How to Get out of Debt in Three Simple Steps

*This article contains affiliate links.

Tagalog Version (Click Here)

The rich rules over the poor, and the borrower becomes the lender’s slave.

— Proverbs 22:7

Are you scared of opening the mail and looking at your gigantic credit card bills? Do you hide from your friends and relatives because you owe them money? Is your income not enough to cover expenses and pay your debts?

If you want to get out of debt and pay them all back, here’s a VERY SIMPLE 3-step plan from George S. Clason’s “The Richest Man in Babylon” (Click link for the book):

 3-Step Plan to Get out of Debt:

STEP 1: List down everyone you owe money to and how much money you owe to each one.

After you list down the people and companies you owe money to, inform them that you’ll pay them back in installments every month.

If you record your debts and see the final, solid number, it becomes a concrete goal that you can work on completing. As you continue paying off your debts and you see that the number of people and money you owe decreases, you’ll be more inclined to continue until you finally pay them all off.

STEP 2: Right as you receive your paycheck, take 10% for investing and take 20% for paying off debts.

We all used to live on a lower paycheck before we received promotions and pay raises later on in our careers. When we started earning more cash, instead of having more money for savings and investments, we simply increased our spending and consumption. For some of us, we increased our spending beyond our paychecks, and that’s how we got into debt.

We have to learn to reverse that process. We must save FIRST and pay debts FIRST before we start spending and buying stuff. As we keep at it, we learn to live on less while slowly increasing our savings AND paying off all our debts.

STEP 3: Avoid borrowing more money and getting into more debt.

You can’t escape a hole if you keep returning to the bottom to dig yourself deeper. If you want to escape debt, you need to slowly pay them ALL off and STOP getting into more debt.

Repeat those three steps until you’re paid!

Living on Less is Easy

If you think that you can’t live on a lower income (the remaining 70%), remember that there are people who provide for their families, have as much fun, and have as many things as you do EVEN IF THEY EARN LESS. Like income tax, if you budget for investing and pay debts first BEFORE you pay bills and buy groceries, you’ll learn to waste less money.

(If you want a great guide for budgeting, here’s a link to my previous article: “Your Wealthy Mind Savings and Budget Plan”)

Paying off debts is like chopping a tree with an axe or plucking weeds off a field. When you take a few swings with the axe and pull out a few weeds every day, you’ll eventually succeed. The tree will fall, the field will be clean… and your debts will all be paid!

Remember: Avoid borrowing any more money and take 10% of your paycheck for investing and 20% for paying debts. If you discipline yourself and do it until it becomes a habit, you’ll eventually be free from everything you owe.

Imagine the day you no longer worry about your debts since you’ve paid them all back. Wouldn’t that be nice?

Sound too simple to work? All you’ll need is a little disciple and you’ll make it! Bookmark this article and try it for a few months, then tell me how well you did in the comments!

Also, if you think this can help some of your friends and family, then Share this Article!

If you want more like this, just click the “Like” button on the YourWealthyMind Facebook Fanpage below!