financial goals and create a budget then you can start paying off debt. I recommend using the Debt Snowball Strategy or the Debt Avalanche Strategy. Both are very effective.
Let’s begin. Below is a simple, yet effective approach to both goal setting and creating a budget. Because financial goals go hand in hand, with your budget, I’ve simplified the process.
A Step-by-Step Guide to creating a budget and setting your Financial Goals
Step 1: Start with the Basics
Before you can effectively plan for the future, you need a clear picture of your current financial situation. Begin by listing all of your monthly bills and living expenses. This might include rent or mortgage, utilities, groceries, insurance, loan payments, entertainment, and any other costs you incur regularly.
- Action: Create a list or use a spreadsheet to record each expense category, along with the average amount you spend each month. Be honest and thorough, getting every regular and semi-regular cost down in writing is crucial for accuracy. You can download the FREE Monthly Budget Worksheets here.
- Action: Review your spending habits. Write down three simple goals related to your spending habits. You can use the SMART Goals Framework to help you define your goals more clearly.
- Get all of these worksheets and more my new book The Monthly Bill Payment Checklist
- $10.99 Color
- $7.99 Black & White
Step 2: Tally Up Your Income
Once you have a handle on your expenses, turn your attention to income. Include all sources: salary or wages, side gigs, rental income, or any other money you receive on a recurring basis.
- Action: Add up all your income streams and note the total monthly amount. This number represents the “fuel” you have to cover your expenses and work toward financial goals.
Step 3: Analyze Your Cash Flow
Cash flow is simply the amount of money flowing in (income) compared to the amount flowing out (expenses). Understanding whether you have surplus cash at the end of the month, or if you’re coming up short is essential for goal setting.
- Action: Enter all of your monthly spending categories from the Monthly Spending Tracker into the Monthly Budget Tracker.
- Action: Subtract your total monthly expenses from your total monthly income. If the result is positive, you have money left to save, invest, or pay off debt faster. If it’s negative or very close to zero, you’ll need to find ways to increase income or reduce expenses.
Step 4: Identify Your Financial Priorities
Everyone has different financial goals. Some common ones might include building an emergency fund, paying off credit card debt, saving for a home, or investing for retirement. Reflect on what matters most to you and your family at this stage of life.
- Action: Write down a few short-term goals (e.g., saving $1,000 for emergencies within three months) and a few long-term goals (e.g., saving for a down payment on a house or reaching a certain amount in your retirement account).
Like what you’re seeing so far?
Available now: The Monthly Bill Payment Checklist
- $10.99 for the full color workbook
- $7.99 for the black & white workbook.
Not ready to buy? Get these worksheets for Free
That’s right. Download these monthly bill payment worksheets for FREE. These Microsoft Excel worksheets will help you create an effective budget.
Step 5: Align Your Cash Flow with Your Goals
Now that you know where your money goes and what you want to achieve, it’s time to make your monthly cash flow work for you. Look at the surplus you calculated or examine how you can create one by trimming unnecessary expenses.
- Action: If you have surplus cash, decide how to allocate it. For example, put 50% of the surplus toward debt repayment, 30% into savings, and 20% toward investments or future goals.
- Action: If you don’t have surplus cash, identify which expenses you can reduce. Perhaps you can find cheaper insurance, cut back on dining out, or sell items you no longer need to increase your monthly wiggle room.
Step 6: Set Specific, Measurable Goals
Vague intentions won’t help you track progress or stay motivated. Instead, set concrete targets. For example, “Save $100 from each paycheck for three months to build a $600 emergency fund,” or “Reduce credit card debt by $200 per month until it’s fully paid off.”
- Action: Break down each financial goal into actionable steps and assign deadlines. Use a calendar or reminders on your phone to prompt you to reassess or celebrate milestones.
Step 7: Monitor and Adjust Regularly
Your financial situation and priorities may shift over time due to changes in income, unexpected expenses, or evolving life goals. Make a habit of reviewing your finances monthly or quarterly. Update your expense and income figures, track your progress toward each goal, and make adjustments as necessary.
- Action: Schedule a recurring check-in, maybe on the first of every month, to update your numbers, see what worked, and decide if you need to modify your approach (e.g., if you got a raise, you might allocate more toward saving; if your car breaks down, you may need to adjust your timeline).
By following these seven steps, you’ll create a budget that not only helps you manage your money but also helps you get out of debt. It sets you on the path to achieving financial freedom. The tools outlined in this blog such as trackers for expenses, savings, and debt, will make the process more accessible and rewarding. Not only that, but these trackers are also available for FREE, just click below.
Paying Off Debt: The Key to Financial Freedom
Debt can weigh heavily on your finances and mental health. Using a focused strategy can help you eliminate debt faster and regain control. Getting out of debt is liberating, it’s the path to financial freedom. Below I outline the basic steps to paying off debt and two rapid repayment strategies that you can use to become debt free in a relatively short time frame.
Steps to Pay Off Debt
- List Your Debts:
- Include all debts, such as credit cards, student loans, and car loans.
- Note the balance, interest rate, and minimum payment for each.
- Choose a Debt Payoff Strategy (See below for a more detailed explanation about each strategy.
- Debt Snowball: Pay off smaller debts first for quick wins and motivation. This strategy is best for quickly improving your monthly cash flow.
- Debt Avalanche: Focus on high-interest debts first to save money on interest. If your cash flow is sufficient, this strategy can lower your overall interest expense.
- Pay More Than the Minimum:
- Allocate extra funds to the debt you’re targeting while continuing to make minimum payments on others.
- Avoid New Debt:
- Freeze credit card usage until you’re back on track. Don’t take out any new loans. Imagine your life with no debt hanging over you and a savings account that contains enough to pay for a new car.
- Remember debt is the opposite of wealth.
Debt Snowball Strategy – get out of debt
The debt snowball strategy focuses on paying off debts in order of smallest to largest balance, regardless of the interest rate.
How It Works:
- List all your debts from the smallest balance to the largest.
- Make the minimum payments on all debts except the smallest.
- Put any extra money toward paying off the smallest debt.
- Once the smallest debt is paid off, roll the amount you were paying on it into the next smallest debt.
Example:
| Debt Type | Balance | Interest Rate | Minimum Payment |
| Credit Card A | $500 | 15% | $25 |
| Credit Card B | $2,000 | 18% | $50 |
| Car Loan | $10,000 | 4% | $250 |
Example Explanation: Pay off Credit Card A first. Once it’s gone, add the $25 minimum payment (and any extra) to the $50 payment on Credit Card B. Repeat the process until all debts are eliminated. By focusing on paying of the smallest debts and rolling those payments into the next smallest debt you eliminate debt quickly.
Benefits: Provides quick wins and emotional momentum by paying off smaller debts first. Keeps motivation high, as you see progress quickly.
Drawbacks: May cost more in interest over time since it ignores interest rates.
Debt Avalanche Strategy – get out of debt
The debt avalanche strategy focuses on paying off debts in order of the highest to lowest interest rate, regardless of the balance.
How It Works:
- List all your debts from the highest to the lowest interest rate.
- Make the minimum payments on all debts except the one with the highest interest rate.
- Put any extra money toward paying off the debt with the highest interest rate first.
- Once the highest-interest debt is paid off, roll that payment into the next highest-interest debt.
Example:
| Debt Type | Balance | Interest Rate | Minimum Payment |
| Credit Card B | $2,000 | 18% | $50 |
| Credit Card A | $500 | 15% | $25 |
| Car Loan | $10,000 | 4% | $250 |
Example Explained: Focus on Credit Card B first since it has the highest interest rate. Once Credit Card B is paid off, move to Credit Card A next, then the Car Loan. The Debt Avalanche focuses on paying off debts with the highest interest rate. It will reduce your overall interest expense and payoff your debt quickly.
Benefits: Saves money on interest by tackling high-interest debts first. Leads to faster overall debt repayment compared to the snowball method.
Drawbacks: Progress might feel slower, especially if the high-interest debts have large balances. Requires patience and discipline to stay motivated.
Which Strategy Should You Choose?
- Choose the Debt Snowball Strategy if:
- You need quick wins to stay motivated.
- You’re more focused on building momentum than minimizing interest costs.
- Choose the Debt Avalanche Strategy if:
- You want to minimize the total interest paid.
- You can stay disciplined, even if progress feels slower at first.
Both strategies are effective; the key is to stick with the one that works best for your financial situation and personality.
The Rest of the Story… Get out of debt
After some heated discussions, I showed Max a path forward. His business had strong cash flow—strong enough, in fact, that he could self-fund future expansion once his debt was paid off. But to get there, he had to make some tough choices.
First, Max needed to tackle his personal finances. That meant creating a realistic budget and paying down his personal debt—everything except his mortgage. Second, he had to hit pause on expansion. If he held steady for just three years, his business would be completely debt-free. That would open the door to nationwide growth and franchising, without relying on banks or outside investors.
It wasn’t going to be easy. It would require discipline, goal-setting, and a commitment to follow through. Max asked for my help with budgeting, and I introduced him to three strategies I believed were simple yet powerful: the Zero-Based Budget, the 50/30/20 Budget, and the Envelope System.
After weighing the pros and cons, Max chose the Zero-Based Budget Strategy. He liked its clarity and control—and saw how it could work for both his personal life and his business.
Max got to work. He and his wife built a solid personal budget. At the same time, he rallied his management team to cut unnecessary expenses and implement tools to better manage cash flow across the company.
Three years later, Max was personally debt-free. In year four, he began franchising his QSR brand.
The turning point wasn’t a new loan or a lucky break—it was a mindset shift. Max finally saw the power of budgeting and the freedom that comes with financial control. That’s the real story behind his success.
About us: Save money, save time and grow your business
Michael Daniel is a business advisor and founder of First Street Processing. With three decades of experience in finance and entrepreneurship, he helps small businesses build smart plans, streamline operations, and grow profitably.
If you have questions, please feel free to contact me.
- Debt.com: Debt.com’s 2025 Budgeting Survey ↩︎
- CardRates.com: Average Credit Card Debt by Year (2004 – 2025) by Marcie Geffner ↩︎
- NerdWallet.com: Most Americans Have a Monthly Budget, but Many Still Overspend – NerdWallet by Andrew Marder ↩︎
- Debt.com: Debt.com’s 2025 Budgeting Survey ↩︎
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