Get Out of Consumer Debt in 6 Steps
Consumer debt is high-risk, high-interest debt that doesn’t make you money; it drains your money. I’m talking about credit cards, car payments, HELOCs, personal loans, payday loans, and medical debt.
If you want out of these debts, first take a moment to step out of feelings around guilt, shame and embarrassment (which are all valid - I’ve been there), look in the mirror and say “I’m done with this. I’m tired of the stress. I’m not going back.” When you hit that moment, you’re ready. Getting out of debt is not easy. It’s uncomfortable, and it takes intensity, consistency, and patience.
Here’s how to pay off these debts and get back to wealth-building:
1. Start saving first (10% or more)
Learning to keep money consistently is foundational to becoming and staying debt-free. This is the first step.
If you have little or no savings right now, decide to keep a percentage of your income as soon as you’re paid (e.g., 10%).
Transfer that savings into a shared savings account, preferably one that earns interest like a money market account.
Determine how long it would take to save up $1,000 doing this consistently. Target your first savings goal to $1,000 and increase the percentage to achieve it faster.
2. Get control of your spending
Learning to control your expenditures is just as foundational as saving. This is the second step.
Create a budget using the remaining income after saving (e.g., 90%). This shows you how much you can put towards your consumer debts. Without it, you’re deciding to wing it, and you won’t feel meaningful progress.
Review expenses, find leaks, and cut unnecessary expenses (e.g., unused subscriptions, overlapping services).
3. List everything
Write down every single consumer debt you have, such as:
Credit cards
Student loans (list each one separately)
Car loans
Any other debt you owe back that you’re making payments on (e.g., medical debt, HELOCs)
Ignore your mortgage for now. We’re focusing on consumer debt. That’s the high-interest, high-risk stuff that’s draining your budget.
4. Unlock as much income as possible
Pause retirement contributions. Pause any other savings goals. Sell stuff. Take on extra work. Free up every dollar you can toward one goal of paying off these debts.
5. Decide on a payoff approach
Avoid passive strategies like consolidation that stretch payments out.
Choose an aggressive payoff method:
Debt Snowball (best for behavior and momentum, but not the best money saver)
List debts by smallest balance to largest.
Pay minimums on all but the smallest.
Throw all extra cash at the smallest until it’s gone.
Roll that amount into the next smallest, and repeat.
Debt Avalanche (best for saving money, but harder to feel traction)
List debts by highest interest rate to lowest.
Pay minimums on all but the highest-rate debt.
Throw all extra cash at that one until it’s gone.
Roll that amount into the next highest-rate debt, and continue.
6. Protect what you’ve built
Now that you’ve freed up your income, build an emergency cash fund with at least 6 months of expenses in an account that yields interest.
Maintain your 6-month emergency fund by replenishing what you withdraw.
Becoming debt-free reduces complexity and stress in your finances and frees up your income to live and spend time how we want to. That’s a version of wealth itself.
Reach out if any questions come up and I’ll see how I can help.
justin@wealthandwisdomcoaching.com
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