If you’ve ever been in debt, you know how crappy and miserable it can make you feel. Here’s an email I just received that puts the ugly, sinking feeling of being in debt into perspective:

In an article you wrote for ‘Get Rich Slowly’ you stated, “Over the past two years, we have worked extremely hard and have paid off all of our consumer debts and student loans.” One question….. HOW!! I have never posted anywhere on anything before, and my apologies for hijacking this link, but I am at my wit’s end with living paycheck to paycheck!! I can’t take it anymore….HELP!! Honestly, I don’t want to be a millionaire, however, I would simply like to live comfortably, and not have to worry about how I am going to pay all the bills next month. Right now…. life sucks…. and I could use some intervention!!


Getting Ahead without Hitting the Lottery

Even though we have been debt-free aside from a small mortgage for many years now, I still remember what it feels like. I remember how frustrating it was to work a full-time job but never really get ahead – and how confusing it was to try to figure out where our money was going.

Fortunately, we changed all of that when we became debt-free several years ago. Here’s how we dug our way out:

We started tracking our spending.

After living the paycheck-to-paycheck lifestyle for the first few years of our marriage, we knew we had to make a change. Once we committed to the decision, one of the most important things we ever did was track our spending for a few months to see where our money was going. Not only did I track our ongoing spending, but I also got out our bank and credit card statements from the previous two months. What we found was absolutely amazing. Not only were we spending more than $900 per month on food for two adults and a baby, but we were also wasting a ton of money on entertainment and mindless unplanned purchases.

We cut out all the “extras” in our lives.

Once we discovered how wasteful our spending had been previously, we knew we had to find a way to spend less money. For us, that meant cutting out things like cable television, restaurant dinners, magazine subscriptions, and frivolous purchases. It also meant being a lot more mindful about where and when we spent money, and how much.

We began using a zero-sum budget.

After we cut out the extras, we knew we had to create a spending plan we could live with. After some trial and error, we stumbled across a budgeting method called “zero-sum budgeting” which lets you base your spending on last month’s income. Since our incomes fluctuated at our old jobs, this budgeting method was perfect for us. On the 1st of every month, I would simply create a budget based on our last month’s income that included regular bills plus “budgeting buckets” or estimates for categories that were variable, such as groceries, utilities, and household goods.

We took the extra money we freed up and paid off debt.

Since cutting out the extras in our lives freed up some cash each month, we used that money to pay off debts. Each month, when I created our zero-sum budget, I would see how much “extra” money we had after paying our regular bills and estimates expenses and add a line item for debt repayment in our budget. We paid down debts with a higher interest rate first which, for us, was a credit card bill and student loans. After that, we put the extra money we freed up towards car loans and everything else.

We kept going.

Even though it got old after a while, we resisted the urge to fall back into old habits and kept going. And eventually, after paying all of our extra money towards our car loans and other debts, there was nothing left to pay off. At that point, we started funneling our extra money towards much more exciting goals – things like college savings, our house payment, investments, retirement savings, and even fun stuff like travel. And now, after many years, we are making huge financial headway and saving a large percentage of our incomes – and all without winning the lottery.

The Bottom Line

If you want to free up the cash you need to get out of debt, you either have to earn more money or cut your expenses. Since it isn’t always possible to earn more money immediately, you need to start by cutting your expenses down to the bare bones. After that, you need to develop the courage and discipline to use the “found money” to pay down your debts instead of spending it on more stuff. That’s it.

If you follow our 5 core principles, a debt-free life is within your reach, but you have to take actionable steps to seize it. And the longer you wait, the more difficult your climb will be.

How are you dealing with your debts? Do you use a budget?