A few years ago my wife and I found ourselves overwhelmed with debt. How much debt? $124,000 spread across six credit cards, a car loan, and student loans. We could never have imagined being debt free at that time.

This article shares our debt story, but more importantly shares our debt payoff plan: the exact steps we used (and that you can use) to become 100% debt free in just 15 months!

Before we dive in, I want to be absolutely clear that we didn’t get into overwhelming debt overnight and we didn’t get out of our debt overnight.

Our debt didn’t come from buying extravagant things. The majority of our debt came from a business I ran from 2009-2013. I got behind on the monthly operational costs, things like employee salaries, design and development expenses, advertising and marketing, and countless products and services that kept my business running. Then we had my wife’s business debt, her student loans, and our car loan.

These were our specific debts and where they came from:

• Jason business debt: $72,328

• Caroline business debt: $6,764

• Caroline student loans: $20,208

• Volkswagen Tiguan lease payoff: $24,794

• Total debt: $124,094

I want to point something out before I move a step further, and my guess is you can relate to what I’m about to say.

I was ashamed of our debt. I was embarrassed by the financial mistakes I’d made. Becoming debt free felt like an insurmountable mountain to climb. If you’re currently battling with debt and having similar feelings, those feelings are completely normal.

You can also watch the video version of our debt-payoff plan:

Debt is something almost all of us deal with

Did you know the average credit card debt per U.S. adult, excluding zero-balance cards and store cards is $4,878*?

How about the fact that 26% of small business owners carry a balance of nearly $10,000 on their business credit cards*?

Or did you know that more than 35% of Americans are seriously concerned about being able to meet essential financial obligations such as their mortgage, loans, credit card, or bill payments*?

Some of us are riddled with debt, stuck in its invisible grasp with no sight of escape. Some of us just have school loans, which seem harmless because of low fees and payments, so we ignore the soul-sucking and bank-account-syphoning elephant in the room. Some of us are able to use debt to our advantage to escape a bad month of business or get through hard times. But debt is dangerous and it needs to be dealt with head-on.

Let us help you attack your debt, just as we attacked and vanquished ours!

STEP #1: YOUR DEBT PAYOFF STARTS HERE

Draw Your Line In The Sand Right Now

Around 2013 I realized our total debt was over $120,000. That was the moment when I knew something had to change.

Unfortunately, that change came with the tough decision of closing my business’s doors. That meant letting people go, cutting as many expenses as possible, and accepting the fact that my business was no longer profitable and was failing.

I hope, for your sake, that $120,000 is not your number. I hope it’s a drastically lower number. But if you do have more debt than we did, don’t be ashamed of it any longer. It’s just a number.

Make today the day you announce you aren’t getting any further into debt. Draw your line in the sand right now.

Changing how we viewed our debt was a crucial first step to becoming debt free

It would have been easy to let the feelings of shame and embarrassment continue to control how we felt about our debt. We could’ve given in to those feelings as we’d been doing and as a lot of people do, but instead we decided to do something different.

Bear with me, as I know this is going to sound weird, but we started to think of becoming debt free like playing the original Donkey Kong video game:

• We were Mario, with a difficult path ahead of us

• The barrels, oil, and fire were our current debt hurdles (credit cards, loans, etc)

• Donkey Kong was consumerism trying to keep us in debt

• Saving the princess was financial freedom!

This Donkey Kong metaphor may sound completely bizarre to you, but it really helped us shift how we thought about our debt. It went from a dark cloud that loomed over our heads, to a silly game we could try to beat. With each ladder we climbed and every barrel we jumped over, we’d be getting that much closer to rescuing the princess (AKA gaining financial freedom).

Whether you want to buy into our Donkey Kong metaphor or not, maybe there’s a way you can reframe how you think about your debt? The most important thing at this point is to draw your line in the sand and to tell yourself: I WILL GET OUT OF MY DEBT!

TIP: A great thing to help draw your line in the sand is to have someone hide your credit cards so you can’t have access to them. Or just cut them up. Start using a debit card or cash only.

STEP #2: CONSUMERISM IS YOUR ENEMY

Change Your Mindset About Credit, Credit Cards, and Buying Things

We’re a society driven by consumerism.

Turn on any TV. Open any magazine. Browse any website. Scroll through any feed on your phone. There’s a new gadget or clothing company begging you to spend money you don’t have. Today is the day you tell yourself you don’t need to buy any more stuff.

“I don’t need to buy XYZ thing. I want it, but I don’t need it.”

How many things have you purchased with your credit card(s) in the past year that you can actually name off the top of your head?

If you can’t remember what you spent your last couple thousand dollars on, it wasn’t that important and you didn’t actually need to buy it.

What’s more important in your life: Owning a couple new material goods, or NOT being stressed out over your current financial situation?

Credit cards points and consumerism are not your friends when you’re deep in debt

Commercial after commercial tells us that the credit card companies just want to help us! They want to give us nice low rates (which most of us can’t actually qualify for) and they want to reward our spending by giving us awesome perks (redeem those double points!).

Except, when you’re in debt, the last thing you should be thinking about is credit card points. One of the important mindset shifts in becoming debt free is greatly reducing your spending. I’ll talk more about reducing spending in a moment, but credit card companies are great at convincing us that “cash back” feels like we’re somehow saving money. Or that “airlines miles” will help you travel for free. If you’re in debt, getting minuscule amounts of cash back or accruing airline miles are thoughts you need to put on hold.

At one point my wife and I had 12 active credit cards and the majority of them were opened because of the so-called “rewards” they offered. Here are a couple of examples, along with the rewards we never actually enjoyed:

Best Buy Rewards Card – A simple VISA card that helped us purchase electronic goodies. Except, when we bought them with Best Buy’s friendly payment plans, we didn’t take into account we’d up spending 20-30% more on the items we purchased because we could only ever afford to make the minimum monthly payments.

Southwest Airlines Card – I remember the day I signed up for this card and thought I’d grab the reward offer of a free companion pass for Southwest flights. Within a month I’d met the qualifying spend of $3,500 on the card, except, I didn’t have the money to pay it off. You don’t get the free companion pass if you don’t pay off required spend. Not only did I not get a stupid free companion pass, I now had $3,500 of debt that probably didn’t need to exist. (Also, FWIW, I can count on one hand the number of Southwest flights I’ve taken in the past decade, we never fly with them.)

CitiBank Diamond Preferred Card – This was a card I signed up for because it would 2x or 3x your points depending on what you purchased. It took me six months to realize I could only ever use those points for stuff I didn’t need (like a blender, or headphones, or other consumer goods that I already owned or absolutely didn’t need).

I hope these examples help you take a look at the cards you currently have in your wallet/purse. You may think these credit card companies are trying to help you, but they’re not. These companies have very well crafted systems in place to keep us all in debt.

TIP: Stop using credit card points cards until you’re completely debt free. When you’re debt free, start to identify one or two credit cards that offer rewards you might actually use.

STEP #3: SPEND LESS AND/OR EARN MORE

The Are Two Ways To Get Out Of Debt: Spend Less or Earn More

The un-sexy secret to getting out of debt is exactly the headline you just read: Spend less money or earn more money.

Sure, there’s a lot more to becoming debt free (hence the length of this article), but along with acknowledging your debt and avoiding consumerism, this is the next mindset shift that will help you get rid of debt.

Spending less money

Getting rid of a mortgage and renting a home

I could write an entire article on why buying a home is a terrible financial investment for the majority of us. Instead, I’ll let the economic crash of 2008 do the talking for me. I would, however, like to explain how renting a home (AKA “throwing money away”) was incredibly helpful in our journey to financial freedom.

When you have a home with a mortgage, as we did for 8 years, you do NOT have stable expenses. In fact, most homes are a ticking financial time bomb.

What do I mean by that? Oh, how about when your air conditioner breaks and you have to spend $8,000 to get it replaced? Or how about when you wake up one morning to an inch of water in your living room, only to find out you had a “slab leak” which still cost you $2,000 (after insurance!)? Or how about the $20,000 “invested” in redoing the kitchen and bathroom which was never actually recouped. Not to mention every stupid little thing that pops up and needs to be fixed (and paid for) when you own your own home.

Deep breath Jason, deep breath.

When my wife and I moved from Florida to California and chose to become renters, we knew one very important thing: Renting gave us the piece of mind that we’d incur $0 in surprise costs when it came to our home.

As renters, we’d never have to worry about an $8,000 air conditioning system. We’d never have to worry about little costly odds and ends. We would pay our rent every month and that was it. If something went wrong, it was on our landlord’s dime. Every dollar we used to have to spend to cover unexpecting home costs could now go toward aggressively paying off our debt.

Renting can be the best thing for people who are in debt. It’s a completely predictable expense every month, and you are guaranteed NOT to lose money in the long run.

A home you buy? Not an investment to be made when you’re trying to get out of debt. Heck, we’re years removed from being in debt and we still (proudly) rent our home.

Sacrificing a 15-year passion: Cars

I want to share a more personal example of spending less money: For me, that was a 15-year passion of owning nice cars.

I love cars. LOVE them. They’re easily the biggest money-pit I’ve had besides my business. Except, unlike my business, there is no potential ROI (return on investment) for a car. Sure, a 1950 Ferrari Dino is a great investment, but let’s be realistic here, you and I are not collecting Ferraris.

Aside from our mortgage and food, my monthly car payment was always our highest household expense. Over the years I had car payments ranging from $500 per month to as high as $1,200 per month—the latter being the time when I needed to own a Porsche Cayenne Turbo as a 25-year-old (dumb, dumb, dumb). Not to mention all the extra hidden costs of cars like gas, insurance, maintenance, etc.

When we decided to attack our debt, I knew my “fun car” hobby had to take a back seat (get it? It’s a car pun folks!). My wife and I talked about this decision together and I made the commitment to our get-out-of-debt plan that we’d purchase an affordable car and be more responsible when it came to spending money on depreciating assets (cars). We ended up leasing an extremely practical Volkswagen SUV, a car that would be very low in maintenance costs, yet not feel like we were driving a 1982 Ford Taurus.

I’d be lying to you if I said I loved driving that VW. Truthfully, I loathed it. It wasn’t a bad car by any means, but it was quite the departure from the BMW M5, BMW M3, Porsche Cayenne, Infiniti G35, etc, I was used to driving. But I just had to keep asking myself: “Do I want to feel cool driving around in a nice car, or do I want to save the financial princess and stop having a looming cloud of debt over my head?”

What you own right now is ENOUGH

Think of spending less as short term pain, for long term gain.

I really hope this point settles in with you. Your current TV, couch, bed, car, etc, are all enough right now. They are good enough and will do the job you need them to do until you become debt free. If you can commit to making short-term sacrifices and not focus on upgrading anything in your life, you can make huge dents in paying off your debt right away.

You are spending less now so you regain control of your finances. It will be uncomfortable to change your lifestyle and remove lavish things from your life, but I can tell you from firsthand experience: the feeling you get from paying off all your debt is a lasting positive feeling that greatly outweighs the short-term blips in happiness you get from buying stuff.

Earning more money

Now that I’ve gone over the spending less part, let’s talk about earning more money with two specific examples.

Let me start off by saying that I realize earning more money is not easy. If you don’t own your own business and you work at a conventional 9-5 job (for someone else), it can be difficult to think about earning more money. I do want to tackle both scenarios though, as I believe it’s possible to earn more money whether you work for yourself or you work for someone else.

Earning more money when you charge by the hour (hello freelancers!)

I’d like you to meet my wife Caroline, she’ll be taking over the keyboard here for a moment to share her story of earning more with her business:

Hi y’all! Caroline here, Jason’s better half (obviously!)

When I was running my own branding design company in 2014 I had a stunning realization: Quite simply, I wasn’t making enough money.

I think this problem can take different forms for different businesses – not enough clients/customers, prices too low, terrible margins, etc. In my case, I was taking on far too many small projects for far too little money. $100 here for a hand-lettering project, $200 here for a small graphic design job, giving deals to friends and not being more vocal about the real amount of time a job would take. Then, when I had bigger branding design projects, I was working way more hours than I was charging my clients. Something had to change.

Jason and I sat down and starting talking about how I was running my business and where we might be able to make improvements (you know, make more money!) As we started talking it became clear that with any service-based business (AKA freelance), time truly is money. If it took me two hours to finish a job that could have taken me one hour, I just lost an opportunity for additional revenue. And if I had a bigger job that I only charged the client for 40 hours of work, but it took me 80 hours, I just missed out on a ton of revenue.

To give you an idea of just how much money I was losing out on, after implementing a simple time-blocking exercise (which I’ll explain in a moment) I was able to TRIPLE my revenue! Not only was I able to earn more money, I gained more time back because I became extremely diligent with how I was spending it on a day-to-day basis.

What is time-blocking and how did it help me triple my revenue?

Jason and I looked at a normal work-week for my branding design business and figured out a few simple things:

1. I did my best work between 11 am – 4 pm each day (5 hours of work per day)
2. Working Monday – Friday, I had 25 billable hours
3. Over the course of 4 weeks, working at $75/hour, I should be making $7,500 per month (25 hours a week x 4 weeks = 100 hours x $75 = $7500)

Seeing that $7,500 was defeating and empowering at the same time. I certainly wasn’t making $7,500 a month (I was lucky to be making $2,000 per month), but seeing how just 5 hours of focused work per day could generate so much more revenue for my business was incredibly motivating.

From that meeting with Jason, I started to block off time on my Google Calendar with client work. Whether it was a tiny 1-hour project, or a bigger 80-hour project, all of the working hours I committed to would go on my calendar and I would do my darndest to ruthlessly stick to the time I’d estimated. This time-blocking system gave me clarity in my work days and was a great way to understand how much my time was worth.

As I mentioned earlier, getting a grip on my hours, estimating my time better, and working during specific time blocks helped me triple my revenue in just a few short months. If you’re a freelancer (or you work for yourself), time is money and you should definitely keep track of it.

Working part-time on a side project can also help you earn more

You thought that Caroline might be passing the writing-baton back to me, but she has another story to share with you about earning more money. This example specifically applies to you if you work a full-time job and don’t think you can earn more money.

It’s Caroline again, I’m back on the keyboard!

If you would have told me that I could make an additional $3,000 per month in revenue with a project I did on the side, I wouldn’t have believed you. If you read the last few paragraphs then you know I was doing branding design as my full-time job. Now, I wasn’t working for someone else in a 9-5 capacity, but the story I’m about to share happened in my “off work” hours.

Whenever I wanted a break from my client work, I would open up a sketchbook and start doodling. I didn’t consider myself an artist, but I enjoyed filling blank pages with drawings and hand-lettering. For months I filled sketchbook after sketchbook, not at all thinking I was honing a skill that would lead to earning more money, I simply enjoyed the creative outlet.

I started sharing some of my hand-lettering creations on my Instagram account and people started asking where I learned how to do hand-lettering. I responded in truth, I hadn’t really learned it anywhere, I just started doing it in my spare time. When enough people asked me about my hand-lettering, I had the spark of an idea: I should write a blog post that explains the basics (that I’d learned) of hand-lettering. Just a really simple guide if someone wanted to go on a hand-lettering adventure of their own.

That blog post started to get a little bit of traffic. Then it started to get shared on Instagram and Pinterest. Before I knew it, hundreds of people were reading my introduction to hand-lettering post and I saw an opportunity. I added an email capture to the blog post that asked people to enter their email if they’d be interested in an online course about hand-lettering (I’d never made an online course, but Jason had, and it seemed like something I could create if there was interest).

After a month I had over 500 email subscribers waiting for me to create a beginner’s hand-lettering online course! I hunkered down one weekend and created my first online course, without grand expectations about how it would sell. I worked on the sales page for the course and some other odds and ends in my non-working hours, and a few weeks later I launched the course. I was happy to make a few hundred bucks from the small email list and decided to change the callout on my blog post from “sign up to my email list” to “purchase my beginner’s course to hand-lettering.”

All of the sudden I was waking up to course sales. Then the traffic to the post would increase and I’d see more sales. Day after day, week after week, month after month, the sales steadily increased and I’d created my first passive income source. In the first two months that hand-lettering course generated over $7,000 in additional revenue I never saw coming and over $82,000 in total revenue!

The best part about the extra money I earned was that it happened on the side of everything else I was doing. It didn’t take an extraordinary amount of effort or time, I just saw an opportunity to create something and there was a demand for a quality hand- lettering resource for beginners.

I share this with you because I want you to realize what is possible. I want you to feel the way I felt when I made my first online course in my spare time and it started making passive income.

There are so many opportunities waiting to be had out there. You just have to find the drive and the commitment to make them happen.

TIP: Grab a notebook and jot down a couple ideas of how you might be able to make more money right now: Is it using time blocking? Or creating a small product in your spare time that you’re interested in? Also, write down larger expenses that you may be able to cut back on.

STEP #4: GET CONTROL OF YOUR EXPENSES

It’s Time To Look At Every Dollar You Spend (And Find Hidden Money)

Have you ever logged into your online banking or your credit card company, only to realize it’s kind of a pain in the ass to figure out how much money you’re actually spending? Sure, you can see your expenses in a vertical list with a total balance (usually always decreasing, ugh!), but banks and credit card companies don’t try to help you see where you can save money or cut costs.

It’s time for you to take control of all your expenses, and get a firm grip on every dollar you spend and make.

There’s a simple exercise that my wife and I did that opened up our eyes to our spending: We exported the last three months of activity on our bank accounts and credit cards, put them in ONE spreadsheet, and did our best to organize them by spending category (separated by month).

We called this exercise ETAC (or Expense Tracking and Categorization)

The silly thing about the name ETAC, if you say it out loud it kind of sounds like you’re saying attack. Which is neat, because you want to be attacking your debt!

Anyhoo, here are the simple steps for the ETAC exercise (video walk-through below):

1. Download the past three months of spending for ALL bank accounts and credit cards (CSVs)

2. Import your downloaded CSVs as individual sheets

3. Format your data so it’s all uniform

4. Once your data is all formatted, add every transactions to “All Transactions” sheet

5. Sort “All Transactions” by month

6. Assign a category to every transaction (use our examples or create your own)

7. Sort “All Transactions” by month

8. Filter transactions by month, and then sort by category

9. Use formulas to sum the expense total for the month in each category

📊 Click here to use the ETAC spreadsheet.

We encourage you to save yourself time and use our example Expense Tracking and Categorization spreadsheet with the categories we use to organize our expenses. If you’re creating your own spreadsheet, here are the categories we use and recommend:

• Auto (car loan, maintenance, gas, etc)

• Business (any costs associated with running your biz)

• Eating Out (coffee, romantic dinners, fast food, etc)

• Entertainment (movies, drinks with friends, bingo night, etc)

• Groceries (food!)

• Health & Personal Care (therapy, Dr’s visits, etc)

• Insurance (health, auto, dental, etc)

• Misc (whatever is left!)

• Pets (pet emojis!)

• Rent/Home

• Shopping (Target runs, IKEA, Amazon, etc)

• Travel (weekend trips, et al)

• Utilities (electric, water, trash, etc)

The reason these categories are so important is two-fold:

1. You want to compare the category month over month and see if there are any big spikes and what your current monthly average spend per category is (this is how you can find where to spend less).

2. Later on, we’ll show you how to create an ongoing monthly budget for these categories, so you can be a wizard at tracking exactly where your money goes and have ZERO financial surprises (you know, like barrels thrown by a digital monkey).

I cannot stress the importance of the Expense Tracking and Categorization (ETAC) exercise enough! Even if you think you have a good idea of what you spend, I 10000% guarantee listing out and organizing all your expenses will surprise you.

NOTE: If you have spouse or family member, this is a great person to do this exercise with. You’ll probably be embarrassed to show them your expenses—but you know what—that’s a huge red flag that you NEED to show someone your finances!

Here’s where we found hidden money in our expense tracking exercise

When my wife and I organized our expenses for the first time, a few items within categories of spending jumped out as potential places to save money (and put towards our debt).

Cell phone bill (I found $1,440 in annual savings!)

We were paying $260/month for our “family” cell phone plan. We’d had the same (unlimited) plan for more than two years and I had a hunch there was a better plan available. I went into an AT&T store (gasp! I know!) and asked them if they had a better option based on our actual phone usage. Come to find out, we were only using around 8GB of total data and didn’t need the costly unlimited plan. We switched to a $140/month plan and netted $1,440 in annual savings.

Cable bill (I found $600 in annual savings!)

At the time of doing our first ETAC exercise, we were paying $185/month for all bizallion cable channels (that we only watched a small handful of). Back in 2014 cutting cable wasn’t as prevalent, so I didn’t think about that as an option, but I did think maybe I could call the cable company and simply ask for a better plan since I had been a loyal customer for years. I navigated my way through the painful customer support phone tree and was able to reduce our bill to $135/month, saving us $600 per year.

Entertainment (I found $1,800 in annual savings!)

Drinks with friends, seeing movies (and getting popcorn), two Netflix subscriptions in one house, and a bunch of other stuff quickly filled this spending category without us even noticing. We decided we’d set some boundaries for our entertainment and hopefully save money. We allowed ourselves to see two movies (in the theater) per month and have two nights per month to have drinks with friends. Setting these boundaries saved us $150 per month or $1,800 per year. Remember, Short term pain for long term gain!

Food (I found $6,000 in annual savings! Whaaat?!)

We were spending $2,000 per month on food ($1,400 was eating out). For two people that is a lot of money each month! However, neither of us love to cook and because we work from home, going out to eat is one of the nice breaks from our day-to-day routine. That being said, we challenged ourselves to cut back by $500 and only spend $1,500 per month going forward (this included eating out and groceries). That $500 added up quickly, saving us $6,000 (!!) that we could put towards our debt in one year!

Just by reassessing a few categories of our spending we were able to find nearly $10,000 we could apply to our debt!

Do a little bit of cutting back in the short term and you’ll find hidden money you can apply to pay down your debt. You’ll be amazed at how living frugally for a short time can help get you out of debt exponentially quicker.

TIP: Don’t waste any time, do the ETAC exercise today and categorize all your spending for the past three months. Where can you find hidden money?

STEP #5: GET YOUR INCOME IN ORDER

Paying Off Debt Requires Looking At Your Income Flow

The one thing that stood out to us, and that would become critical to our success in our war on debt, was building a better income flow.

If you’re anything like we were a few years ago, you deposit money into your bank account, you pay your credit cards from your bank account, and there’s not much else to it. There’s nothing inherently wrong about this, but there is a better way!

Creating an income flow will help show you a more logical and systematized process for managing the flow of your money (in and out of your accounts).

Here’s what we did to create our income flow:

#1 Established our bare minimum monthly household expenses

After doing the Expense Tracking and Categorization exercise, we had a bunch of categories of spending that we could total up to see our average monthly budget. We took every category except our business expenses, added them up, and that became our minimum monthly household expense number.

#2 Established our bare minimum monthly business expenses

Similar to the household expenses, the category from our ETAC exercise that grouped our business expenses together showed us our average monthly budget for business. Keeping this separate from household expenses is helpful if you have a bank account specifically for your business (which, if you work for yourself, you should!).

#3 Created a monthly schedule for transferring all excess income to a new account

It should go without saying that you need to be making more money than you’re spending every month. If this isn’t happening for you right now, you have a bigger problem at hand. Hopefully, after going through the ETAC exercise, you have some excess income that you can apply to your debt (especially if you found hidden money!). For us, we identified the excess money we made over our expenses every month and would transfer this to an external savings account to be applied toward our debt (more on this savings account in a moment).

#4 Scheduled a weekly budget meeting

Weekly budget meetings helped us deal with the shame and embarrassment of our debt.

This may sound crazy to you, but my wife and I decided to put a standing meeting on our calendars every week to start talking about our finances. This meeting would involve doing a couple things:

• We’d download the previous week’s expenses and track/categorize them

• We’d discuss the previous week’s expenses and go over any outliers

• We’d discuss our income for the week

• We’d look at our debt payoff schedule (more on this in a minute)

• We’d make transfers from our business accounts into our household account

• We’d make excess cash transfers to an external savings account

• We’d pay down or pay off any debts we could

I could talk for hours about how vitally important these weekly budget meetings were for us (and continue to be). Not only did they help us get a firm grasp on our financial situation, but they also helped us deal with the shame and embarrassment of our debt. The more we discussed and attacked our debt every week, the less shame and embarrassment we felt about it.

If you don’t have a spouse to do weekly budget meetings with, find one! Just kidding… But ask a friend? Get a financial advisor? (More on the latter option in a bit as well).

#5 Set goal numbers of how much debt we could pay off each month (debt payoff schedule)

I’ll get into much more detail about this in Step #7 of this article. But the idea is to look at how much excess money you have above your expenses that you can immediately apply to your debt. Some weeks it may be $50, some weeks it may be $0, and some weeks it may be $500. The key is to continually know more information about your financial situation based on your income flow.

Our example income flow

Creating an income flow isn’t rocket science, and I felt like we already had some semblance of a household budget, but using this new process was incredibly helpful. Our income flow consisted of these things:

1. Caroline’s business checking account (Caroline Biz)

2. My business checking account (Jason Biz)

3. Household checking account (Household Account)

4. External savings account (Debt Crusher!)

The most important part of our new income flow: Debt Crusher (savings account)

When all your bank accounts can be seen on the same online banking dashboard page, it’s easy to see the money in one account as money available to any account. It wasn’t until our financial advisors introduced us to creating a completely separate external savings account (with a completely different bank) that we understood how important this was.

Our new savings account was nicknamed our “Debt Crusher” because that was its sole purpose for existing. We would transfer our excess cash from our Household Account (or sometimes Biz Accounts) and make debt payments from the Debt Crusher account.

Having a completely separate bank account that we couldn’t see next to our business and household bank accounts really helped us build momentum in paying off our debt.

No longer did excess money sit in our main bank accounts where it could easily be spent. That excess money got transferred to an account with one important job: Crushing debt!

Assign goals to each part of your income flow

Have you ever had a month where you realized you didn’t have enough money in your bank account to pay your electric bill? Maybe you’ve overdrafted a time or two and cursed yourself each time it happened? We’ve been there!

When you create your own income flow it’s extremely beneficial to add goals to each section. Our financial advisors gave us the sound advice to keep a goal amount of money in all our accounts as a buffer to never drop below (this helps avoid those crappy overdrafts!) I’m sharing our example numbers to give you an idea of how to set this for yourself…

• Caroline Biz: Goal to have $1,500 in account at all times

• Household: Goal to have $8,000 in account at all times

• Jason Biz: Goal to have $3,000 in account at all times

• Monthly transfer goal from Caroline Biz to Household: $2,500

• Monthly transfer goal from Jason Biz to Household: $10,000

• Monthly transfer goal from Household to Debt Crusher: $4,500

For Caroline Biz and Jason Biz, our goal number was at least one month of average expenses. The idea was to never drop below that number again if we could avoid it. For Household, our goal number was also one month of average expenses.

And if you’re wondering, YES, we had to work our way up to these goal numbers. When we first set these goal numbers we did NOT have those amounts saved in each account.

This income flow exercise showed us that we should be able to pay down $4,500 of our debt every month (that was $54,000 in a year!). At the end of each month, we’d look at our debt payoff sheet (again, coming in Step #7 of this article) and pay down the different areas of our debt.

We didn’t always hit our exact $4,500 number, but it was extremely helpful and motivating to have a goal to hit each month.

TIP: Create an income flow of your own! Add goals for all your accounts, transfers, and get a clear picture of how much money you can apply to your debt every month.

STEP #6: YOUR SIMPLE DEBT PAYOFF PLAN

The 4-part Simple Debt Payoff Plan You Can Stick To

Truthfully, you already have a big part of your debt payoff plan if you’ve done the Spend Less/Earn More, ETAC, and Income Flow exercises. But, let us show you four additional pieces to your debt payoff puzzle based on our experience paying off our $124,000 in debt.

Debt payoff plan part #1: Short-term pain for long-term gain

Yeah, yeah, I’ve said this phrase multiple times, but it’s such an important mindset shift that you need to make when it comes to getting out of debt.

To remind you, we didn’t accrue our $124,000 in debt through lavish spending. However, do admit that our financial habits weren’t the best and there was plenty of room for improvement. A huge part of that improvement was setting budgets and sticking to them.

You cannot and will not get out of your debt if you continue to stick to the same financial habits you’ve had up until this point. You have to make changes.

The phrase that we came up with and that was a guiding principle over and over again while making sacrifices to get out of our debt was: Short term pain for long-term gain.

When we finally accepted the fact that cutting back for a few years didn’t mean cutting back FOREVER, it created a spark of momentum. Yes, we’d have to spend less money each month, travel less each year, and watch our dollars much closer every week, but those things would lead to removing the dark cloud of debt that hovered above our heads.

We want the same thing for you! So… say it with us: Short term pain for long-term gain.

Debt payoff plan part #2: It’s time to make difficult phone calls

Did you know that American Express has a hardship case that will lower your credit card interest rate (APR) to 0% for three months, 1% for the next 3 months, and then 9.99% for the 6 months that follow? All you have to do is call the number on the back of your American Express card and ask to talk to someone about a “hardship case.”

Hardship cases are made for people like you and us. We got into debt, it sucked, and we were worried about how we’d be able to afford the minimum monthly payments on our credit cards with how high the interest was on our cards. Credit card companies would rather lower your monthly interest rate (APR) then see you default on your payments (AKA: not give them your money).

I didn’t know a hardship case existed when I called American Express and was simply looking for any way to reduce my 24% APR. I hopped on the phone with a customer support person and explained my business was going through hard times and instead of defaulting on my payments, I was hoping there was some other option for me. That’s when the customer service person explained they had a program that would freeze all spending on my card, but would lower the monthly interest rate from 24% down to 0% for three months (then raise it to 1% the next three months, then raise it to 9.99% for the next six months).

These phone calls suck, but staying in debt sucks much worse.

If you apply for American Express’s hardship case, they do have to lock your cards during that time period. This sounds scary, but you shouldn’t be using your cards anymore anyway.

We also called the companies where we had other credit card balances with high APRs: CitiBank, Wells Fargo, and another American Express card. CitiBank and Wells Fargo didn’t have a hardship case like American Express they were both willing to lower our APR by over 10% on each card.

We spent just over an hour making these humbling phone calls to our credit card companies and were able to get our interest rates lowered to a point that would save us $400 in credit card fees each month.

That’s $4,800 annually, which when you add in the savings from our Expense Tracking hidden money we found, it meant we had nearly $15,000 to pay toward debt!

Ready to call your credit card company(ies) yet?

Note: We didn’t call our mortgage or student loan company to find out if they offered a hardship case of any kind. You could call and ask, it definitely wouldn’t hurt.

Debt payoff plan part #3: Move credit card debt to 0% APR cards

One of the craziest things I’ll never understand is that even when we were riddled with credit card debt, we could still get approved for additional credit cards! Insane.

Our financial advisors were happy with the hardship cases we were able to get with a few of our credit cards, but on some of them, the APR was still too high. They recommended we apply for cards with 0% APR and very low balance transfer fees. The idea is that we’d transfer the balance of an existing credit card with a high interest rate to a new card with a 0% interest rate and just pay the one-time balance transfer fee.

Here’s an example of exactly how we did this:

Step 1: I applied for the Discover It credit card (0% APR and 3% balance transfer fee)

Step 2: I got approved for the card with a line of credit of $12,000

Step 3: I transferred the balance of our Wells Fargo Platinum card to the new Discover It card ($12,000 balance x 3% transfer fee = $360 one-time balance transfer fee)

I repeated this process and signed up for the Chase Slate credit card, as they also offered a 0% APR. We moved over three separate cards that had over $9,000 on them and nearly 30% APR.

This part of the debt payoff plan is going to be dependent on your credit score and credit history. We were fortunate that we both had pretty great credit scores and credit history and could still get approved for new credit cards with reasonably high credit limits. If you can’t get approved for new cards, don’t worry, just skip this part of the debt payoff plan.

Note: We found the best 0% APR credit cards by checking out NerdWallet. They keep an up-to-date list and give you an easy way to apply. IMPORTANT: Be very careful when signing up for more credit cards, remember these are only for transferring your debt, not to use for spending!

Debt payoff plan part #4: Pay off high interest cards/loans first

You should aim to pay off the credit card or loan with the smallest balance AND highest interest rate first. As Dave Ramsey (“America’s trusted voice on money”) says, paying off one card creates a snowball effect. Once you see that first card (or loan) paid off, it motivates you to want to pay off the rest (instead of evenly reducing all debts). Think of paying off each credit card or loan like getting one level closer to that financial freedom princess!

Momentum moves money mountains (a quick story)

Around the beginning of 2015, we had stashed enough money in our Debt Crusher account to pay off a credit card that had the highest interest rate. This was a CitiBank card with a 21% APR and a balance of over $14,000.

It was during one of our weekly budget meetings when Caroline and I hunched over my laptop. We logged into my CitiBank account. We clicked “Make A Payment.” We selected the magical option of “Pay Total Balance” (an option we hadn’t be able to select for many years). And we hit the glorious Submit button.

What a wonderful feeling that was! Up until that point, we’d only felt the mundane feelings that came along with paying minimum monthly payments. Yeah, some of our monthly payments had a little extra thrown in here and there, but none of them were as satisfying or motivating as paying off an entire balance. (I’d liken this to beating that first level of Donkey Kong where he not only throws barrels, but he starts throwing them rapid fire. Beating rapid fire Donkey Kong barrels proved to us that we could finally rescue our debt-free Princess!)

The little celebration we did lead to getting even more focused on wanting to pay off our debt as quickly as possible. We wanted to select all the “Pay Total Balance” buttons on all our debts. We couldn’t make it happen at that moment, but we could feel that snowball effect was in motion.

Hopefully this 4-part debt payoff plan gives you some really solid momentum toward debt freedom. Now would be a great time to make those hardship phone calls, look for 0% APR cards you can apply for, and get ready to organize all your debt in one place.

STEP #7: THE DEBT SUCKS SPREADSHEET

It’s Time To Organize All Your Debt In One Place

Congratulations friend, you are on your way to debt freedom! But before we release you into the financial wilderness with all the debt payoff strategies you’ve learned thus far, we have a pretty important spreadsheet to share with you.

Say it with me: Spreadsheets are our friends!

Just like you created a spreadsheet for Expense Tracking and Categorization (ETAC), it’s time to make another one that shows you exactly how much debt you owe. This additional spreadsheet will help you create a monthly payoff schedule that shows you exactly which debts need to be paid off in which order. This is the Debt Sucks Spreadsheet.

Seeing our debt laid out on one sheet was incredibly powerful. Yes, the total amount of debt staring us in the face sucked, but the fact that we could see a clear monthly path to paying off all our debt was incredibly helpful.

I’m going to walk you through how to use our Debt Sucks Spreadsheet step-by-step below. There’s also a video after the written steps if you want to see me using and updating the spreadsheet.

💸 Grab your own copy of the Debt Sucks Spreadsheet here.

Step #0 to using the Debt Sucks Spreadsheet: Make your own copy!

When you open up the Google Sheet, you’ll need to make your own copy that you can edit. Simply go to the top menu bar: File > Make a copy… and boom, you’ll have your own version you can edit.

Steps #1 & #2 to using the Debt Sucks Spreadsheet: Enter in your debts

Now that you have your own copy of the Debt Sucks Spreadsheet, you’ll want to fill it out. Leave Column B as the last column you fill out.

Column A: This is where you’ll list your debts (credit cards, loans, etc).

Column C: Add the total current starting balance.

Column D: Add your interest rate (APR). Don’t be surprised if this information is hard to find!

Column B: The card or loan with the highest interest and lowest balance is your #1 priority (remember, this is the snowball effect).

If you have more than three debt items, we recommend copying and pasting one of the existing debt sections and adding it to the far right of the spreadsheet. Make sure to also add a new debt item in the top left section too.

Step #3: Add your balance and enter your monthly payments

You wrote down your credit card/loan balances in the top portion of the spreadsheet, now let’s add them to the corresponding color section below (to help you pay down those debts). Here’s a quick guide to where you need to match up your balances:

• Cell C2 should match cell C15

• Cell C3 should match cell H15

•  Cell C4 should match cell M15

You only need to update cells C15, H15, and M15 in this step! The spreadsheet should update the rest of the cells automatically.

Once you’d add the Balance numbers to match, you can edit the Date and Amount Paid columns to match your debt payoff schedule. You may need to add more months, and you’ll certainly want to update the Date column to match your calendar. You enter monthly payment data in the Amount Paid that is your goal payment each month. (Once a payment is made you’ll change its background color to denote you made the payment.)

You will most likely not stick to the payment schedule you first write in. That’s okay! We didn’t either. Just make sure to go in and make the biggest payment you can and the Balance totals will update for you.

Step #4: Set your interest rates

This is the only complex part of the Debt Sucks Spreadsheet, but it’s not as bad as you think! You want to update the formula that calculates the interest rate so you can see the actual amount of interest you’re paying each month.

To update the interest rate for the first debt item, click on cell D16 (or 16D). When you click that cell, you’ll see the formula in the bar at the top of the sheet. We’ve set the default interest rate at 10% (or 0.1 as written in the formula). All you have to do is take the interest rate you wrote in cell D2, convert it to a decimal, and update the formula.

Example: Let’s say you have a 5% interest rate (APR) on your credit card. You’d enter 5.00% in cell D2 and in the formula in D16 you’d change 0.1 to 0.05.

Example #2: If you have a 24% interest rate (APR) you’d enter 24.00% in D2 and in the formula in D16 change 0.1 to 0.24.

Repeat this process for all cells in the “Balance Plus Interest” column where a formula exists (when you click the cell).

Step #5 to using the Debt Sucks Spreadsheet: Make your monthly payments and update the sheet!

Now that you have the Debt Sucks Spreadsheet setup with all your debts, your total starting balances, your interest rates, your estimated amount paid, you can start making monthly payments and denoting them in this sheet.

Don’t get discouraged if you can’t meet the goal you set for your monthly payments. Stick with paying down your debt and use this sheet to your advantage!

STEP #8: GET A DEBT ACCOUNTABILITY PARTNER

Accountability Will Help You Pay Debt Off Faster

You know what sucks about debt? Talking about it often. But you know what helps get rid of debt? Talking about it often.

Finding a financial accountability partner is key

If you have a spouse or significant other, I highly recommend this being your financial accountability partner. Conversations about money SHOULD be had in a relationship. Money is evil. It causes so many problems when not discussed often.

Debt isn’t fun and neither is getting out of it. Don’t do it alone!

But if you don’t have a spouse or significant other, you’ll want to get some financial accountability from another source. Here are a couple of recommendations:

Online or local groups: Are you in any Facebook Groups or do you attend any local meetups? Could you ask around and see if anyone wants to team up on attacking debt together?

Financial advisors: I always thought of financial advisors as crusty old men who wore those bright green visors you see in paintings that usually involve games of poker. Maybe there would be cigars involved, but most certainly, being $124,000 in debt didn’t qualify to talk to financial advisors. Then we were proven wrong. We were introduced to our financial advisors through a friend and have been using them since 2013. I’ll also mention that you don’t have to be wealthy, rich, or even making much money to have financial advisors. We had none of those things when we started our relationship with the financial guys we use.

Ask your friends: It may sound crazy, but given the stats I shared earlier about the average debt in the US, you are very likely to have a friend who is in a similar debt position as you. Don’t be ashamed to ask. Heck, forward them this article and have that be the way you broach the subject.

No matter who you team up with, finding a financial accountability partner is hugely beneficial. It removes all the pressure from your shoulders and allows you to have someone to commiserate with. Debt isn’t fun and neither is getting out of it. Don’t do it alone!

Weekly budget meetings will make all the difference

I may sound like a broken record, but our weekly budget meetings were the turning point in our debt story.

I give my wife a lot of credit (money pun!), she was the catalyst for starting our weekly budget meetings. At first, I hated these meetings. It sucked to confront the debt we had, most of which was caused by me and my poor business decisions. But as we started to talk each week about our debt and how we were working through paying it off, it became a much easier topic to discuss. The shame and embarrassment started to melt away.

It’s not an exaggeration to say that since 2013 my wife and I have had over 250 conversations about our finances.

When you have 250+ conversations about anything, progress is bound to happen! Sure, some weeks our budget meetings are short and sweet. We download our data. We review our spending. We update our budgets. We’re on our merry way. But every few weeks it’s a much longer, and sometimes difficult conversation. Those tougher meetings are that much easier with all the boring meetings sprinkled in between.

We can clearly remember being blindsided by random bills, business expenses, or even income before these weekly budget meetings. Now, we feel completely in control of the flow of money coming in and out of our accounts. It feels really effing great.

DEBT CONCLUSION

Be Ready To Adapt, Change, And Iterate On Your Debt Payoff Plan

When we created our first debt payoff plan I was hell-bent on paying off all $124,000 of our debt in 12 months. Well, things didn’t go according to plan. We didn’t make as much money as we’d hoped and we had a few unexpected expenses pop up. But just because we didn’t stick to our first debt payoff plan, doesn’t mean we gave up.

We were able to pay down $60,000 of our debt in the first 12 months of our debt payoff plan. And, a whopping $25,000 of that money came directly from doing our Expenses Tracking and Categorization exercise (and then setting budgets, making sacrifices, and making those tough phone calls). So, $25,000 of our first year’s debt payoff came directly out of money we already had and otherwise would have wasted!

Week after week my wife Caroline and I would sit down, go over our finances, make our monthly debt payments, and update our Debt Sucks Spreadsheet. It took just under two years, but we finally reached debt freedom.

Paying off our final credit card

On June 14, 2016, we jumped over that final debt-filled barrel and kicked Donkey Kong right in his credit-card-loving face.

I simply can’t type enough words to explain how great it feels to be debt free. That $124,094 used to make us feel ashamed and embarrassed, but now all we feel is pride.

Our very last credit card to pay off was carrying a balance of $9,639. When we paid it, we immediately grabbed a phone and took a selfie (which, obviously, needed emojis added to it).

Being 100% debt-free is a feeling like I’ve never felt before. It feels like so much more is possible in life. It feels like we’re in control of the decisions we make. It feels like we’re breathing some really sweet, sweet oxygen these days.

If you’re currently in what feels like insurmountable debt, you can get out.

There is no perfect debt payoff plan. There is only the perfect plan you can create for your situation and your life.

Money is a deep, emotional subject for a lot of people and just talking about it can bring up a lot of negative emotions: guilt, shame, scarcity. But we promise the moment you acknowledge the barrel-throwing monkey in the room and make a plan to rescue your financial princess, things will start to change. They did for us.

Remember: It’s not going to happen overnight, and it’s not going to be easy. Short-term pain for long-term gain.