Debt is a major concern to many people at the moment. I hear this every day in my work.

However, there are some simple steps you can take to reduce the debt burden in your life as quickly as possible and create a better life for you and your family; one where you have little or no money stress.

I've talked a lot about debt burden in the past and no doubt will do so again in the future.

Here's the reason why... if your Fairy Godmother came along, waved her magic wand and wiped away all of your debt, I'd just about guarantee that you would borrow more money at some time in the future.

And I'd be surprised if that didn't happen within a year or two.

We are all so used to having debt that if we had none, we'd start thinking that maybe just a small loan would be OK and that would allow us to do something sooner than if we saved up for it. Very few of us would never borrow money again.

While there is no debt pressure, we're comfortable with it and it seems okay. It's only when there is debt pressure that we want to get away from it!

The problem is, while debt can often be a good thing, many of us are in the wrong type of debt.

This creates all kinds of problems, such as:

  • Feeling overwhelmed and constantly stressed about money

  • Struggling to afford big financial decisions like buying a house or taking a family holiday

  • Feeling like you never have any money

  • Or even legal trouble

So, if you currently have debt stress, to avoid going back there in the future you need to set some clear personal ‘debt rules' before you start the process of getting out of your current debt, or you may end up right back where you started!

You need to consider questions like these...

  • Would you borrow to invest?

  • Would you borrow to buy a new car or boat or some other ‘toy'?

  • What does a sensible investment look like?

  • Is it okay to borrow for a car?

  • What about borrowing for toys?

  • What's the difference between good debt and bad debt?

Okay, let's get started!

How to Get Out of Debt: The Smart Way

Step 1

You need to decide what your rules will be and make sure you choose smarter rules than you have used in the past. It's quite likely that circumstances beyond your control contributed to your current position so now you've learned from those experiences you are smarter than before and can make smarter rules.

Here are some examples of rules and thoughts that will help you start shaping yours:

  • Never borrow for things you don't absolutely need.

    • You need a house (but not a mansion)

    • You need a car (but not a Rolls Royce)

    • You don't need a holiday that is paid for by debt

    • You don't need a techie gadget because your kids are nagging you or your friends have one.

  • If you just can't wait to purchase something you want that is not a need, save half of the purchase price before borrowing the other half. That way if the sky falls and you need to get out of debt in a hurry you can sell the item and clear the debt.

  • Never pay the recommended retail price for anything, and especially not for things you intend paying for with debt. You need to look for smarter ways to get what you want.

  • Always pay more than the minimum loan repayments so you can miss or reduce your repayments for a while in the future if you fall on hard times.

  • Change the way you think about possessions. They really are overrated! If you've ever had the experience of working out what to do with someone's possessions after they die you will know what I am talking about.

  • Use a broker rather than going directly to one lender and hoping to get the best deal. A broker will get you more options.

  • Make ‘looking for ways to earn more money' your hobby rather than being conned into thinking that you'll get more pleasure out of spending it. Is there some way you can generate extra income from your passions? It might not be obvious at first but if you keep looking for opportunities and work on developing skills you will find a niche.

    • If you love cars, can you make money taking photos or creating YouTube videos about cars?

    • If you love clothes can you make money designing them and selling ‘How To' videos online?

  • Always calculate the ongoing cost of ownership with every purchase you make. Even if you purchase something that has high ongoing costs without going into debt on the purchase, you may well end up in debt because of the repairs, maintenance and storage costs.

    • Don't fix the interest rate on a loan if there is a penalty for unlocking the rate and you're thinking of:

a. Selling your home
b. Refinancing with a different lender
c. Changing your life circumstances during that fixed period.

For example, it would be crazy to fix the interest rate on your mortgage if your home is for sale. You'll have to pay unlock fees!

  • Make sure you are really clear on the difference between Good Debt and Bad Debt before considering borrowing money:

    • Good Debt leads to more wealth

    • Bad Debt leads to less wealth

I'll be bold and say that again:



Step 2

So now you've seen my sample rules it's time to make your own. Think about what debt you would be prepared to take on when you have paid off your current loans and the reasons why and WRITE YOUR RULES DOWN.

Once you have them clearly defined, type up a nice neat copy and have it laminated and put it somewhere you will see it regularly.

I'd love to get some insight into what rules you chose. If you are happy to do so please enter some of yours into the Comments Box below this blog.

I'm looking forward to hearing about the rules you chose and why!

Start Planning

If financial security and getting out of debt is important to you I recommend you take the time to connect with a Spending Planner and find out how they can help you. Go to A Spending Planner will help you get serious about pushing your ‘financial future' to the next level.

Join the Team

By the way, if you already have a Spending Plan and your finances are ticking along quite nicely as a result, you may be interested in joining the Spending Planner team. If you would like to feel the satisfaction of helping other people turn their lives around and the thought of creating your own business in the process, you might want to consider becoming a Spending Planner too. Go to to find out more.