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How to Get Out of Debt and Grow Rich

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I was in your shoes. I was in debt to a tune of $20,000, twice, and both times I have gotten out of it and I am now in a position to make money with my money, just like the rich do. I desperately want you to do the same.

The Seven Steps to Becoming Wealthy

When I was 24 years old, I had $20,000 in student loans to pay off. Cash flow was tight and it didn’t seem like I had much hope of paying it off quickly, and then I received Dave Ramsey’s DVD series. To be honest, I was never a big Dave Ramsey fan. He always seemed to state the obvious and didn’t have anything original to say. However, stating the obvious was exactly what I needed, and maybe it’s what you need as well. Here are Dave’s 7 steps to get out of debt:

  1. Build up a $1,000 emergency fund
  2. Pay off all debt using the debt snowball
  3. Save up 3 to 6 months of expenses in savings
  4. Invest 15% of household income into Roth IRAs and pre-tax retirement
  5. Start college fund for children
  6. Pay off home early
  7. Build wealth and give!

My Experiences in this 7 Step Plan

The most difficult steps in this plan are steps 1 and 2. If you don’t have that much money left over at the end of the month, it can seem like FOREVER before you save up that $1,000! And, just when you think like you’re going to see that comma in your bank account, your vehicle breaks down or your kid breaks their arm. It can absolutely happen, but I know you can do it!

LAMFMany times, in order to get that $1,000 built up, you will first have to sell some things that you might not need or use that much. This could be a snow blower, a video game system, or patio furniture. These things I just listed won’t necessarily be easy to do without, but they aren’t necessities. You CAN live without them. Beyond the selling of goods, you might have to increase your income. To do this, many will have to work a part-time job. Personally, I started this website, which definitely took some time, but once it got rolling it helped drive down my debt considerably.

Step number three is extremely easy if you reduce your expenses to a minimum. My monthly expenses consist of my mortgage, car insurance, gas, food, utilities, and my phone bill. That’s it. If I had to, I could live on less than $1,700 per month. That means I really only need to have about $5,000 in my bank account for 3 months worth of expenses.

Dave suggests that you put 15% of your money into Roth IRAs, which is good for the moment, but when you get up to step number 7, you’d better looking for more investments than just the market. I plan on diversifying my investments with real estate – specifically, multiplexes (and I may even sell my house and live in one of the units). Beyond this, I will most likely start other businesses of my own such as a car wash or an online store. The possibilities really are endless.

Step #6

Let me tell you, step number 6 sucks… My house only cost me $75,000 and I have about $55,000 left on the mortgage. Much of my earnings are going toward this loan, but it feels like it is taking forever! I can’t imagine having a $200,000 loan right now – it would drive me nuts because that number is so hard to move!

This may not be Dave Ramsey approved, but I am taking a slightly different approach with my house payoff. Rather than putting all of my extra funds toward the loan each month, I am holding onto some of my cash and trying to multiply it by the end of the year. One of my recent methods is to buy a truck for cheap, fix it up, and sell it for much more than I paid for it (Article: Let the Car Flipping Begin). Hopefully this works like I think it should. I just want to get my house paid for as fast as I can so I can start building wealth. Heck, without my house payment, I could live on $1,000 a month!

What step are you on? Have you gotten frustrated with your progress like I have?

Get Out of Debt Money

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

11 Comments

  1. I’m currently debt free, but wished I read the book years ago, when I still had my car payments. I am now saving money and trying to optimize our budget more.

    • Some may learn about debt freedom after others, but it’s all about what we do with the knowledge once we learn. Sounds like you are doing an excellent job dojo! Keep up the awesome work.

  2. We’re still on step #2. With $200k in student loan debt, it’s going to take a few years to pay it all off, so we jumped ahead to step #3 first. But we’re back at #2 and trying to get that monkey off our back!

    • That’s ok Rebecca. It’s good to be secure with a solid emergency fund. Are you producing any extra income to help you pay down your debt faster?

  3. Great post
    Those are some great steps to get out of debt. Building that emergency savings is what we did and helped us to move forward with our debt repayments.

    • Yep. If you don’t put any money aside, it’s really tough to get traction with your debt. It just seems like you pay off a little, then have to add it back when those emergencies come. Good job tackling your debt CBB. I would love to hear your story sometime. Maybe you could even do a guest post.

  4. Love your stuff, as usual. Yes, I’m looking at around $45K in credit card debt, but THANK GOD I’ve been making money finding freelance writing clients on Elance and my Kindle books are selling and I’m getting other writing monies that are helping pay off those debts.

    • Great job finding other sources of income online! When do you expect to pay off the $45k?

  5. I disagree with the steps. The first 3 are perfect, but everything after that should be done in parallel.

    The idea of delaying wealth building to pay off your home, save for your children, or invest in the stock market is ludicrous. Building your wealth is what will give you the leverage you need to accomplish those goals. Without the wealth, you miss out on the power of compound investing.

    • I would wait to invest until after my consumer debt was paid off. Then, once invested 15% consistently, I would pay down the house mortgage in parallel with the investments, which is just what these steps displays.


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