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Finances: How to Get Out of Debt

M.D. Jackson has 25 years of business management experience and a Masters Degree in Industrial and Organizational psychology.

Follow these steps and you too will be able to rid yourself of your debt.

Follow these steps and you too will be able to rid yourself of your debt.

Financial Crisis

Financial crisis is something most people will deal with in their lifetime. In 2014 Forbes reported that more than 10,000 suicides were linked to finances every year (Haiken, 2014). The number one issue couples fight about is money (Ramsey, 2018). While your financial crisis may not be as bad, the harsh reality is that financial crisis can bring you to your knees. What do you do when you find yourself in a financial crisis? How do you get out of it and more importantly how do you change habits that caused your crisis? Today we will be exploring some ideas to help you get out of financial trouble.

How Financial Insecurity Relates to Insecurity of Other Kinds

We have all heard the saying “keeping up with the Joneses.” It’s a reference to trying to appear as though you live at a certain financial level. People are constantly striving to look as though they are moving up in the world.

During the housing crash, I had young girls trying to sell me their designer handbags for rent money. Why would someone who can’t pay their rent have a $500 purse?

The idea that gets most of us into money trouble—aside from hospital debt, which we will address later—is the idea that you can live in excess even though your income doesn’t support it.

Keeping up with the Joneses can take a toll on your finances. Obviously, if you worry about money every month, you shouldn’t be planning big vacations or buying new cars.

What do you think of yourself? What kind of person are you? From a psychological standpoint, people who buy in excess of their ability to pay are compensating for insecurities. Why do you think you need the best of everything? If a $50 golf bag does the same thing as a $500 golf bag, why would you buy a $500 bag? Do you think it means you are better than other people? Does it compensate for insecurities in your personality?

If you believe you have to put on appearances for other people, it is time to reevaluate your beliefs. I’ve never been at a funeral and heard someone say “Tony always had the best, that’s why we liked him.” It’s an interesting dynamic that we judge others by their character, but judge ourselves by our worldly possessions. Think about that fact. You want friends who are loyal, caring, and kind. Yet, you want to be the friend with the money?

Here is the horrible part about good-time friends: people who hang around you because you have things and appear to have money are not your friends. In my lifetime I have known people who were wealthy; the truth is they have a hard time finding real friends because there are so many freeloaders out there. Have you ever met someone with money and then met friends of theirs who are obviously freeloaders? If you read some of the lottery-winner stories online you quickly see a pattern where winners isolate themselves after realizing they are becoming the cash machine for freeloaders.

The lesson is there isn’t any shame in living at your current level. There isn’t any shame in telling a friend, “We are trying to pay off bills so we can’t go out to the lake this week, maybe next time." Financial responsibility starts with being honest with yourself and others. It’s nearly impossible to enjoy a vacation you can’t afford. The financial stress of going to someplace and realizing that you are running up more debt can prevent you from enjoying the vacation. The same is true for any activity that requires you to add to your debt.

Finding More Money Inside Your Budget

There are two schools of thought about money. The first approach is to chase money to get what you want. The second approach is to take the money you make and invest it to make more money. People don’t get financially stable by chasing money; they get financially stable by investing what they have into areas that will bring them more money. If you can take a dollar and turn it into five, then you are further ahead than the person who just spent $20,000 on a car. Rather than looking at your money and saying “it’s just not enough,” look at your money and say, “how can I double you?”

I know what you are thinking: how do you double money? First, you have to find the money in your budget to double. Every month you get money and it does not seem to last. It’s time to look honestly at your spending.

Places to Save

I’m going to start with something people mention all the time, the $10 a day coffee/breakfast habit. If a person is getting breakfast every morning outside the home that amount can easily be $3100.00 a year. Consider your habits. Do you smoke or drink? Those habits can easily run you into the poorhouse. While quitting may not be as easy as me mentioning it, you can quit or slow down. Look realistically at how you spend your non-working hours. Do you watch a lot of TV? If not, consider canceling your cable. Maybe all you really need is internet. Do you have subscriptions to magazines you don’t read? Cancel those subscriptions and get that information for free online.

Here comes the painful one: cell phones. Compare carriers to get the best deal or go with a landline that is cheaper, yep I said it. Also, most people do not use their phones to call people. If you don’t call people, you are better off getting a tablet you can connect to the internet. You can still video chat with people over the internet without a cell phone carrier to pay (this requires internet service). Here is one most people never think about: daycare. Maybe taking a work-from-home job would be better for you. If you have toddlers it’s cheaper to stay home with them until they start school. The average household could free up around $14,690.00 a year.

Here is a list of possible savings in your home:

  1. Daily Coffee: $3100.00
  2. Smoking: $3650.00
  3. Cable: $1200.00
  4. Drinking: $3800.00
  5. Subscriptions: $100.00
  6. Cell Phone: $1800.00
  7. Restaurants: $1040.00
  8. Daycare: $10,800.00
  9. Downsizing: $3,600.00


In 2010, NBC News reported over a million people lost their homes to the banks (Schoen, 2010). We all knew someone who overbought a house before the crisis. I knew we were in trouble when I saw store clerks purchasing $400,000 homes on less money than I was making.

There was a time when I wanted a big home. If you have a big house, look realistically at how you use the space. Do you use your third bathroom? Do you actually spend time in your game room? Do you have bedrooms no one sleeps in? Your rent or mortgage shouldn’t be more than ¼ of your net income. That means if you make $2,000 a month your rent/mortgage shouldn’t be more than $500.

Over the years we moved a lot. The best homes we lived in were small houses where our family was together all the time. I found that the larger the house the more distant we became with each other. For five people, a good 1200–1300 square foot house seemed to keep us closer. There is also the fact that bigger homes cost more to take care of and clean.

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If you own a big home, maybe it’s time to downsize and get a lower payment. If downsizing your home will get you out of debt, consider it. No one should keep a house for a dining room they use once every two years.

The same is true for renters. If you rent a big house and don’t need all that space, consider downsizing and saving a few hundred dollars.

Living a Good Life on Less

At one point in my life I was an at-home mom (until my kids were in school). My husband was only making about $35,000.00 a year. Our rent alone was over $10,000 a year. That didn’t leave a lot to live on. I was raised in a thrift store, fix it up, make do, or go without household. One of the first things you learn is never pay full price. I’m not talking about couponing, which is great too. I’m talking about shopping for the deal. Our family moto has become “Get your money’s worth”. Incidentally, that is also the beginning to many of our crazy stories. My coach purse was $25 on eBay. I waited until I found a good deal. If you really want something, then you should be willing to wait for the deal. Impulse purchases are a short lived happiness. A good deal is a joy forever.

Christmas and birthday shopping is a yearlong process involving a lot of clearance sales. Discount toys are the best since children have a short attention span for toys. This is something to keep in mind when your kids are young, do not overspend on holidays. They won’t remember what you got them two days later. When my kids were little we spent a lot of time in the park and at the library. We also spent a lot of time with family. Write down a list of priorities in your life and make that a model for how you spend your money.

My husband’s position has allowed us to eat free in many five star restaurants. However, the best meal I’ve ever had was cooked by my husband. Leading a good life is not about being able to afford everything, it’s about enjoying everyday living. Enjoy things that are free. Community events, stargazing, camping, hiking, and exploring. If you are spending more time on making money then you are enjoying life, it will catch up with you.

A long time ago I realized you can spend a lot of money and still have a horrible experience. I call it “chasing fun”. Whenever we spent too much money on a trip or occasion, it never turned out the way I wanted. An example of chasing fun is owning a boat. I have kayaked for over ten years. Kayaking is easy and practical. I can unload and launch a kayak anywhere in under a minute. Many times while I was launching my kayak I would see people with boats who looked frustrated from waiting to launch or upset when trying to reload their boat on a trailer. The truth is I wouldn’t trade my kayak for the trouble they have with their boats. Keeping life simple is more enjoyable. I will admit I can’t tow an inner tube behind my kayak, but then again I have no desire to hit the water doing 35mph. If you truly enjoy your boat, that’s great. If that boat brings you more frustration than joy, maybe it’s time to sell it.

Don't Borrow Money

At the end of January 2018 the US hit an all-time high in credit card debt 1.03 trillion dollars (Mayer, 2018). So if you are in credit card/loan debt, you are not alone.

Stop borrowing money. There comes a point when no amount of money will fix your situation and borrowing more is only going to toss gas on your financial fire. Once you are in debt, it is difficult to get a loan to consolidate your debt because your income to debt ration makes you high risk with most banks. Consolidating credit cards never works unless you can get a better interest rate and you change the spending habits that got you in financial trouble.

Do not borrow money from relatives. It is always interesting to me that people who spend so much time trying to convince others that they are doing well seem to have no problem asking family for money. If you have an all-terrain vehicle, a boat, a motorhome, an extra vehicle, or other adult toys, you should sell those before asking relatives for money. IT IS NOT ANYONE ELSE'S RESPONSIBILITY TO MAINTAIN YOUR LIFESTYLE. This is a lesson in being an adult. Be honest with your children. Tell them the truth, that you used to be able to afford the boat but, cannot afford it now so you are selling it. This teaches them that being financially responsible is more important than looking like you have money.

I have one more thing to tell you about borrowing money. This comes from 15 years a loan officer in a car title loan company. Do not, under any circumstances, take out a payday or car title loan. While both these loan types may seem like a good idea in an emergency, ultimately the odds of paying off the loan are not in your favor. The goal of these loan companies is to keep you in debt and paying. Deceptive practices such as only disclosing minimum payments keep people in debt. While people may think these companies want to take your vehicle, that is almost always a lose/lose situation. In nine out of ten repossessions the car doesn’t sell for what is owed on the loan. In some states, if your vehicle sale doesn’t cover the loan, the lender can come after you for the difference. I have known a few people over the years that used these lenders very short term. Most people end up digging a bigger hole for themselves.

"I often say that paying off your debt is like dieting.

There are no miracle cures; it takes discipline and hard work."

— Lisa Madigan

Emergency Money

A sign of maturity is having money and not spending it. Your first financial goal is to save $1,000 in a savings account for emergencies. You might think that you don’t have a way to get $1,000.00, you do. The first way to get it is to sell some things or a lot of things. You can have a yard sale, or post your stuff for sale online. Do you have a money-making hobby? Everyone can do something. My sons made $7 an hour washing diesel trucks on the weekends to by an Xbox. If my 12-year-old can find an odd job, you can too. Offer babysitting services to couples at church. Maybe you are good at technology and can assist small businesses with their computers. Find that extra cash.

We all have little life emergencies. Mechanical items break, health emergencies happen. Having that $1,000 serves as a security blanket to catch life’s little mishaps. This keeps you from using a credit card or high-interest personal loan to fix problems. Being prepared helps you survive without stress.

Budget Spreadsheet Diagram 1



To get out of debt you have to know what debts you are paying. This budgeting formula can be done with a pencil and paper. I prefer the excel computer spreadsheet (see diagram 1). Most people are paid twice a month. If you pay rent/mortgage on one payday and all your other bills on the other payday, it tends to even out your expendable income. While the bills for your area may be different, you can see how using the spreadsheet tells you exactly what you have left for gas, groceries, and incidentals. You can also include your gas and groceries in the debt column if you like.

In the first column is the names of people in the household, I chose Sally and Linus (from the Peanuts). Then to the right of their names, you see their income for that week. At the bottom of the column is the combined income total. The pink (next) column is their bills. You will notice that money going into savings is listed as a bill but, also has a running savings account total in green to the right. The last column shows the remaining funds after the bills are paid. You may have more bills but what this spreadsheet shows you is how to budget appropriately. You may not have money for savings right now, or maybe you can cut back on something and save the money.

Paying Off Debt Diagram 2


How to Pay Off Debt

My grandmother taught me a simple formula for getting out of debt. It requires sacrifice and planning. Look at the balance of your debt and pay more than the payments starting with your smallest debt. While you are doing this you will continue to make the minimum payments toward your other debt. The extra amount you pay may be as low as an extra $10. Once the smallest debt is repaid, you move onto the next debt and do the same thing until you pay off all the debts. As debts are paid off you can re-budget putting more money toward your other debts.

Example: Debt Amount Payment

  • Visa $500.00 $35.00
  • Loan $5,500.00 $490.00
  • Car $11,000.00 $550.00
  • Hospital $60,864.00 $75.00

Looking at these debts you would put as much money as you could toward the visa debt first. Once you pay off the visa debt you can add the $35 you were paying visa each month to the loan payment. Once you have the loan paid off, you can put an extra $524 toward the car payment each month until it is paid off.

This brings me to hospital bills. Hospitals will take payments. You do not have to come up with $60,000 right after you exit the hospital. Be honest about what you can afford to pay. Make sure you send them money each month. As long as you are paying something, most hospitals will not sue you.

Looking at diagram 2 you can see I have calculated the early payoff of a loan. You may not be able to throw in a $1200.00 payment, however you can probably come up with the money to put an extra $50 toward the loan. As you can see the early payoff saved $200 in interest. That may not seem like a lot, yet it also saved two months where you can put more money toward another debt. The harder you work at these debts the faster they will disappear. Maybe you usually go on vacation with your tax return, this year skip the vacation and pay down your loan.

Negotiating Debt

There is an interesting dynamic that functions in the world of debt. A credit card company will sell your debt for ten cents on the dollar to a collection agency but, they will refuse to lower your payment or interest rate. It doesn’t make good business sense. Many companies function under the “a bird in the hand is better than two in the bush” theory. The company would rather get the ten cents on the dollar than have to wait for your money. Also, they are writing you off as bad debt to counteract their profits at the end of the year. Many debt collectors will not negotiate with you or your debt consolidation company.

Any company that will negotiate with debt consolidation will also negotiate with you. For this reason, you do not need a debt consolidator. All you have to do is write a letter to your debtor offering a specific amount a month in lieu of the regular payment. Many companies have a default process that allows for payments. In some states, there are laws in place that require the debtor to offer lower payments. It is worth looking into before you hire anyone as a middle man. If you can offer a lump sum payment that is greater than the company will get to sell your debt, they may take the offer.

When a person goes through tough times they do what they have to do to survive. Most people do not take out loans with the intention of not paying. Yet there comes a point when you have to decide between food and making that loan payment. Don’t beat yourself up over having to survive. You can’t give someone money you don’t have.


Bankruptcy is a personal decision. Years ago a person could file chapter 7 bankruptcy and walk out of bankruptcy court with a clean slate. Today that is no longer true. If you have a steady and reasonable income you are more likely to have to go through a chapter 13 which requires the repayment of most debts. According to the US bankruptcy court, the process for repayment can take 3 to 5 years. Seven years is the recovery time for bad credit anyway. If you fail to make the court-ordered payments, the court throws your bankruptcy case out and your creditors can come after you. The only time bankruptcy should be an option is in situations where the person is unemployed or the debt is so excessive that it prevents the person from supporting themselves. If you are considering bankruptcy you can contact a reputable bankruptcy attorney and discuss your situation.

Living With Meaning

There is an old saying that states “where there is a will, there is a way”. Instead of spending money, write down a list of things or people in life that bring you joy. It could be anything from creating art to playing cards with your grandmother. Put that list where you can see it. Focus on the things in life that bring you joy, and get rid of everything else. Life is too short to live with debt and life is way too short to have regrets. Focus and stay debt-free.


Haiken, M. (2014), More Than 10,000 Suicides Tied To Economic Crisis, Study Says. Retrieved from

Mayer, B. (2018) . 2018 Credit Card Debt Statistics: Average US Debt. Retrieved from

Ramsey, D. (2018). Money Ruining Marriages in America: A Ramsey Solutions study. Retrieved from

Schoen, J. (2010). Study: 1.2 Million Households Lost to Recession. Retrieved from

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2018 MD Jackson MSIOP


Liz Westwood from UK on September 22, 2018:

This is a very useful article with a lot of great advice. I wholeheartedly echo what you say about the most expensive not necessarily being the best. We had the opportunity last week to stay in a 5 star hotel. The building was fine, but the customer service left a lot to be desired. Luckily we hadn't had to pay for it, or we would have been doubly annoyed. We were much happier the next night in a 3 star hotel with lovely staff.

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