How to Get Ahead without Hitting the Lottery - picture of different denominations of money

How to Get Ahead without Hitting the Lottery

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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!!

-Anonymous

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?

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56 Comments

  1. I remember those crappy days all too well. Going to work all those hours knowing that it was going right back out as soon as the check was deposited. Truthfully, if my husband hadn’t been a saver, l would still be in the same boat that l was before we met. It was painful for years, but it had to be done. Now, thankfully, all that is behind us. Good luck to this poor soul. Following these steps will surely put them in a better place.

    1. Great tip! We do exercise videos too. It’s a great workout and I don’t have to leave. Plus I can do it at random times, like after the kids are in bed.

  2. Great strategy. For me, consistency is the key element. You need to remind yourself everyday to stick to it. It’s amazing how fast debt starts melting away once you put all your energy towards it. Good luck!

  3. The zero sum budget was key. We use YNAB but the general methodology is just so sound!! Oh, I need an extra $100 for X. Let’s find another category where we can find that money. It won’t just appear out of thin air!

  4. Aside from budgeting, I and my wife live below our means even though one of us got promoted or raise. We still stick to the frugal life we are used to. This works for us, which is the reason why we are debt free for a long time now.

  5. I think the big take home from this is to be proactive and take charge of your own destiny. When you are in debt it feels like debt owns you and you’ll never be free. But when you take steps like cutting cable and restaurant dinners, you are really taking back the reins of your financial life by deciding that debt isn’t going to own you any longer!!

    1. That is so true. You have to become the CEO of your own life in a way. Don’t let life happen to you – make things happen for you.

  6. Well when you have a debt, budget that works well is the best option, I am agree with you for unplanned expenses… so now I am doing a sort od shopping ban not deleting everything but planning almost all, for example hang out with friends and dinner out yes if we can go in a local that i can permit, luckily almost all my friends are in my financial situation, we are low cost types but this doesn’t means a empty live because you can have rich life also living cheaply!!!

  7. We get sucked into believing so many things are necessities because most people have them. People don’t know how to go without cable or new cars, etc. If you want to be debt free without hitting the lottery, you have to be willing to be a little different. I’ve found that’s really hard for most people to grasp.

    1. Exactly. A lot of people think cable TV and car payments are a given, but they’re not. Nearly everything is optional if you want it to be.

  8. Tracking our spending was key for us in getting ahead. We immediately saw areas of spending that could be eliminated or that were over paying for. We were always saving money, but we were able to really vamp it up after this.

    1. Yes, exactly. It’s easy to waste money each month if you’re not keeping a close eye on it. But tracking your spending – even for a while – forces you to come to terms with how you’re really spending your dollars.

  9. I received a similar email from a subscriber recently, too. My biggest piece of advice is to believe in yourself and keep going. Without that, you’ll be lost. For me, starting with $206k in student loan debt seemed impossible. Now, I’m down to $125k. Although I have a lot left, I’m doing everything I can to repay it as fast as I can.

  10. Just tracking your spending can be pretty powerful. I remember when we started to track our spending (not even budgeting yet) and we saved a ton of money. All of a sudden you become more mindful of every purchase. It\’s pretty cool.

  11. One of the key elements too is time. It takes time. You have to keep doing it over and over and over. There’s no easy quick fix. It’s not like an extreme diet but rather a slow and steady lifestyle change.

  12. Tracking our spending was life-changing for us. We didn’t have any significant debt (aside from a mortgage), but we were mostly just spinning our wheels in terms of savings. We never spent more than we made; but often times, we spent almost just as much. Also, there is a considerable amount of stamina and perseverance required that really flies in the face of society’s “instant gratification” mentality.

    1. Great points! It takes stamina and dedication for sure. I think that’s what turns people off sometimes – finding out that their debt payoff timeline will take several years.

  13. This is great – it really makes the debt-payoff process sound quite simply (if not still slightly painful). Congrats on paying off all of your debt!

    1. Ha! Thanks! It’s been many years but I can still look back and appreciate what we’ve been through.

  14. I remember the feeling all too well of thinking I’d never get ahead. I followed much of the same you described here and just continued to put one foot in front of the other until that built momentum. It wasn’t always easy, but having a plan helped keep me on path. One thing I did was set myself small goals to reach. That helped motivate me to find ways to cut/earn more as I’d want to hit the next goal.

  15. Kudos to the reader for reaching out! The one thing that I find frustrating as a blogger is not knowing whether there are additional topics that I’m not addressing or that there are questions readers have that I am not aware of. I love posts like this where it’s more focused on practical advice. Once you are committed to getting out of debt and getting into a better financial situation it becomes much easier to improve your situation because you are willing to take the action steps to actually DO IT.

  16. The formula is relatively simple but I think as humans our emotions often get in the way. Same is true with the fact that we have a very overweight population. If everyone just “ate right and exercised…” but what you said about sums it up.

  17. Thanks for sharing your story, Holly! It’s very heartening to read the testimonials of others who have been able to make it work and get the debt paid off. My husband and I are in the throes of working our tails off to pay off debt. It’s hard work, but it will definitely be worth it in the end.

  18. Oh yes, all those things! And, I have to make it a priority, otherwise I slid back into old habits!

  19. Shirria @GDTH says:

    The hardest part of getting out of debt for me is tracking my spending and not always having to purchase something (toilet paper, new notebooks, a stove, tire, something) . Since I don’t currently have an emergency fund, I fall victim to relying on credit. Although, I’ve made small progress paying off small department store credit cards, I’ll have a long way to go.

  20. Being in substantial debt can make you feel helpless. It’s hard to start making progress, but once you see the debts begin to shrink it’s incredibly rewarding. I’ve been debt free (with the exception of our mortgage) for a few years now and it feels amazing.

  21. I used to live like this and it sucked. I don’t know what this person does for a living, but it’s also smart to look at your own earning potential. Maybe it’s a side job, and all the income goes towards debt or perhaps it’s changing jobs. I busted my butt and now gross more than double what I earned 4 or 5 years ago. Holly, you guys have done the same, which is really admirable because you did it as entrepreneurs!

    Personally, my tactic with debts (student loan car loan, home remodel loan) is to use one check a month to put towards principal on debt. I get paid twice a month instead of bi-weekly, which makes budgeting for this so much easier. I just bought this house and I got it for a steal because it needed cosmetic updates. I’m being reasonable and staying within what the neighborhood can handle investment wise and I got a roommate whose $800 rent goes straight towards those costs. She also means I don’t have to pay a dog sitter when I travel anymore and that is a huge savings! Also – no fast food, restaurants when I’m not on company travel, buying things on sale that aren’t actually needed

    1. Nice job on all your savings! We just got a cat and that means I am now paying someone $15 per day to watch her when we travel. Ugh. When she’s little older, she can stay by herself for a few days… Right now she is a tiny little furball.

      1. Yeah the pet sitting is a drag! I paid $660 last month for the dogs in just over night visits for work travel and discovered a little footnote in my company’s travel policy that says I can be reimbursed for that. I asked today. Fingers crossed!

      2. Wow! $15. a day for kitty sitting. I look after a neighbor’s 2 kitties when she goes away and she only gives me $40. for 5-7 days. In all fairness, she did give me a gift of 3 very nice cat related bracelets along with the $40. when she came back from her most recent trip but I would rather have a little more money because I don’t wear bracelets. I don’t set the amount of money, I have just left it up to her to give me what she wants to. I am not running a business just kitty sitting as more of a favor because I am a cat person.

        1. My neighbor’s teenager watches her for $15 per day. If you check Rover.com in your area, you can see what others are charging. Personally, I don’t think $40 for a week is nearly enough – especially for 2 cats!

  22. I don’t think anyone can get far financially without a budget of some sort. That’s first and foremost. Personally, I’ve been working on a combination of increasing my income and decreasing my expenses along with trying to stay motivated during this long and dreary debt repayment journey. So far so good.

  23. Couldn’t agree more about tracking spending. That was life changing for us too. Once we learned that it was a money management problem and not an income problem (because we went over a year’s worth of credit card/bank statements and saw the waste first-hand) we knew we had a choice, and that changed everything.

  24. Love that the reader reached out to you. She is in the position that so many people are in. They are stuck, struggling to live paycheck-to-paycheck , and don’t know how to break the cycle. I agree that it begins with tracking your spending. I have had many people tell me that they know where their money goes and it’s an exercise they don’t need to do. They have subsequently apologized afterwards because they were wrong. They spend a lot more mindlessly than they realized, which I think everyone does and why it’s so important to actually see where your money goes. And how those little mindless expenses add up quickly.

  25. I like this simple advice because, as you said, it isn’t always easy to earn more money. And without the discipline to spend that money wisely, that might not help. We have used a similar approach to pay off our student loans before having children, and now have only a couple years remaining on our mortgage. We do a yearly budget and track monthly, but rather than budgeting monthly we just try to spend as little as possible. This approach seems to work well for us, but I think it depends on your personality and habits.

  26. We don’t have a strict budget but rather a money monitoring system. If you REALLY want to get out of debt you have to budget/monitor your money to start. There is simply no way around this! then make cuts and possible earn more money. Both of which we’ve done. We’re set to pay off almost 25k this year alone.

  27. All about having a plan for you money. No matter what way, system or app you use as long as you are being intentional with your money you can be successful.

  28. olivia, frugal bohemian says:

    Some of you mentioned this, it’s not just tracking spending, but earning enough money to pay off debt. We’ve been in a place where income was not sufficient to make progress, no matter how far back we cut. Then it is a matter of treading water for a time and plodding, steady, very slow progress when opportunities come. When you’re really strapped you learn life skills that make saving possible when circumstances ease up. The trick is not to get discouraged, but to stay the course.

  29. You have got to start somewhere when battling debt and trying to get ahead. The e-mailer is at least exhibiting a desire to change his/her life for the better. That’s a good first step. Take that desire and combine with the steps discussed in the article and good things will happen.

  30. I think the biggest thing to remember is that financial changes, like physical changes never happy overnight and never happen without working on them. You can’t expect to have your situation change if you keep doing the same things you have always done. You and Greg are great examples of the change that’s possible if you make changes in what you’re doing.

  31. Love this! Our budget helps keep us in line. It’s nice to know where our money is going and what we need to work on.

  32. Great advice! These steps are so easy to follow, but many people are just too overwhelmed to even start. I did the same thing as you to pay off my loans. I cut out everything that wasn’t important and focused solely on putting as much money as I could toward them.

  33. What terrifies me is that apparently some people count on winning the lottery as their retirement. Um… what?! A friend of a family friend had that mentality and was asked, “Well, what happens if you don’t win?” Her response: “I just can’t think about that right now.”

    Eesh.

    I remember the days of struggling. I think it can be difficult depending on your salary and health. If even one of those is a problem, well… you’ll still make progress (most months), but it’ll be incremental compared to others. Which can be pretty disheartening. Take it from someone who had to pay off debt with two sick people living on unemployment and disability. Our rent and his high-risk insurance were more than a third of our budget! So there were a lot of two-steps-forward-one-and-a-half-steps-back kind of months.

  34. I have just started using the “zero sum” budget method. I have to say it is changing my life for sure. I don’t feel as if we live outside our means or that we are struggling to stay afloat, but I have realized that I can save quite a bit more money than I have been just by cutting back in a couple areas! So thank you for your advice!

  35. I admit I did not read *all* of the comments, but the game-changer for us was learning how to set aside a fixed amount of money each month for irregular expenses, like taxes, homeowner’s & auto insurance that only come around 1-2 times a year. Those used to kill us from a budget perspective. We finally figured out to add all premiums/taxes for an entire year and document the month they needed to be paid. Then we took the entire amount and divided it by 12 to figure out how much we should allocate each month, then we set up automatic transfers to an *entirely different* bank/account that we use to pay those bills. We had to “seed” it a little bit to get started, but this helped tremendously. It was much easier to ignore/not spend that large chunk of money “just sitting there” when you a) did not see it every day, and b) knew ahead of time that a large chunk of it would have to go toward an insurance or tax bill in a couple of weeks. On the rare occasions when we have house, life, umbrella (yes, we need it), AND property and local taxes all due in the same month, it is very nice to know the money is already there.

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