When it comes to money, there are the haves, the have-nots and those who haven’t paid for what they have. Consider the following:

  • A couple with an annual income of $35,000 amassed over $42,000 in credit card debt.
  • A widow with a $56,000 income racked up $36,000 on credit cards. Her $900 monthly payments were slightly less than her $922 a month mortgage.
  • A former professional athlete filed bankruptcy claiming $144,000 in assets and $1.3 million in debts.

These are just three of the countless North American households struggling with debt. For many families, debt is like falling into a deep, dark hole – it’s easy to get in, but you can’t see how to get out. Yet it is possible to get out of debt – if you are willing to change your lifestyle and have the determination and discipline to stick to a plan and make tough choices.

Grab a shovel

Before you start, set your heart and mind on taking the next three to five years to become debt-free. Freedom from debt is not a New Year’s resolution; it is a new life resolution. You must commit to make this the most important goal for the next several years.

Then, change your lifestyle. The easiest way out of debt is to spend less. For the next 30 days, write down the amount of each cheque, credit card swipe and cash expenditure. Be honest. After 30 days, review how you spend and brainstorm how to cut expenses.

Aim to create a spending plan that uses no more than 70 per cent of your take-home pay for living expenses, including minimum payments on all debts. Then promise to stop using your credit cards. Tell a friend or family member, and turn over your cards for safe keeping. Living on 70 per cent of your income may require tough choices like moving to cheaper housing.


Living on less than what you earn will provide you with the essential tool for climbing out of debt: financial surplus. Save some of the surplus to build an emergency fund that can be used instead of credit to pay for unexpected expenses. The rest of the surplus goes to debt reduction.

First, add the surplus funds to the minimum payment on your smallest loan balance. Don’t be afraid to start with what you have. Even $25 a month makes a difference. Pay off the lowest balance first, which will build confidence and encourage you to keep making progress.

Second, when the smallest balance is paid off, reward yourself (within your budget). Then take the amount you were using to eliminate the first debt and add that to the minimum payment on what is now the smallest outstanding balance. Repeat this process until your debts are cleared.

Watch for cave-ins

Be careful about considering a debt consolidation loan. Without a change in spending habits, most people who consolidate loans eventually wind up in deeper debt. And while about one in 50 households files for bankruptcy each year, consider this only as a last resort.

Most bankruptcies are avoidable by making tough lifestyle choices. Bankruptcy stays on your credit report for 10 years, making it difficult to re-establish your credit. Seek qualified financial and legal advice before taking this step.

Climb to freedom

Overcoming debt takes desire, determination and discipline. By doing nothing or not enough, you’ll only slip deeper into debt. Getting out of debt is the best thing you can do for your family.

Stay committed to spending less money than you earn, put your surplus toward paying your bills and stick to your plan. After a while, you’ll start to see the light as you climb out of the debt hole.

Ray Linder is CEO of Goodstewardship.com. He lives in northern Virginia with his wife and two daughters. 

© 2007 Focus on the Family. All rights reserved. International copyright secured. Used by permission.

If you liked this article and would like to go deeper, we have some helpful resources below.

Our recommended resources

Join our newsletter

Advice for every stage of life delivered straight to your inbox

View comments ()