How to Get Out of Debt - And Why You May Be Stuck

Getting out of debt can be a real struggle.

I’ve seen countless women work hard to pay off their balances, but then life happens - the car breaks down or suddenly the washer stops working - and they end up right back in debt again.

It’s a maddening cycle.

Every woman who has struggled with debt has the same question:

What, exactly, do I need to do to get rid of it once and for all? What am I missing?

The answer, as I’ve discovered over seventeen years of working as a money coach, often has little to do with money.

If you want to become debt-free and remain debt-free, then you need to change your starting point. Most advice gets this wrong, which is why traditional approaches to debt elimination don’t yield lasting results.

Before you can shift your money patterns, you need to gain clarity in a couple of key areas.

Today, I’m going to share my insights from nearly two decades of one-on-one work with women and the process I’ve used to help them become debt-free.

No Shame, No Blame, No Judgement

Before we go any further, I invite you to adopt my motto: no shame, no blame, no judgment.

Debt can trigger many negative emotions, which are all rooted in self-judgment. The last thing you want to do is start shaming or blaming yourself for your financial situation. That’s destructive, counterproductive behaviour.

Let’s leave all of that negativity behind and don a researcher’s hat. Researchers simply want to understand what’s going on.

And the reason you want to take that approach is to get a clear-eyed view of your debt in order to solve the problem.

You can’t solve what you haven’t identified and clarified. So as I dive into my findings from nearly two decades of work in this area, apply my motto and tackle your situation as if you’re a researcher looking in from the outside.

Deal?

OK, great! Let’s dive in.

“I can’t because…”

Debt is complicated.

There can be a million and one reasons why someone is in debt. And some of those factors are out of their control, like having a pandemic wipe out your business, or suddenly being diagnosed with a major illness and being unable to work.

That’s not the kind of debt I’m addressing in this post. I’m talking about debt that comes from overspending and living above your means.

One of the most common answers I hear when I start to make suggestions about how to tackle this kind of debt is, “I can’t because…”

Or, “I’ve tried everything. Nothing works.”

The thing is, saying, “I can’t because…” is a barrier to becoming debt-free.

The words “because” and “but” will keep you on a financial hamster wheel.

They point to a mindset block that will keep you stuck until you reframe your situation.

The truth comes after “but”

Suze Orman, a well-known American author, once noted, “Check out what comes after the 'but. That’s where the truth resides.”

I would add the word “because” in addition to “but” here.

You know what? I get why people tell me they can’t implement a solution or why it won’t work for them.

When you’ve spent years struggling with debt, getting on top of it all can start to feel impossible.

And sometimes, it feels like you’ve already cut every extra dollar out of your budget. How on earth can you find even more savings to pay off the debt and build up a security fund?

It’s overwhelming.

I know what that’s like, because I’ve been there. If you’re not familiar with my story of being widowed in my thirties and left with $400,000 of debt, with no income, you can read it here.

The point is, I get the challenge of debt.

I also know this about dealing with debt:

🔺 Learning to live on less than you earn is difficult when you’ve become accustomed to living on credit and treating credit cards like a bank account.
🔺 Breaking old, comfortable spending habits is hard work.
🔺 Coming to terms with the extent of your debt is stressful if you’ve been avoiding it.
🔺 Making hard choices is 0% fun.
🔺 You sometimes have to give up possessions and activities that you love in order to regain financial balance.
🔺 You may disappoint some people when you stop joining them for paid activities you’d previously shared with them.

The good news is that becoming debt-free is absolutely achievable with the right approach.

Let’s change the framing from “I can’t because” to “Here’s how”.

Money problems are seldom only about money

Kudos to you if you’ve decided that you are determined to become debt-free and you’re taking accountability for the debt.

That’s a critical first step - but owning the problem isn’t enough.

What I’ve seen repeatedly over the past seventeen years as a financial coach is that if you simply dive in and start chopping and slashing, you’ll probably end up right back in debt…

… because you haven’t solved the underlying problem.

Here’s a much more effective way to become debt-free.

Before you get to the doing, there are three other steps to take first.

Here’s the four-step process I’ve used with clients to help them become debt-free forever.

#1. Fix your Mindset

Start with your mindset.

If you want to finally kick debt to the curb, you can’t start by saying that it’s impossible.

As Richard Bach famously said, “Argue for your limitations and sure enough, they’re yours.”

If your mindset is working against you at the outset, then you’re right – it will be impossible.

The most important real estate in your world exists in the six inches, give or take, between your ears. That’s where the magic begins.

Start by tackling the unconscious biases, beliefs and blocks that make you believe debt-elimination is impossible.

Remember, though, as you work through this material, the idea is to take a no blame, no shame, no judgment approach. You simply seek understanding and clarity for better results.

Here are a few questions to ask yourself:

🔸 When do the words “but” and “because” creep in as you’re considering possible solutions to tackling your debt?

🔸 Did you rack up the debt to avoid disappointing someone?

🔸 Do you overspend to compensate for another area of your life?

🔸 Did your family deal with ongoing money challenges as well? Are you reproducing a pattern from your past?

🔸 Are you afraid of the consequences if you make significant cut-backs?

🔸 Will you feel guilty if you stop spending so much on the kids or make them responsible for more of their expenditures?

🔸 Are you comparing yourself to someone else and trying to live up to their lifestyle?

Take some time to understand the patterns at play as well as the emotions behind your actions.

Once you’ve identified them, you can begin to formulate an approach that will serve you much better.

For example, I’ve had clients realize that they grew up in families where debt was the norm. They had unconsciously absorbed the belief that they would always be in debt. Once that came to light, they were able to release those beliefs and create a new story for themselves.

Once you have clarity on your money mindset, you can let go of harmful stories from the past - stories which often belong to other people - and create a new, empowering money story of your own choosing.

#2 – Determine your values

One of the biggest problems underlying debt is mindless (vs mindful) spending.

With a wallet full of plastic or a smartphone with tap-and-go payment options, it’s easy to part with cash without seeing or feeling a thing - until the bill comes in.

Next thing you know, your debt has piled up and you’re in a world of stress.

That’s why making spending part of a conscious process is critical to your success.

For years, I taught people to fix their finances by following carefully planned budgets, until I realized that budgets alone don’t work. For lasting results, we need to link spending to our values.

Why is that?

Because money needs to serve us – our needs, our wishes, our goals.

When you tie spending to the things that really matter to you, and cut back mercilessly on the things that don’t, you start to experience more joy and satisfaction from your money…

… rather than the momentary high of another mindless purchase.

Your money will stop disappearing into the cracks of life when you take an intentional, values-based approach to spending.

I’ve written about identifying your values in this post. In a nutshell, it boils down to writing out the top five to ten things that matter most to you.

Once you sort out your top, non-negotiable values, you can shift your spending to be more in line with the things that matter most.

When you’re facing a cash shortfall or debt, start by eliminating the items that don’t align with your values.

You may even have to eliminate some of the ones that do in order to get back into the black. That’s OK, for now.

Remind yourself that you’re on a mission to achieve your financial goals. This is part of the building process.

If you’re in a relationship, both partners need to establish their own list of values. Then, sit down together to figure out how you can create a list for the family that honours both of you, while allowing you to achieve financial stability.

#3 – Work out the numbers

You can’t tackle a debt problem until you know exactly what you owe and where your money is going. This step involves a two-pronged approach.

1. Track your money.

Go back through your records for the past three months and figure out where the money went.

Print up your bank and credit card statements, then use a spreadsheet to create totals for every category.

A quick word about categories: Create groupings that make sense for your family. The idea here is to drill down beyond meaningless categories such as “fun and entertainment”. That doesn’t really tell you anything. Did you spend on restaurants? Movies? Concerts?

Break it down to gain a better understanding. This will become essential when you start tying your spending to your values.

You may decide that going to the movies as a family once a month is very important to you, but eating out at restaurants simply for the sake of convenience is not.

2. List out your debts in order of cost.

In other words, start with the debt that is costing you the most in terms of interest rate and end with the lowest-cost debt.

Credit cards are almost always at the top of the list, since they typically charge anywhere from 18% to 30% interest on balances.

Did a relative give you an interest-free loan? Add that to the list too. The list of debts should include everything you owe including the monthly payments to keep them up-to-date.

Once you have all of the numbers in front of you, proceed to the next step, but keep tracking your spending.

#4 – Decide what to eliminate and GO

This is where the rubber meets the road.

It’s time to make the hard choices now, so you can ditch financial stress and experience the joy that comes from being in control of your finances.

Here are just a few more benefits that come with doing the work now:

✨ Improved relationships
✨ More satisfaction from your money
✨ Growing net worth as you start to save and invest
✨ More options for your life
✨ Increased confidence
✨ More joy
✨ Ability to retire financially secure

Use your values to guide you in choosing what to eliminate, and go for the big wins.

What do I mean by big wins? I’m talking about choices that will net you more dollars in your account for your efforts.

Cutting four streaming services you barely use every month will net you a lot more money than cutting back on the Friday afternoon latte. No one will ever make a dent in their finances by chopping out a coffee.

Selling a second car and using alternative transportation methods will net you a much bigger win than cutting out the once-a-month mani-pedi habit you love.

When I was paying off $400,000, I chopped out every little thing for nearly two years to pay off the debt. It worked, and it was awful. I don’t recommend that approach.

Retain an indulgence that lines up with your core values, but mercilessly chop out everything else.

It may mean unhappy choices for the kids, too. That’s part of life. Get them in on the project. It’s important for kids to understand how to manage money well and to make touch choices when necessary. Even if you don’t talk to them about your challenges, you can bet they’re watching and absorbing your lessons.

You get to pick the lessons they’ll retain.

Once you start to free up cash by:

a) cutting back on your spending;
b) selling any items you don’t need or don’t use;
c) downsizing; and/or
d) by starting a side hustle

You put all the “found” cash toward your debt.

Snowball or Avalanche?

There are two typical approaches to paying off debt. You can attack the debts with the lowest balances first (the Snowball method) or you can start with the most expensive debts, wipe those out first, then work your way down to the least expensive debts (the Avalanche method).

The former helps some people stay motivated by giving the appearance of eliminating debts more rapidly (it’s all about psychology with this approach), while the latter makes more mathematical sense.

If you tackle the debt that costs you more, you’ll save more. It’s as simple as that.

Still, if you know that you’re the kind of person who needs the psychological boost that comes with knocking off a card’s balance more rapidly and checking it off your list, then use the snowball method.

Either way, start paying it off and keep at it until it’s done.

Muzzle the cards

One of the lessons from behavioral economics about changing habits is that we need to make the right choices easier to make, while making the wrong choices harder. We do that by changing our environment.

In the case of debt elimination, I suggest the following steps:

1. Leave your cards in a locked drawer at home and remove it from your digital wallet. Can you still get at it? Yes, but it will make the process harder and more cumbersome for you. It may just stop you from automatically spending.

2. Retain access to a single credit card for emergencies only. Wrap it with a bright post-it note (with several elastics) that reads “Emergencies only”. At the very least, it will be a pain to use if you’re tempted.

3. Shop with a list and only buy items that are on that list. If you see something tempting, make a note to consider it for your next list, but don’t buy it.

4. Before adding something to your list, run it by your values and goals filter. Is it in line with your goal of financial wellness? Does it fit in your list of values? When in doubt, say no.

5. If you’ve memorized your credit card number, consider taking Jean Chatzky’s advice and have it replaced. Call the credit card company to declare the card lost, then do not memorize the new numbers. If you know the numbers, your job of cutting back on spending is rendered that much harder.

6. Keep your financial goals written on an index card and carry them in your pocket or purse. The more you connect with your goals and your “why”, the greater the likelihood of success.

7. Pay for everything using your debit card. If your first response is that this is impossible, revisit the section on mindset above. If you claim that it will be challenging, you’re right. That’s the idea. As Dan Ariely, a noted behavioral economist, points out in his book Dollars and Sense: How we Misthink Money and How We Can Spend Smarter, we need to make spending more painful.

8. Check your bank and credit card accounts daily. The goal is to raise awareness and make money choices consciously.

## Final thoughts

Do yourself a favour – don’t tell yourself that you’ll tackle your debt tomorrow. Tomorrow won’t be any better or easier than today.

Your future self won’t make better choices than you’re willing to make today. Today is the best day to start the journey to debt freedom.

You can do this. 🙌🏻