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7 steps to get ruthless about paying off your debt

Ready to get serious about paying off your debt? Read this step-by-step guide about how to find the money to make it happen.

By MSN Money Partner May 20, 2014 1:22PM

This post comes from Maryalene LaPonsie at partner site Money Talks News.

Money Talks News on MSN MoneyDave Ramsey calls it getting "gazelle intense."

The popular get-out-of-debt guru uses the term to describe that singular state of mind in which you think of nothing other than getting out of debt and away from your creditors.

Past due stamp sitting on three bills. © Derek E. Rothchild, Stockbyte, Getty ImagesIt's an interesting concept, but Ramsey can sometimes be decidedly short on the details about how to hit that intensity.

If you're wondering how to get gazelle intense, let us fill in the blanks. Here are seven steps to start ruthlessly attacking your debt:

Step 1: Rethink your budget from the ground up

If you already have a budget in place, this step will be easy. If you don’t, first go read this article for a simple way to create a budget.

Pull out your budget and scrutinize each and every line item. Eliminate everything that isn't a need -- and by need, we're talking about things that help you stay alive, stay healthy or stay in a job. Everything else can go. Cut the cable. Eliminate the Internet. Cancel the cellphone.

Then, take a second run through your budget and think long and hard about how to reduce what's left. Could you install a programmable thermostat to save on your heating bill? Maybe cut coupons to reduce your grocery spending? Or think really big and consider whether it makes sense to downsize your house or trade in your cars for cheaper vehicles.

Step 2: Stop spending and start saying no

Now that your budget is stripped down to the essentials, you need to flex your self-discipline muscles.

It's time to stop spending. That means no weekend trips to the mall, the thrift store or the art show. Likewise, stop swinging into the farmers market or the street vendor fair just to see what's there. Only go into stores or marketplaces if you have planned (and budgeted) purchases in mind.

Also, get in the practice of saying no. If your child wants candy in the checkout lane, the answer is no. If your spouse suggests seeing a pricey concert, the answer is no. If your friends want to go out to eat to the swanky new hot spot, the answer is no.

Of course, you need a little common sense too. Unless you want to be pegged as Mr. or Ms. Scrooge, the key is to have a free or cheaper alternative in mind that you can suggest right after you decline.

And special occasions may require a little flexibility on your part. If your friend wants to celebrate her birthday at a particular restaurant, it would be rude to demand a venue change. Assuming you can afford the meal, by all means, go and enjoy time with your friend. Don't forget that people are more important than money -- even when you're gazelle intense.

Step 3: Limit your access to cash

To help with step No. 2, limit your ability to spend. A cash envelope system is often used for this purpose, but it's not the only way to stop from overspending.

With a cash system, you leave the debit and credit cards at home and use cash only.

However, if carrying cash makes you nervous, try a variation that involves plastic.

Open a prepaid card and load it with only your budgeted amount for the week. Make that the only card in your wallet and opt out of any overdraft protection to force yourself to keep your spending in check.

Step 4: Sell at least half of what you own

Next, look around. What do you see? If you're like the average American, you're probably surrounded by items you don't need and rarely use. It's time to move those things out and bring some debt-paying cash in.

There are a couple of different ways to do this. You could try selling it all on a single weekend during a yard sale. Another option would be to piecemeal it out to get top dollar from various sources.

The best option will depend largely on your personality. Some people don't mind intense work for short periods of time but get frustrated if a project seemingly never ends. In that case, a yard sale may be the best bet, particularly if you can combine it with a community sale day. Other folks like the slow and steady approach, perhaps posting 10 items a week to eBay or Craigslist for a small but steady cash flow.

Step 5: Earn extra cash whenever you can

Many people living in debt find their budgets are exceedingly tight. The money comes in and goes right back out. There is very little wiggle room to make extra payments. That's why you need to stop spending and start selling.

However, go one step further and start bringing in extra income whenever possible. Depending on your individual circumstances, that could mean picking up a second job or offering to take extra shifts or overtime.

If you aren't able to commit to a regular job, you could try baby-sitting, housecleaning or even using your smartphone to make extra money (assuming the phone is still in the budget). Plus there are a lot of other little ways to rack up a few dollars here or there.

Step 6: Consolidate your debts

This step may not apply to everyone, but if you're carrying around multiple debts with high interest rates, you may want to consolidate.

You could do this in several ways. First, if you have equity in your home, you could apply for a line of credit. These loans often have lower interest rates than credit cards, and you may be able to deduct the interest on your income taxes. However, lines of credit may require loan fees and an appraisal, which can make them cost-prohibitive.

Another option would be a personal loan you use to pay off your other debt and credit cards. With financial institutions still licking their wounds from the Great Recession, these loans may be hard to come by.

Finally, you could transfer existing balances to a low-interest or zero interest credit card. Many of these cards come with an introductory period, after which the rates can zoom to the stratosphere. Be sure you're able to pay off the debt before the promo period is over or at least transfer it to a different card. Plus, watch for balance transfer fees, which can tack on an additional 2 to 5 percent to the amount you owe.

Step 7: Set up an online bill pay system

The last step is to have a system in place to get all of the money you're saving and earning to your creditors as quickly as possible. It defeats the purpose of selling the DVD collection if you use the money to buy your family dinner from McDonald's.

You can find free online bill pay services at many banks and credit unions. Sign up, input payment information from all your creditors, and decide which bill to attack first. Then, every time you get some extra money in your account -- whether it's $10 from an eBay sale or $1,000 from an awesome yard sale -- send it straight to your creditor. As in, make the payment that day.

Don't let the money get cozy in your checking account. The longer it sits there, the more likely you are to use it for something else. When the money comes in, send it right out, and soon you'll enjoy the peace of mind and financial freedom that come with being debt-free.

More from Money Talks News

May 20, 2014 4:31PM



Washed down with water.

That saves lots-o-money quickly.

May 21, 2014 8:38AM
In preparations for retirement, I have been cutting back and slashing my spending habits like a pauper. I save, save, save money whenever and wherever, I can. Paying off the only credit card I have and have no car note to owe. Then I will tackle my mortgage payments with a vengeance. Hopefully, I will be living a debt free life a few years before I leave this old world.
May 20, 2014 3:38PM
Selling half of what you own is a bit extreme; however, an idea that I implemented was taking clothes and shoes (in good condition) and selling them in a consignment shop. It helped me cash in on clothes and shoes I no longer wear and put some extra cash in my pocket with little effort.  Another good pointer from this article is staying out of the stores in the first place, because you'll always find something to buy that you really don't need.  In addition, I slightly increased my 401k contributions (to an amount I really wouldn't miss).  I think common sense is the key with controlling household spending. 
May 21, 2014 2:46AM
There are lots more ways to cut costs. These are just a few.
1) drop the smart phone and get a "dumb" one. Save about $50 per month. Get a low-priced tablet (e.g., Kindle Fire) or use your old iPhone as a wi-fi only device. Wi-fi is available everywhere; you really don't need to pay for cell-based data plans
2) call your car and home insurance company and tell them you want to go through all your coverage because you found another carrier that is cheaper. They'll probably help you "find" 10% off or more.
3) speaking of car insurance - An expensive policy from GEICO, Progressive, etc. is not needed. You can find one usually for less than $30/month from Insurance Panda (I pay $25!). If you spend too much on car insurance from one of those big companies, chances are you are simply funding their expensive TV ads with cute animals.
4) compare what your house is really worth to your assessment. Many assessments have never been properly adjusted down to reflect the market over the last 4 years. We cut our property taxes by about 20%.
5) re-fi your 30-year mortgage to a 15. The interest rate will drop by at least 50-75 bps, more depending on your current rate. The payment may go up slightly, but it is because you are paying off your loan faster. If it's possible, get the mortgage paid off before the kids go to college. At a minimum, have it paid off before you retire.
6) review your credit card bills for all the things you are paying $10-20 per month for that you no longer need. I bet everybody has at least a couple
7) drop all magazine (paper and on-line) subscriptions. Sorry WSJ, but that includes you too. If you look around, you can find comparable content for free.
8) review your investment portfolio for ways to replace higher fee mutual funds or ETFs with lower fee ones. S&P500 funds/ETFs shouldn't charge more than 0.10% in fees. Fees may be higher for specialty funds, but they are all coming down fast. If your company 401K uses high-fee funds, talk to the folks in charge. A difference of 25 bps in fees will mean a difference of about 5% in your portfolio value after 25 or 30 years.
9) and of course the most impactful -- never carry a balance on a credit card. If you can't resist, cut up the cards.
May 21, 2014 11:29AM
The best advice in the world will not prevent a fool from being separated from his/her money.  When buying stuff is a substitute for unhappiness psychotherapy, poverty will result.  My parents were financially responsible and active savers.  They taught me to be as well.  Their incomes were low by any standards yet they were able to economize without our ever feeling deprived of what we needed.  Our life style was pleasant and the compounding economic benefit of their savings was truly astounding.
Happily I continued with their examples in my own life.  Now I'm among the top 0.1% in national individual income yet my cell phone plan costs $6.50/mo. and my home phones (2 lines with multiple extensions) cost about the same. I never set foot in a new car showroom because I'm not a fool.  I have a beautiful but not ostentatious home, a staff to take care of the things I just don't want to do myself, etc. I am able to give substantial amounts to charity and that is very rewarding.  Anyone can do what my parents and I did.  They just have to actually do it.  No piece of junk that you buy in a store can possible equal the happiness of financial security.

May 21, 2014 12:31PM

Another worthless MSN article.


1 "ruthless" step.



May 28, 2014 1:31PM
Yeah Everyone , according to the writer of this article we should have no cable, no internet and no phone and even no trips to the thrift store to buy cheap things we might need, oh and we should sell half of our stuff. While we're at it how about just cutting off our utilities and just use candles and rainwater, except candles would cost money. We can all just sit in the dark naked and hungry...another useless article with nothing practical to say. The best advice actually comes from the readers, but if we cut off our internet we'd never know...
May 21, 2014 1:12AM
I make all my money orders out ahead of time for the month. Then I take the left over money and budget for spending. The rest I just throw at my mortgage.
May 20, 2014 3:06PM
You live in Obamaville.  Your debt will outlive you.
May 28, 2014 4:01PM
For someone who puts Dave Ramsey down, you tend to use many of his strategies except some of the poor advise like consolidating into one loan.  Consolidating is frowned on by future credit card companies one might want to use and if you trust a company to pay all your bills for you and they are late in their payment or miss payments - it is out of your control.  Also the way they may "reduce" your credit card debt is to lengthen the loan at a lesser payment - which actually increases the accumulated amount you pay.  Dave Ramsey has several books out there (even a new one with his daughter) and a radio program with a lot of great advise, I believe he has a lot of useful advise if someone really want's to get out of debt - in a legal manner. Some suggestions may seem extreme but use the one's that work for you. It might take longer but you'll be going in the right direction.
May 20, 2014 3:03PM

This type of article is useless.  Yes, living like a dead person will save money, but what is the point?  How about suggesting you stop eating or stop heating your home.  THAT would sure save a lot of dough!  People need pointers that really work WHILE you live. It is like starving to lose weight - everyone knows that people are very unlikely to stick to such a diet and will go off on a binge that is self-defeating.  Better to have a slow and steady lifestyle change.



May 21, 2014 1:10PM

just stop living.

Anyhow....look up Consumer Credit Counseling Services, (MMI)...don't be fooled by shady companies acting like consumer credit.  There are a lot out there.   CCCS  will consolidate your credit card debt & you will pay ONE amount towards the balances per month.  Instead of the 13 years that it would take me to pay off my took 5 years & I saved $60,000 in interest. Best move I ever made.  I now have one credit card that I use & I requested a low credit limit on that.  I pay it off each month if I use it.  I mostly have it for emergencies.


May 28, 2014 1:02PM
This system has only created the Rich and the Poor...
something I abhor.
And, the Criminal Bankers do look nice...
but we are stuck eating beans and rice.

May 28, 2014 3:57PM
Many need internet for our employment/careers, but cable TV is almost universally unneeded. I would dare say that a good portion of people must have a cell phone with email capabilities for their employment as well. 

I do agree on many of the other points, especially the get rid of half your stuff, but it's seriously short sighted to say that people don't need a cell phone or internet. This is coming from a business owner in a tech related field, and there's nothing I personally despise more than the infatuation with smart phones that we currently have. I think our attachment to technology is an absolute poison of humanity.
Jul 13, 2014 8:49PM
I love how step #1 suggests "eliminate internet" and step #7 suggests "set up an online bill pay system"
May 21, 2014 12:31PM

Some people are not capable of doing steps 1,2, and 5. And they still blame George Bush for that too.

May 21, 2014 12:10PM
Those are good ideas, but honestly, how many Americans would be willing to do even one of those things?  Not many, that's for sure.

There are some really Arrogant pricks on here fronting like they never had a hardship........

 They will be the ones next to kill their families n selves because of their extreme comfort seeking....
Aug 14, 2014 7:09PM

Pay your bills, lower your debt.


That was easy.

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