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Are you struggling to get out of debt?
Do you feel like you’re stuck in a never-ending cycle?
If so, then this 10 step debt challenge is for you!
In this post, I walk you through each step that will help you pay off your debt and become financially free.
Ready to get started? Let’s go!
Table of Contents
A Proven 10 Step Debt Challenge
#1. Stop Using Credit Cards
The first step to overcoming debt is to stop digging yourself into a deeper hole each month.
The simple way to do this means you need to stop using your credit cards.
For some people, this could be as simple as taking them out of your wallet and putting them in a drawer.
But for others, this is not enough.
You might need to take more drastic steps, like cut them up or even freeze them.
This might sound extreme, but you will never get out of debt if you keep spending and adding to your credit card debt.
If you rely on credit cards to buy things, you might wonder how you will pay for things going forward.
You can spend using your debit card or simply pay cash.
Both options not only will keep you from increasing your credit card debt, they will also help you get your spending back in control.
Finally, understand you are only giving up credit cards temporarily.
If you feel like you can use them responsibly in the future, you can.
But if you want to avoid debt forever, then you might want to give them up permanently.
#2. Make A Plan To Pay Off Debt
Once you commit to no longer using credit cards, it is time to make a plan to get out of debt.
After all, if you don’t make a plan, how will you ever get to where you want to go?
The first step is to sit down and think about your debt and how you want to become debt free.
Do you want to pay off debt as quickly as possible?
Or do you want to focus on paying as little interest as possible?
This is important as there are different plans you can follow.
For most people, I recommend the debt snowball method.
- Read now: Here is a detailed debt snowball plan
This has you organize your debt from smallest balance to largest.
Then you make minimum payments on all the balances except for the smallest one.
For this one, you pay as much as you can each month.
Once the smallest debt is paid off, you pay as much as you can on the next smallest balance.
For everything else, you keep making minimum monthly payments.
This plan works because it helps to keep your focus and motivated.
You see progress and want to keep pushing through.
Another option you can consider is debt consolidation.
With this, you take all of your debt, so your credit card debt, car loans, and other debts you owe money to and take out a personal loan.
Personal loans are great for debt consolidation because they are easy to qualify for and typically have lower interest rates than credit cards.
#3. Create Some Goals
While having a plan is great, you also need some goals.
Having goals will help you to stay motivated during the entire journey.
So what are your goals?
Do you want to have your debt paid off in 2 years?
Do you want to go on an epic vacation?
Don’t make the goals only about your debt.
They should also be about the things you want to do after your debt is gone.
- Read now: Here are the joys of debt free living
This will encourage you to get rid of what you owe so you can start saving for the things you want to do.
Two final points about making goals.
First, make sure they are detailed.
Don’t just say you want to go on an epic vacation.
Write down where you want to go and what it will be like.
Same with being debt free.
Envision life without debt and write those feelings down.
This will make it easier to connect to your goals over time.
Second, keep the list of your goals visible.
The more you see it, the more you will want to reach them.
In fact, you might even want to tell a close friend and use them as an accountability partner.
Not only will you motivate yourself, but they will motivate you too.
#4. Set Up A Simple Budget
Your next step is to set up a budget.
Don’t make anything complex here, just something simple.
The 50/30/20 rule is a great example.
With this budget, you take 50% of your income and put it towards essential living expenses, or needs.
The next 30% goes to discretionary spending, or wants.
The final 20% is for debt repayment and savings.
- Read now: See the 50/30/20 rule in action
By keeping your budget high level like this, you don’t make it overwhelming and can focus on paying down your debt.
An important point about this is you don’t have to follow the bucket percentages exactly.
You could do a 50/25/25 budget or 45/20/35 budget too.
You have the flexibility to make it work for you.
The key is putting a good amount of money into the third bucket so you can make fast progress on your debt.
With that said, don’t take all the dollars in this category and use them to pay down your credit card debt balances.
You want to slowly grow your savings too.
This allows you to pay for an emergency if one comes up and not add to your balances.
For example, of the 20%, save 5% and put the rest towards your debt.
It might not sound like an important thing to do, but it is a great habit to start working on as you will need it to build wealth for the rest of your life.
Just make sure that after pay off the balance on your debt, you continue to budget your money.
It will help you to better manage your money and as a result, help you reach your financial goals.
- Read now: Discover good money habits to develop
#5. Start Paying Bi-Weekly
This is an underrated debt payoff trick I don’t hear talked about enough.
Years ago, when we relied on mailing in our monthly payments, it was hard to pay multiple times a month.
Now that you have online access and can electronically transfer money from your checking account to your credit card company, this trick becomes a game changer.
This is because it helps you to pay off your debt faster.
And you can customize it to work for your financial situation.
You could split your monthly payment in two equal payments.
So you could send in $250 every two weeks.
Another option, and the one I recommend, is to send in a payment whenever you have more money.
For example, maybe you make a little extra cash on the side.
When you get the money, use it to pay your credit card bills.
Then when your actual payment is due, send in the balance you were planning on sending in.
Let’s look at an example.
Say you have $2,000 credit card debt and you can pay $300 a month.
This payment by itself means you will be free from debt in close to seven months.
I’m ignoring interest here to keep it simple.
If on the other hand, you are able to send in $25 twice a month on top of your $300 payment, you will be debt free in close to five months.
Many people use this trick to pay extra and get out of debt sooner.
As a result, whenever someone asks me about paying off their debt, I make sure to tell them about this trick.
#6. Cut Your Monthly Bills
Another way to find some extra money to make larger payments on your debt is to review your monthly bills.
There is a good chance you can cancel a service or lower the cost of something to save money.
For example, maybe while you are focusing on becoming getting rid of your debt, you cancel your meal delivery service.
Then after your debt is gone, you can start it up again.
Or you can review your cable bill and downgrade service.
You might even lower your internet speed to save costs.
The more you can lower your bills, the more money you will have to put towards your debt.
And who knows, you might even find that you don’t need to have these services at all.
Then you can put that money towards building your savings once your debt is gone.
Finally, if you don’t have time to review your bills, look into Rocket Money.
This AI assistant will review your spending and negotiate some of your bills for you!
Rocket Money is your assistant to help you find and cancel subscriptions, track your spending, create a budget, and more. Join the other 80% of people saving money thanks to Rocket Money.
Another place to look for big time savings is Insurify.
They offer multiple free quotes on car insurance so you can find the cheapest plan.
They will even switch plans for you, free of charge.
The average user saves close to $500 a year!
By just using these two services, you can put an extra $800 a year towards your debt balance.
Think about the impact that will have on your goal!
#7. Take Part In A No Spend Challenge
Taking the above tip one step further is using a no spend challenge.
Here you pick a spending category and decide to not spend any money for the month.
A good example would be dining out.
You don’t eat out for the month and put that money towards your credit card balances.
Or you decide to make your own coffee instead of buying it to save money.
You could switch categories the next month or stick with the same one.
You could even keep it and add another category.
I know some people try to go 6 months without buying clothes.
The key to making this trick work though is to not go too deep.
What I mean by this is, don’t restrict your spending to the point you are not enjoying life.
When this happens, you will resent your debt and likely rebel.
This is what happened to me.
You have to remember a no spend challenge is a game, and it should stay that way.
#8. Use Saving Challenges
If not spending money is too extreme for you, consider a spending challenge.
These are games to help you save money.
In some cases, you save by playing a game to trick yourself to think more about the impact the item you are thinking of buying will have on your finances.
In other cases, you are saving your spare change or any one dollar bills you get.
As with the last tip, work to keep this a game so that it is fun and you look forward to playing it.
This will ensure you stick with it long term and can maximize the amount of cash you put towards your debt.
#9. Make Extra Money On The Side
The reality of life is you can only cut expenses to a certain point.
After that point, you stop enjoying life because you are going without.
But what do you do if you get to this point and still want to pay more on your debt balances?
This is where side hustles come into play.
There are plenty of ways to earn some extra money on the side that are enjoyable to do.
The important thing to remember is to take the money you earn and pay off your debt with it.
What are some things you can do?
You could take online surveys, drive for Uber, sell crafts, grocery shop for others, and more.
The list is truly endless.
- Read now: Here is how to make $1,000 fast
- Read now: Discover the best ways to make money on the side
In some cases, some of the things you want to do won’t pay in cash, but instead give you free gift cards.
Don’t dismiss these because of this.
You can still earn the free gift cards, just make sure you get them for places you regularly shop.
Then when you pay using the gift card, take the money in your bank account and transfer it to pay your credit card debt.
It’s the same as earning cash, just with an extra step.
And if you get gift cards you don’t need, consider selling them for cash.
- Read now: Here is how to sell gift cards for cash
#10. Stay The Course
Finally, you need to stick with your debt payoff plans long term.
Getting out of debt is a journey and won’t happen overnight.
I’ve talked to too many people who give up because they don’t have the patience to go a year with this plan.
Remember, you didn’t wake up one day and have a mountain of debt.
It was building for years.
It will also take years to pay it off.
But the more dedicated you are, the faster you can pay it off.
There is the 10 step debt challenge you need to follow if you want to be debt free.
This plan works.
I’ve used it to pay off my credit cards and I’ve shared it with many others who have also been successful.
You have to be committed to paying off your debt and be patient too.
And I can’t tell you enough how important having an accountability partner is along with having long term goals.
Both will keep you motivated to see your goal through.
- Read now: Learn the hidden costs of debt
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I have over 15 years experience in the financial services industry and 20 years investing in the stock market. I have both my undergrad and graduate degrees in Finance, and am FINRA Series 65 licensed and have a Certificate in Financial Planning.
Visit my About Me page to learn more about me and why I am your trusted personal finance expert.