How to Get Out of Debt

Published on: February 26, 2021 (Updated on: April 22, 2024)

Get out of debt with 3 effective strategies

In this post, I will share with you 3 strategies to help you get out of debt. In 2020, during the pandemic, I suffered a financial downturn and it took a 2-year-old savings plan to save me from incurring debts at the time. The situation emphasized how bad I never wanted to be in debt… again. Unfortunately, with the rate at which different loan companies spring up these days with zero collateral and heavy interest rates, there’s proof that people really borrow money.

How to get out of debt

There are three strategies I used to get out and stay out of debt. They are the Plan, Preparation and Vigilance.

A. Plan to get out of debt

Planning to get out of debt

This stage allows you the opportunity and helps you plan towards leaving the debtor title behind. it involves:

  1. Making a decision to be debt free – this is tantamount to being responsible. At this point, you need to forget about borrowing money. You can’t get out of debts by incurring more. It sounds hard but yes, you can do it.
  1. Create a suitable refunding schedule – here, it’s important to enlist all your debts. Put them in an order of preference which to pay first. Start with the ones that are with high interest rates, time bound and could attract any form of embarrassment or discomfort. For instance, you don’t want to ignore something that would affect your shelter, feeding or transportation. Then, create an achievable refunding plan to repay those debts considering your income. It could be stretching but follow through with it; it’s worth your peace of mind.

B. Prepare to stay out of debt

This is the stage that says “never to be caught unfresh”. It still involves planning but this will be planning your expenses and it involves:

  1. Have avenues of income - my mother-in-love would always pray for avenues for me. She says it means multiple streams of income. While we could have a street or a close or a lane which is one-way, avenues always have multiple entry points. That’s how your income should look like.

You could turn your skills and areas of expertise to streams of income. You could also invest in reliable money markets or investment platforms; do your due diligence. Avoid paying interests, earn it instead. It also won’t hurt to ask for a pay raise at work if you feel you deserve it. There’s no harm in trying.

  1. Save! – the importance of saving can not be overemphasized. It is encouraged to save toward your goals like travel expenses, getting a degree, buying a property, wedding expenses etc. it is also important to have savings in an emergency fund account. This could cover for unforeseen expenses like health bills, gifts for celebrations, burial expenses, accident covers etc. All these things are hardly anticipated reason you should start building an emergency fund, NOW.
  1. Have insurance policies - Fortunately, most of these things can be covered by insurance companies at a premium. Premiums are usually cheap and we have savings, investment, risk, target and retirement plans in Insurance policies. The younger you are, the cheaper your premium.

Like I always say too, you buy insurance when it doesn’t look like you need it because when you need it, it can’t be bought. For instance, you can’t buy a Family Benefit Life Cover after loosing a parent; you buy long before so it covers for their funeral and other expenses when they do, no matter how long it takes.

C. Be Vigilant

This is the point to identify and avoid all forms of temptations. Here, you should:

  1. Choose the simple life - first, you must understand that a simple life is a happy life. Make that decision to live within your means and you shall be peaceful. You don’t have to buy a new car if all you can afford is a solid used car. Like I’ll always say, wait for your time. You should not travel, buy a home or rent a house on credit. Get what your income can accommodate and maintain.
  1. Avoid impulsive spending – you see that your excessive craving for suya and parfait every night, it should stop. It is good to enjoy life and satisfy your cravings but you sure don’t want to land in another bad debt. Impulsive spending is a habit that should be entirely curtailed. Have a budget and stick to it. Avoid sentiments when spending or giving. Also avoid emotional and financial blackmails from friends and family. You’re not being selfish, you’re just being financially wise.