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Pay Off Debt Systematically

Paying Off Debt Systematically

When I was younger I found myself with over $10,000 of credit card debt and getting further and further away from paying it off.  I was frustrated and thought I just needed to make more money and that I could pay it off later.  When I finally realized that I was going the wrong way, I developed a system to take control of my personal finances.  Years after paying it off, I read Total Money Makeover by Dave Ramsey and realized that he describes a very similar system that he encourages people to use to get out of debt.  

The first thing that I did was to create an excel spreadsheet for my checking account information.  I had the standard fields that a checkbook would have at the top (income, expenses, balance, etc.).  Then I added in columns for bills, charity, car, food, credit cards, savings, etc.  

I took my expenses and figured out what percentage of my after tax income I would need to designate in order to pay my bills and expenses every month.  Every dime I made then got divided up and put into each column.  I didn’t realize it, but what I was doing was creating a detailed and effective budgeting process.  Suddenly I could track everything that I spent money on.  I soon realized that there were numerous things that took up large amounts over the course of the month, even if they were only small purchases.  I was finally able to get control of my finances and understand where my money was going!

Then I had to change the system for buying things.  I had to stop putting everything on my credit cards and thinking that I will pay this off eventually.  The interest rates for credit cards are extreme and I was really just helping to make the credit card company rich at my expense.  I started to use my debit card for everything.  I would keep the receipts in my wallet and every few days add them to the spreadsheet.  It made it more difficult to make a small purchase because I knew that I would have to keep the receipt and add it in later.  Suddenly I was thinking about my purchases and not simply buying on impulse alone.

Once I got a handle on my income and expenses, I knew I had to tackle the debt.  I started to do everything I possibly could do to earn more and spend less.  It wasn’t easy.  I was called cheap by family and friends.  I missed out on fun nights out with friends.  I got rid of certain monthly expenses that I previously thought I had to have.  I even sold things around the house that I wasn’t using.  I took every extra dime I had for the month and put it towards my credit card debt.  I started with the lowest balance one first and paid the minimum on the others.  I started to get really excited as I moved closer and closer to being debt free.  

As soon as I paid off all of my debt, sudden expenses started to come up.  I did everything I could to manage those expenses without resorting to credit cards.  I built a safety net of funds.  I knew that I had to have a cushion because I can’t predict all of my expenses.  I started to value the comfort in knowing that I had money available if I had trouble.  In fact I started to value that even more than the things that could have bought.  The reduction in stress was worth a little sacrifice and the pride of knowing that I was able to climb my way out of mistakes that I had made was priceless.  

Regardless of your financial situation, knowledge of systems can help to improve your situation.  Paying of debt, investing, and building wealth all require thought-out systems.  Regardless of your strategy, make sure to research and understand what financial tools are available to you to achieve your goals.  


Understand that there are several authors that discuss ways to build wealth.  Some may say to build the safety net/emergency fund first before paying off credit cards and some may say to leverage your ability to make money through debt.  I am not here to tell you which methods are best for you; I only want to emphasize the power of having thought-out systems to achieve your personal financial goals.  

For more information on how to achieve your idea of financial success I suggest reading Robert Kiyosaki, Dave Ramsey, T. Harv Eker, Thomas Stanley, and any other author that gives insight into building wealth.  Just understand that each one has a different philosophy and your method may be a combination of several rather than blindly following one technique.  I personally have found that I followed Kiyosaki’s teachings for years with little success but I eventually felt more comfortable with Ramsey and Stanley’s works.  By taking their conservative approach, I was able to reach my goals faster with less risk.