Knock Out Debt in Just 7 Simple Steps

Knock Out Debt in 7 Steps

There are two sides to the debt coin and 7 simple steps to Knock Out Debt. We have the income side and the expense side, with me so far? So when you’re in debt you have to analyze how exactly you will tackle one or both of these sides. I encourage you to tackle both sides since the sooner you face the income and the expenses, the quicker your dilemma will resolve.

Unfortunately many of us have at one time or another have made the bad choice of adding more debt to our already existing debt only to get out of debt! Sounds like a tongue twister, doesn’t it? Applying for more credit cards or another loan is not the answer. Well it can be if you are consolidating but this means you also have to get rid of a few existing debts as well, not keep them and add more. So here’s what YOU are going to do ….

Step 1: Spend Less Than You Make

Sounds simple, right? You can knock out debt¬†if you know where your money is actually going each month. Sit down and make note of all your income and all the expenses you can think of right now. No need to get into full details since we aren’t creating any budgets. Just simple math here. Take a pen and paper or if you want Excel spreadsheet. You should have something that looks like this:

knock out debt by knowing where it is going

Now with this directly in our vision we can see how much income there is and roughly where it is going AND we can see that each month, $160 is going over budget. The primary step in becoming debt free is to spend LESS than what you make. So you need to analyze this and right away I would say cut down or even cut out on daily coffees and lunches. Trust me you can make your lunch and bring it with you and the same goes for a coffee!! Oddly enough with the figures I used that would be exactly $160 each month bringing you even with your income. If you dig deeper it is likely that you could cut down the entertainment expense and thereby also cutting the gas used for the vehicle. Find lower rates for that cell phone and see how you can cut utility bills by saving power and using LED lighting and more.

Step 2: Reducing Household Expenses to Knock Out Debt

Each expense likely has the possibility of a savings. Get out your receipts for insurance companies, utility bills, entertainment, your car etc. Now let’s get on the phone and call these companies. (10+1 Tips to Cut Household Expenses)

swamped in debts, knock out debt to relieve stress and anxiety

This Doesn’t Have to be YOU

I manage to save $100 each month by switching from a monthly Bell phone line to a MagicJack phone line which costs $30 per year. That alone is a savings of $1200 per year !! My hubby rides motorcycle and his insurance went up to $1200/yr, so on the phone I was, I called his company and many others, I even went on Kijiji to find a similar bike as his and the fellow quoted a much lower insurance rate. So being frugal me, I emailed that fellow and asked what company he used. After our new policy was in place we now pay $400/yr. Another savings of  $800 per year !! With savings like these it becomes easy to knock out debt.

Are you starting to see a pattern here? This is YOUR hard earned money. Take care of it as no one else will. We decided since we watch mostly DVDs and we are often on the Internet to cancel our Satellite TV. BANG another $2000 per year savings !! I do this all the time and it works! Only you are in charge of your money AND you can knock out debt. Call around and check out the prices as if you were comparison shopping for any other product like groceries. It takes a few minutes of your time to possibly save thousands of dollars each year.

You can see from a few simple changes alone we now save $4000 each year !
That’s money that can go onto other outstanding debts, like personal loans or credit cards.

Step 3: Knock Out Debt by Creating a Budget

Knock Out Debt and feel the relief

Crawling Out from Under Debt

YUP there ya go, I said it, BUDGET! You need to sit down and really think about every single dollar you spend in order to knock out debt. In your budget you can leave a miscellaneous amount, which can be for all those odds and ends each month that you don’t exactly account for but the main thing is that you have to create a budget that you will stick to!

No point in writing it all out nicely if tomorrow you go to the store and let impulse buying take over. If it’s not in the budget it’s a NO GO ! That’s going to be the only way to knock out debt. Make a plan and stick with it. Be a little harsh on yourself.

Some people I know set up separate bank accounts for various expenses, others actually withdraw their funds and use separate envelopes. You have to decide what will work best for you and then stick to the plan.

By now you should be well on your way to saving a few thousand dollars each year. Good start!! Give yourself a pat on the back.

Step 4: Deciding What to Pay Off First

There are actually two schools¬†of thought about this; some will say pay off the expenses with the higher interest rate first! Others will say, that to keep the momentum and enthusiasm going you should pay off the lowest balance first. Neither is really right or wrong, it’s what works best for you. Personally I started with small expenses that had the higher rates of interest. Once one was paid I used the amount that I would normally have paid to them and put it onto the next expense. When I came into large sums of money, immediately it went to my largest loans so that I could see the dent I had put in. It made us feel good about paying off our debts.

Step 5: Making Extra Payments

There are two ways you will be making extra payments to knock out debt. The first is whenever you receive money you weren’t counting on whether from work, a government cheque, extra side hustle income, a bonus etc; you immediately put it onto an expense. Sorry, NO you can’t go get that nice shiny thing-a-ma-jig!! That comes later.

Step 6: Roll Payments/Snowball Affect

The second way you will make extra payments begins as soon as one¬†debt expense is gone! When Credit Card A is paid in full where you used to pay $65 per month, you will now take that same $65 and apply it to the next expense in line. This is called the SnowBall affect. Once two expenses are paid off, again take the total amount and apply it to expense #3 and so forth. This may seem like you never really have any more money AND in honesty, you don’t, because you are still paying off debt.

In the beginning all your efforts may not look like much at all, but believe me when I say that every penny does count and it all adds up. Slowly but surely you will be able to breathe just a little bit easier and your stress and anxiety levels will adjust to normal.

Now for the absolute toughest step of all !!!

Step 7: Stay the Course

No matter what, don’t give up!! You can knock out debt!¬†If you falter once or twice don’t worry about it, pick yourself up and get back on track. You know how, you just have to do it until all your debts are paid. Stay the course.

Each time an expense is gone, you free up a little more money and eventually you can breathe again! Consider it all a very good “return on investment”, especially when ultimately that investment is in yourself and how you feel every single day.


Debt can be a¬†vicious cycle. For some people as soon as they pay off some or all of their debts they immediately begin to think of something they’ve wanted or have been missing out on in some time. Instead of saving for it, they run out and put it on credit or get a loan. No No No !! Just remember how it feels now. Write about it in your journal or post a daily reminder to yourself on the wall. It is important not to fall back into the same vicious cycle of paying down and then increasing your debts.

Many of the above steps don’t actually take any great efforts, just a little adjustment. Eliminating debt doesn’t have to been painful. Some simple life changes can make all the world of difference.

*Stay tuned for future posts on Earning Extra Income through Side Hustles and Online Work that you can do from your home in your spare time.