By: Jeena Cho

Frequently, when I speak with clients about money and debt issues, they ask me about ways to get out of debt or living debt free quickly. I know it’s easy to think there is some “secret” or “trick” - after all, if you watch any amount of late night TV or listen to the radio, it’s filled with “get rich quick” or “get out of debt in a week” scams.

Here’s all that you need to know about getting out of debt - spend less than you earn. I know - you’re probably rolling your eyes and saying “I learned that in first grade.” Here’s the second part of the rule - the difference between what you earn and spend must be enough to pay down the principal amount of your debt (not just interest). So, the equation looks like this:

DEBT FREE = (income - spending) > minimum principal payment *

*Admittedly, I am not very good at math so if you can come up with a better formula, please let me know.

Now comes the hard part. If your disposable income (money left over after subtracting expenses from income) isn’t enough to pay off your debt, it’s time to seriously consider your spending. There are lots of great tips (check out Get Rich Slowly) out there about spending less but the most important part of spending less and getting out of debt is having the right mindset.

When you’ve been living on borrowed money and easy credit for years, it’s tough to cut back. It may feel as though you are depriving yourself or your family. For example, I was recently reviewing a client’s budget and they were spending $180/mo on cable. When I suggested they eliminate or opt for a cheaper alternative such as Netflix, she bulked and said “well, my kinds need cable.” Actually, they don’t need cable. Food, water, shelter - yes. Cable - no. Same goes for the spending money on pet care, or beauty products.

I’m not passing judgement here. Obviously, everyone has different needs. What I am saying is if you want to get out of debt (or start saving), you have to make it a habit. Like anything (exercise, quitting smoking, drinking, etc.), it’s always tough in the beginning but it will get easier. It’s also about prioritizing and figuring out what you really need & want then cutting out the rest.

As J.D. Roth of Get Rich Slowly says:

You can have anything you want — but you can’t have everything you want.

Image credit: hockadilly

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