Transcription
Let me say something that might sound shocking. If you're in debt right now, it's possible you'll be in debt for the rest of your life. Not because you have to be, not because you even want to be, but because you don't know how to escape the cycle.
Right now, about 64 million Americans have debt in collections. That means non-stop calls from debt collectors, late fees stacking up, and the constant stress of knowing you're behind. But it doesn't have to be that way for you. That's why you're here. In this video, I'm walking you through the eight-step debt payoff system that actually works so you can get out of debt fast and stay out of it for the rest of your life. This is the system that will change everything. Let's get into it.
Step one, face the brutal truth about your debt. A lot of people go, "Yeah, I have some debt, but it's fine. I'm handling it. I'm making payments." If you were handling it, you probably wouldn't be watching this video. Pull up every single debt you have. Credit cards, student loans, medical bills, everything. I don't even care if it's a random $200 bill you owe your friend from three years ago. Write it down. Here's what you need: Total debt amount, interest rates (this is the silent killer), and minimum payments.
For example, James gathers everything we just covered. Here's what that would look like for him. Notice he's got his credit card, which has a really high interest rate, another credit card which has an even higher interest rate, and a car loan at 9%. And notice those minimum payments. They're quite revealing.
Now, most people truly avoid this step because it's painful. Who wants to go digging around for how much we owe? But ignoring your debt does not make it go away. It's like ignoring a gas leak in your house and going, "Well, I don't smell it all the time." All right. Well, it doesn't mean it's not going to blow up.
And here's one more thing. Add your credit report to the mix. It's a very high chance you may have forgotten about one piece of debt. Go to annualcreditreport.com and pull your full report. You might find an old debt that you don't even remember or a mistake.
Now, if you've ever looked at your credit card statement and thought, "How the hell did this get so high?" You're in the right place. I'm not here to shame you. I'm here to help you pay it off faster, smarter, and without restricting everything you love. So, hit subscribe, turn on notifications, and let's make sure the only thing you are moving forward with is confidence, not debt. All right, you have your full list of debts and interest rates and minimum balances. Let's move on to the next step.
Step two, choose your attack plan. Snowball versus avalanche. Now that we know how much debt we're dealing with, it's time to attack it, to go on offense. There are two proven ways to do this. First, the debt snowball method. This is where you pay off the smallest balances first. You get some quick wins. You feel good about yourself. It gives you the motivation to keep going. The second approach is the debt avalanche method. This is where you focus on paying off the debt with the highest interest rate first. This approach saves you the most money in the long run.
Let me be real with you. If you're more numbers-oriented, the avalanche method is mathematically the best choice. You'll pay less interest overall, and that's a win. But if you need small wins to keep yourself motivated, go with the snowball method. I really don't care which one you choose. The most important thing is you pick one and you commit. For example, James chooses the snowball method to keep himself motivated, and he attacks his smallest debt, which is his Chase credit card first.
Bonus strategy: The five-minute call that can save you thousands. This is a strategy most people don't even realize they can use. Call up your credit card company and ask them to lower your APR. Here are the exact words to use: "Hi, I'm going to be paying off my credit card debt more aggressively beginning next week, and I'd like for you to lower my interest rate." "Uh, why?" "I've decided to be more aggressive about paying off my debt. Other cards are offering me rates at half of what you're offering. Can you lower my rate by 50% or only 40%? I've been a customer for 8 years and I would prefer not to switch my balance over to a low-interest card. Can you match the other card rates or can you go lower?"
Now listen, it doesn't work every time, but when it does, you can often save thousands of dollars in interest alone. So, make the call. That leaves more money to go towards your actual debt so you can pay it off even faster.
Step three, the lazy genius way to pay off debt. The biggest mistake people make when trying to pay off their debt is relying on willpower. Guys, willpower is garbage. It's like depending on motivation to go to the gym. That lasts about 3 days, and then you're right back sitting on your couch watching Netflix for 4 hours, salt and vinegar chip crumbs all over you. Instead of relying on willpower, automate your debt payments so you don't even have to think about them. Here's how.
First, set up minimum payments on all your debts so you won't get hit with any late fees. Next, automatically send any extra cash to your highest priority debt using the avalanche or snowball method, your choice. And most importantly, make sure to time your automatic payments right after payday, so you never even see that money sitting in your account, which tempts you to spend it.
Now, once this is set up, your debt shrinks every single month without you stressing out over it or creating any work for you. Quick little bonus: You can use our new debt payoff calculator to see the exact time when you will be debt-free. Take a look.
Step four, free up cash without living like a hermit. You guys, paying off your debt doesn't mean you have to give up everything you love. People think it means no dinners out, no vacation. Well, okay. You probably shouldn't be taking $5,000 vacations if you have $20k of credit card debt. Let's be honest. But you don't have to sit at home with the lights off eating reheated ramen noodles just to pay off your debt. That's not how we do things here, okay? I believe in living a rich life today and a rich life tomorrow, even if you have debt. So, let's find some extra cash you won't even miss.
Start with these quick wins: Unused subscriptions. If you're still paying for subscriptions but not actually using those services or they're just outdated, cancel them. Overpriced insurance. Call your providers and say, "Hey, I'm shopping around for better rates. What can you do for me?" And finally, impulse spending. Take an honest look at your spending, especially on eating out and delivery. Figure out what you need to do to pre-plan. That can often save you hundreds of dollars per month.
In my experience talking to tons of people, I found that most people can free up at least $500 a month by methodically going through those steps. And when you free that money up, whether it's $100, $500, $1,000, you can take that money and redirect it to getting debt-free even faster. Now, let's move on to step five.
Unlock the cheat code to pay off debt faster. Okay, now you're paying off debt methodically. But if you want to speed things up even faster, don't only focus on cutting back. Find creative ways to earn more. Even an extra $200, $500, $1,000 a month can make a huge difference. That can often cut off years of debt payments. Here's how to bring in extra cash.
Freelancing. Take the expertise you already have and sell it. For example, writing, graphic design, tutoring, project management. There's so many ways you can start to earn more. Side gigs. Ride-share driving, food delivery, pet sitting. These are just three of a million ideas. Sell things you don't use. Sometimes people show me videos of their closet and I'm like, "What the?" Taking the things in your closet, the things in your storage. In fact, if you have storage right there, that's a great way to get rid of it and cut a monthly fee. Turn hobbies into cash. Cooking, photography, even fitness coaching can become viable income streams. Check out my earn1K program in the description below to see how I can help you start to earn more money. And ask for a raise. If you've been delivering real value at work, learn the skills to negotiate your salary.
When you increase your income, stay laser-focused on paying off your debt. So, take that extra cash and take at least the majority of it and put it towards paying that debt off even faster. That is the best way to get debt-free and to live an even richer life tomorrow.
Step six, turn your debt payoff into a game. Debt payoff is boring if you don't track your wins. Now, I don't mind boring. I like eating the same meal pretty much every day. I like seeing my investments grow slowly over time. But I've learned a lot of people hate boring. They want to gamify everything. They want everything to have flashing lights. Sometimes they hand me their phone to take photos. I go, "What? You have this many notifications? What's wrong with you?" Whatever. It's your life, not mine. But for those of you who are allergic to boring, I get it. If something is boring, you might quit.
The secret is making your progress visible and exciting. A weekly check-in, not just monthly, keeps you engaged and helps you catch unnecessary expenses before they drain your spending. Now, for example, these little recurring small charges can often add up over time when you are making an aggressive debt payoff plan. Subscriptions, convenience fees, impulse purchases can sneak in. For example, you might be paying for three different streaming services but only really watching one. A gym membership you actually haven't used in two and a half months, or random service fees that you didn't even authorize.
Now, if you're only checking your statements once a month during your aggressive debt payoff plan, it's going to be hard to connect those fees with what's going on with your debt. Those fees have already been levied. But if you do a quick 5-minute review every week during this aggressive sprint, you can stop those money leaks. Here's your weekly routine: One, you open up your debt tracking spreadsheet, or you can use YNAB, Credit Karma, or another tracker. Two, you look at how much your debt has dropped. Even if it's small, you give yourself a big pat on the back. That's progress. Three, you hunt down sneaky charges. Find those little expenses that add up and cut them. And then four, make this a game that you celebrate. Each week, at the end of the week, take a look and really realize how far you've come. That is impressive.
Tracking your progress weekly is not just about accountability. It's also about momentum. And momentum is what separates the people who actually get out of debt from those who learn to live with it forever. So set a reminder in your phone every Sunday. 5 minutes, no excuses.
Step seven, avoid debt traps that keep you stuck. You're making progress, you're paying off debt, you're feeling better, but then boom, you're right back where you started. Why? Because a lot of people fall into the same traps over and over. And you know what I'm talking about if you've ever said something like, "It feels like I take one step forward and two steps back." Well, let's make sure you don't. Here's what will keep you in debt forever and how to avoid it.
Looking for quick fixes like balance transfers. These sound tempting: low APRs, a temporary break from interest, and a way to escape high-interest debt. Here's the reality: These credit card companies are way smarter than you or I am. They lure you in with 0% APR for 12 months, but the moment you miss a payment or don't pay off the balance in full, boom, you're hit with a retroactive interest rate that might be even worse than what you started with. Now you're stuck in the same cycle, just with a different company. Balance transfers, in my opinion, can work, but they are often a gimmick.
Keeping the same old spending habits. Paying off debt is not just about throwing money at your balance. It's actually about changing your relationship with money. So, here's the brutal truth: If you're trying to pay off debt, but you're still swiping your credit card for impulse buys, you're self-sabotaging. And a lot of the ways people tell themselves this is they go, "Well, it's already so big, it's not going to make that much of a difference anyway." Imagine you're trying to run a marathon while eating a triple cheeseburger between each mile. Not only are you slowing yourself down, you're actively making things worse. In other words, you can't dig yourself out of a hole while you're making it deeper. So, if you are serious about paying off credit cards, put those credit cards away and get aggressive with your debt payoff.
Falling for debt consolidation scams. Yes, there are real debt relief options out there. And there are a lot of scams that will screw you over even more. A lot of these debt relief companies promise to simplify your payments or settle your debt for pennies on the dollar. Some of them just charge you hidden fees and drag out your payments longer. And some of them do what you yourself could do: Put you on a spending plan, have you call up the companies and negotiate with them. You could do all of this yourself. Really, a lot of people are simply looking to delegate the problem to someone else. But if you want to pay your debt off, you have to take responsibility yourself. Here are some red flags to watch out for: High upfront fees with these debt relief companies before they even help you, guarantees that sound too good to be true, and advice to stop making payments on your current debt. A good guideline is if a company claims they can erase your debt overnight, run. You can work with a nonprofit credit counseling agency, not a for-profit debt relief company looking to squeeze you for more money.
Paying only the minimums. Well, banks love it when you do this because it means they get to collect more interest from you over decades. Let me show you how they trick you. Let's say you have $5,000 in debt on a credit card with a 27% APR. If you only make the minimum payments, you could be paying that off for almost 25 years. And over time, you'd pay more than triple what you originally borrowed. Meanwhile, the bank is sending you these credit limit increases and special offers to keep you hooked. Oh, you get 32 points per month. You can redeem it for a Marriott stay uh 300 years from now. Don't fall for it. Pay more than the minimum every single month. And if you can't, then you need to take a hard look at your current spending.
If you avoid these traps, you won't just get out of debt, you can stay out of it for good. Which brings me to step eight.
Step eight, never go back. How to stay debt-free for life. Okay, congratulations. You did it. You paid off your debt. You're ahead of most people. But now, let's look at the next challenge over the horizon. Getting out of debt is just the beginning. Staying out is the real win. A lot of people make that final payment, feel the relief, and then slide right back into old habits. Why? Because they didn't have the systems in place to stop that debt from creeping in. We don't want to be yo-yoing back and forth in and out of debt for our whole lives. That sucks. So, let's make sure that's not you.
Here are three simple strategies to stay debt-free for good:
Number one, use the envelope system to control your spending. If credit cards were your weakness, try switching to cash for a little while. It's kind of like using bumper lanes when you start bowling. Just get the habits right, and eventually, you can take it away. The envelope system is a powerful set of training wheels to build some discipline. Here's how it works: You set spending limits by category (groceries, dining, etc.). You put cash in labeled envelopes, and when it's gone, you're done spending. This forces you to live within your means. No surprises, no swipe-and-forget moments.
Number two, use credit cards only if you pay in full every month. Credit cards aren't evil. I have no problem with credit cards, per se. I use multiple credit cards. But here's a rule: If you carry a balance, stop using that. Period. Red alert. That is an emergency. Do you know how many people I talk to on my podcast where they have thousands of dollars in credit card debt every single month? I go, "Why are you paying that?" And they go, "Well, what about the points?" What about the points worth less than one penny, meanwhile, you're paying 27.99% interest? No. Who told you that? Americans hate to not optimize everything. Why don't you optimize your debt payoff instead of optimizing a stay at a two-star property 36 years from now?
Number three, build an emergency fund so you don't rely on credit. You know, a lot of people fall back into debt because they're not prepared. Something happens that they didn't expect: a flat tire, a medical bill, broken AC. That should not derail your finances, which is why I want you to start small by creating an emergency fund. Start with $50 a month, $100 a month. Get that number to $1,000. Aim for 3 to 6 months of fixed costs and store that money in a separate high-yield savings account. The easiest way to do this is to make it automatic. Set up an automatic transfer every payday. Even $25 a week adds up fast.
Remember, we're not relying on willpower. We are using systems to protect you from slipping back into debt. Do this, and you will never have to climb out of that hole again.
Now you know how to pay off your debt in six months. And what's the best way to stay out of debt? Make more money so that debt is not your primary problem. Go watch this video next on how to increase your income. Trust me, earning more is the kind of decision that will pay off huge for you.