How To Get Out of Debt

Note: When I refer to ‘debt’ in this article, I’m talking about debts outside of a mortgage.

People often ask me for investment ideas or stock tips, but when I dig a little deeper, I usually discover they’re still in debt.

The truth is, most Americans don’t have enough capital to make meaningful investments. This leads many to look for quick wins or risky gambles to fix their financial problems, but these rarely pay off.

This blog is all about investing, but it’s really meant for people who are already on solid financial ground. If you’re still in debt, chasing hot stocks or the next big investment isn’t the answer. Your focus needs to be on getting out of debt first.

From an interest rate perspective, paying off debt often provides a better return than investing. Historically, the stock market has averaged around 10% per year, but credit card interest rates can soar as high as 20% or more. There’s no investment strategy that can reliably offer a 20% return (if anyone tells you that they can generate 20%, run away as fast as possible). Even with lower interest rates, like 7%, paying off debt gives you a guaranteed 7% return, compared to a volatile and uncertain 10% from the market.

Additionally, the stock market’s future returns may be lower than the historical 10%. Since 2000, the compound annual growth rate (CAGR) has been just 7.6%, and with stretched valuations and slowing population growth, it's likely that future returns will align closer to that figure.

Moreover, many Americans have a half-assed approach to investing. They contribute just enough to their retirement accounts to get an employer match, typically around 3-6%, and then stop there. But to build real wealth, you need to go beyond that and start investing significant portions of your income. If a large part of your paycheck is going toward debt payments, that level of investing will never be possible. The first step is to focus on eliminating debt entirely, so you can free up the cash flow needed to invest in meaningful, wealth-building amounts.

Only by freeing up cash flow can you invest substantial amounts over time and build real wealth. If your income is tied up in payments or you’re dealing with poor spending habits, no investment strategy is going to save you. You need to address those foundational issues head-on.

That’s what this article is about: the first steps. How to get out of debt and build a strong financial foundation so that, when the time comes, you’ll be in a position to invest meaningfully.

When I read advice from personal finance gurus, it often feels like they’ve always had it all together. Take Mr. Money Mustache, for instance—someone I really admire. He had his financial life in order by the time he was 17. But for most of us, that’s just not the reality. It certainly wasn’t for me.

That’s why I wanted to share my own journey—how I overcame bad financial habits, learned from my mistakes, and what strategies helped me get out of debt. Hopefully, my experience will offer practical insights for those still working to get their finances on track.

My Backstory

In 2008, I found myself buried in debt.

I was 26, and the financial crisis was in full swing. Like many others, I worried about losing my job. I saw firsthand the toll that debt was taking on my coworkers. Some had bought expensive homes, taken out home equity loans during the housing bubble, and racked up credit card debt. On top of that, they had families and other major responsibilities. The stress they were under was palpable—while I was anxious about my own situation, they were terrified.

That fear drove me to make a commitment: I would get out of debt and avoid that kind of future. It wasn’t easy—my debts were almost as large as my income, and I had to take some extreme steps to climb out of the hole. It took a few years, but I made it.

I followed Dave Ramsey’s debt snowball method, which worked well for me.

Now, looking back on my experience, here’s the advice I’d give to anyone struggling with debt today:

• Visualize why you want to get out of debt.

You’ll only succeed if you're fully committed—getting out of debt can't be a half-hearted effort. If you’re deep in debt, this needs to become a primary focus of your time and energy. When the going gets tough (and it will), you need to have a clear vision of why you're doing this in the first place.

I made sacrifices constantly. I rented a cheap, cold, unfinished basement and lived on a bare-bones food budget. Saying "no" to fun became a habit. But I couldn’t have stuck to it without a clear picture of the life I wanted after the debt was gone.

So, let’s paint that picture for you.

In 1 to 3 years, you’ll receive a paycheck. But this time, instead of sending most of it off to soulless banks, it will be yours. Every dollar. You’ll have control over your money and won’t be sending most of it out in the form of payments.

You’ll have six months’ worth of living expenses sitting comfortably in a savings account.

The constant stress and pressure around money will be radically reduced.

Losing your job won’t fill you with panic—it will be a manageable inconvenience. You’ll have the cash reserves and the freedom from debt to handle life’s curveballs with confidence.

This is the life you're working toward. And it's not some distant fantasy—it’s completely within your reach. But it will take hard work, sacrifice, and persistence.

When you’re debt-free, you’ll feel like Andy Dufresne stepping into the outside world for the first time in 19 years. That freedom will be worth every sacrifice.

• Stop digging.

You’re in a hole. The first step? Stop digging.

While it’s true that some people can use credit cards responsibly, if you’re buried in credit card debt, you’ve already shown that you’re not one of them—at least not right now. If you could manage credit cards properly, you wouldn’t be in this position in the first place.

We all start out with good intentions: “I’ll pay this off every month and earn the rewards.” No one gets a credit card thinking, “I’m going to rack up so much debt that half my paycheck will go to the banks.” Yet, that’s exactly where many people end up. Why do you think credit card companies flood us with TV ads every two minutes? It’s not out of charity.

Credit cards are a lot like alcohol. Yes, some people can drink responsibly. But if you're an alcoholic, drinking responsibly isn’t an option—and I speak from personal experience. After multiple failed attempts to quit or limit myself to “weekends only” or a “three-drink limit,” I realized the only real solution was to stop drinking altogether.

The same goes for credit card debt. If you have significant credit card debt, you’re a credit card addict. And like any addiction, the only solution is to quit. You need to go cold turkey and become a teetotaler when it comes to debt.

From now on, credit cards are no longer an option. You need to shift your mindset to: “If I don’t have the money, I can’t afford it.”

That’s the mentality that will keep you out of debt.

The mindset that will keep you stuck? “I don’t have the money right now, but I’ll get paid in two weeks, so I’ll just put it on the card and pay it off later.”

When I was accumulating debt, I always told myself that I’d easily pay it off once I started making more money. In college, I thought that once I had a full-time job, paying it off would be a breeze. After college, I convinced myself that my next big raise or bonus would take care of it. But, as you can imagine, this mindset spiraled out of control quickly. Constantly banking on future income to fix today’s debt creates a never-ending cycle that only makes things worse.

Stop the cycle. Cut up your credit cards. Remove them as the default option on online shopping sites. You're done using them—period. From now on, you’ll pay with cash whenever possible. If cash isn’t an option, use a debit card.

The key to getting out of debt is to stop digging.

Repeat this to yourself: "If I don’t have the money, I can’t afford it."

You’ll hear plenty of criticisms of this approach, so let’s address them one by one.

“But I’ll lose my rewards!”

Yes, some people manage to pay off their balances every month and rack up rewards. But right now, that’s not you. The amount you’re paying in interest is far greater than any rewards you're earning. Focus on the bigger picture—eliminating your debt.

Credit card rewards are often overhyped. In reality, they typically equate to just about 1% of what you spend. At the same time, the ease of using credit cards and frictionless transactions can trick your mind into spending more, often far surpassing that 1% in rewards.

The time and energy people dedicate to maximizing these rewards is disproportionate to the benefits. Instead of chasing small perks, that mental effort could be better spent on increasing income, cutting expenses, or making smarter financial decisions.

Some people treat credit card rewards like a hidden strategy for building wealth. But if you look at the Forbes 400, you won't find anyone who made their fortune by fixating on credit card points. It’s a distraction from more meaningful financial pursuits.

“But I’m more vulnerable to fraud with a debit card!”

Most banks provide solid protections for debit cards. If your card gets stolen, they’ll work with you to freeze the account, reverse fraudulent charges, and issue a new card. Some banks, like TD, even offer same-day replacements. Besides, the money you’re losing by continuously carrying debt and paying interest far outweighs the benefits of sticking with credit cards for fraud protection.

“But all my subscriptions are linked to my credit card!”

This is a good time to reevaluate your subscriptions. If you’re in debt, you should be canceling as many of them as possible. Don’t worry about how convenient it is to automate payments. Convenience isn’t your goal right now—getting out of debt is.

“Credit cards are so useful for online shopping!”

If you’re serious about getting out of debt, now’s the time to scale back on online shopping. In fact, if you’re an online shopping addict, you may need to quit entirely for a while. If that’s not the case, reducing your spending is still beneficial. The more friction between you and impulse buying, the better. Right now, your focus should be on spending less.

Once you’re debt-free, you might regain the discipline to use credit cards responsibly. I eventually did, but not until I trusted myself again. If you're in debt, you're not there yet. Cut up the cards and stop using them.

When Cortez began his conquest of Mexico, he burned his ships, sending a clear message to his men: there’s no turning back, and failure is not an option. You need the same mindset with your debt. You’re going to get out of this, and there’s no turning back.

• Bring in some cash and build a starter emergency fund.

Dave Ramsey suggests starting with a $1,000 emergency fund, and that’s solid advice. Having cash on hand for unexpected expenses is crucial, so you don’t have to rely on credit cards.

However, considering two decades of inflation since that recommendation, I’d suggest aiming for a $3,000 starter emergency fund. It’s still not a full emergency fund, but that’s the point—we want to tackle debt aggressively while having enough cushion to handle things like car repairs or unexpected trips without derailing your progress.

A $3,000 emergency fund may not be enough for a serious financial crisis, but when you're living paycheck to paycheck, with most of your income going toward minimum payments, building a full emergency fund is going to take too long. The immediate goal, however, isn't to fully fund that emergency account just yet. Instead, aim to create a small financial cushion. This will give you some breathing room, allowing you to focus on paying down your debt without feeling overwhelmed by unexpected expenses. You can work toward a larger emergency fund once you're in a better financial position.

To build this starter fund quickly, start by bringing in some cash right now.

If you’re in debt, chances are you’ve accumulated stuff you bought on credit—things you don’t really use but that might still hold value. It seemed like a good idea at the time, but now it’s just collecting dust.

For example, I had a PlayStation Portable that I barely touched, a massive DVD collection, and a stack of expensive books I’d already read but held onto for sentimental reasons. I put it all up for sale on eBay, and since it was 2008, DVDs still fetched a decent price. In no time, I’d raised over $1,000 and jump-started my emergency fund.

You might have even more to sell than I did back then. If you own big-ticket items like boats, jet skis, or motorcycles, now’s the time to sell those unnecessary luxuries.

Platforms like Facebook Marketplace and eBay make it easy to bring in quick cash. Maybe you have an extensive sneaker collection, some valuable artwork, or a high-end smoker you never use. Perhaps you’ve splurged on expensive clothes that just sit in your closet.

Chances are, you’ve got things around the house that you can sell to raise cash fast and start building your emergency fund.

• Get a full scope of the problem.

One of the first steps to getting out of debt is understanding the full scope of your financial situation—and that starts with creating a budget.

Back when I was in debt, I had to track everything manually using spreadsheets. Today, budgeting tools make it easier, but the core principle remains the same: you need a clear, honest picture of your finances.

Start by listing all of your accounts—credit cards, bank accounts, loans—so you can see everything in one place. You need to know exactly how much you owe, across all sources of debt. This can be a tough pill to swallow, but confronting the full picture is a crucial first step. Once you have that total, check in with your finances regularly. It should become a daily habit. Seeing your progress (or lack of it) over time will help keep you motivated and accountable.

Next, focus on your spending. If you’re in credit card debt, you’re likely not living on a budget. Start tracking every expense. Every coffee, lunch, and impulse buy. At the end of the month, categorize your spending to get a sense of where your money is going. This process is key to helping you build a realistic budget.

Your goal is simple: cut unnecessary expenses and lower your overall spending. Once you’ve tracked your spending for a month, you’ll likely find easy targets. Maybe there’s a subscription you no longer use—cancel it. A gym membership you haven’t used in months—drop it and start working out at home.

Pay close attention to categories like dining out. In the moment, it’s easy to justify $15 lunches or $30 takeout on a Friday night, but when you see that it adds up to $300 or more a month, you’ll realize just how much it’s costing you. That’s $3,600 a year that could go toward paying off your debt.

The key here is tracking the data. Only by looking at the numbers can you find areas to cut and adjust your spending habits.

Once you’ve gathered your financial data, it’s time to create a budget. Start by listing your essential monthly expenses—the basics you need to live on. Then, compare that to what you’re actually spending. Chances are, you’ll spot a gap between the two. That gap is where you’ll find the extra money to tackle your debt.

• Cut the minor expenses.

You don’t need fancy apps or data to figure out what you need to cut—you already know.

When I was 26 and deep in debt, my biggest spending problems were eating out and drinking. I wouldn’t think twice about blowing $150 on a weekend out with friends or treating myself to a nice lunch during the workweek. I even did ridiculous things (ridiculous if you’re in debt) like putting a $100 steakhouse dinner on a credit card. All of that had to stop. If you’re serious about getting out of debt, these kinds of habits need to end.

You likely have similar areas in your life where you’re overspending. Pack a lunch instead of buying one every day. Swap restaurant dinners for home-cooked meals. If you smoke, quit. If you have a habit of online shopping, it’s time to hit pause and replace it with something more budget-friendly.

Deep down, you already know what your “thing” is—the habit or indulgence that drains your wallet. Whatever it is, ask yourself: is it really worth staying in debt, stressed and desperate?

Eating out is a huge budget buster for many people. In fact, spending on restaurants and takeout has recently outpaced spending on groceries. If you’re working to get out of debt, it’s time to flip that around. You need to spend more at the grocery store and less at restaurants. Dave Ramsey’s advice to stick with "beans and rice" is sound, but honestly, just switching from takeout to homemade meals will free up a significant amount of money for most people. Frankly, cooking a New York Strip at home every night would still cost less than dining out for most restaurant meals!

Use common sense and the financial data you now have to cut your spending.

One powerful strategy is to implement a “spending ban.” This doesn’t just mean cutting out shopping—it’s about stopping all non-essential spending. You’ll quickly realize that most of the things you spend money on aren’t necessities; they’re wants, not needs.

One effective way to speed up this process is to change your spending habits. Try "shopping like it’s 1997"—use cash instead of credit cards and cut back on online shopping and convenience services like delivery apps. By adding a bit of friction to your purchases, you become more mindful of your spending, reducing impulsive buys. This simple shift can help you naturally save more, without sacrificing your quality of life, and ultimately make a bigger dent in your debt.

Many of these sacrifices don't have to be permanent. Once you're debt-free and have a healthy financial cushion, you can reintroduce the luxuries if you’re so inclined—dining out, multiple streaming services, and the occasional DoorDash. But while you're focused on eliminating debt, it requires total laser-like intensity towards the achievement of your goal. This is something you want to tackle with intensity and purpose, like a T-800 looking for Sarah Connor.

Why the intensity? Because you don’t want to do this for 10 years. The longer you stretch it out, the more time you lose that could be spent building real wealth through investing. Staying in debt delays your ability to grow your financial future. If you’re in debt, you want to get out fast, in 6 months to 3 years. The sooner you’re debt-free, the sooner you can start putting your excess cash toward investments (excess cash that is now getting eaten up by payments), where true long-term wealth is created. The goal is to achieve debt freedom quickly, understanding that the short-term sacrifices lead to a lifetime of financial security.

• Start the debt snowball.

The debt snowball might not make the most sense mathematically, but it works because it taps into behavior and momentum.

The strategy is simple: you tackle your smallest debts first, regardless of interest rates. Here's how you start:

First, list all your debts from smallest to largest. Next to each one, add a column for the minimum monthly payment.

Looking at the total of those minimum payments might feel overwhelming—and that’s good. It should light a fire under you to eliminate them as quickly as possible.

Now that you’ve freed up some cash by cutting unnecessary expenses and selling off items, it’s time to attack the smallest debt. That $500 department store credit card balance? Knock it out. Once it’s gone, you’ve also eliminated an $8 monthly payment. That’s $8 per month that you can now apply toward the next debt.

Next up: a $3,000 balance on your Bank A credit card. It’s not the largest balance, but it’s your smallest one now. Attack that using the $8 from the store card plus the extra cash you’ve found in your budget. When that’s gone, you’ve freed up another $50 a month. Now, you’ve got an extra $58 per month to put toward the next debt.

Now let’s focus on the $5,000 balance on your Bank B card. The minimum payment is $85 a month. With the snowball gaining momentum, you now have $143 ($58 + $85) per month to put toward this debt. Once that’s eliminated, you have even more cash flow to tackle the bigger debts.

Next up is your car loan. You originally borrowed $25,000, but now you’ve whittled it down to $10,000, with a $465 monthly payment. With the snowball effect in full swing, you can throw your original budgeted amount plus $143 per month (the old minimum payments on your credit cards) toward this loan. Once that’s paid off, you’ll have an extra $608 in your monthly budget, which you can now aim at that $15,000 student loan looming over you.

As you free up more cash each month, your debt snowball gains momentum. With each payment, you build a stronger financial weapon to tackle your remaining debts. As your debts shrink, your confidence grows, and so does the buffer between your income and expenses.

The alternative method, the debt avalanche, focuses on paying off the highest-interest debt first. While this makes more mathematical sense, it can lack the psychological momentum that many people need to succeed. If your highest-interest debt has a large balance, it can take longer to pay it off, which can feel discouraging if you’re living paycheck to paycheck. The debt snowball method frees up cash flow faster, giving you room to breathe as you go.

The debt snowball works better because it builds momentum. Paying off that first $500 debt gives you a quick win, showing you that this goal is achievable. As you pay off more debts, the sense of progress grows, and you feel more empowered. In contrast, focusing on a large debt with a high balance can make you feel powerless and overwhelmed, as if you’re not getting anywhere.

The snowball method also helps with cash flow for people living paycheck to paycheck. When you're broke and in debt, your budget is tight. You don’t need relief in 18 months when the big debt is paid off—you need breathing room right now. By knocking out smaller debts first, you free up monthly cash flow a little at a time, giving yourself more flexibility in your budget as the snowball grows.

Both methods work, but the key is speed. You don’t want to drag this out for a decade. The goal is to get out of debt in 6 months to 3 years at most. Attack your debts aggressively, clear them up quickly, and don’t look back.

• Make more money—immediately.

You’ve identified the full scope of your debt, cut your expenses, raised some cash by selling your junk, and begun the debt snowball. Now it’s time to boost your income, and you need this boost immediately.

Don’t rush to your boss demanding a raise. This rarely works and can create unnecessary tension at work. Most companies have a structured process for raises, usually tied to year-end reviews or promotions. If you want to position yourself for a raise down the road, focus on excelling in your role over the next year, not on demanding money right now.

But, again, you need money now—not next year.

One quick option is to find a new job with higher pay, but if you like your current job and manager, there are other ways to boost your income without making such a drastic change.

If you’re in an hourly role, see if there’s an opportunity for overtime. It’s one of the fastest ways to increase your earnings.

Another straightforward option is to take on a part-time job. Pizza delivery is a classic example, especially since most orders come in at night and on weekends, meaning you can do this in addition to your full-time job. Many drivers can make $200 in a single night. Doing this every weekend can significantly accelerate your debt repayment.

Other options include bartending, waiting tables, or driving for services like Uber, DoorDash, or Lyft. These are flexible jobs that allow you to earn extra income on a schedule outside of normal office working hours.

If you prefer something less traditional, consider mowing lawns or offering other local services. The gig economy also offers plenty of opportunities for those with specific skills. Platforms like Upwork and Fiverr let you freelance in areas like writing, graphic design, or virtual assistance, allowing you to work online and make extra money from home.

The bottom line is this: whatever you can do to increase your income right now will help speed up your journey to becoming debt-free.

Working part-time jobs and juggling side hustles on top of your main job can feel exhausting, but consider the alternative: staying in debt for the rest of your life. Achieving financial success requires sacrifice and a willingness to tackle difficult challenges. The alternative is continuing the paycheck-to-paycheck cycle until you are six feet under. While it may be tough now, making sacrifices for a few years is worth it if it helps you break free from debt and build a more secure future.

In the long term, it's important to focus on advancing your career, building new skills, and aiming for promotions or higher-paying opportunities. These are great goals to work toward, and you should definitely pursue them.

However, when it comes to getting out of debt, the top priority is finding ways to increase your income immediately. This isn’t about long-term career goals that might pay off in five or ten years—it's about generating money you can use to attack your debt right now. That is probably going to be in the form of part time jobs and side hustles. While career growth is important for your future, the immediate focus should be on creating short-term income streams that can be directed toward reducing your debt as quickly as possible.

It’s important to remember that this is only temporary. You won’t be working excessive overtime or spending weekends delivering pizza forever. These are short-term sacrifices aimed at securing a stronger financial future. Once you're out of debt and have built a solid financial cushion, this kind of hustle won’t be necessary. When the grind feels overwhelming, remind yourself that this is just a phase. You’re putting in the hard work now to create a better, more stable life down the road - one that will have a lot more free time!

• Cut the major expenses.

You’ve already trimmed the minor expenses—unused subscriptions, DoorDash, restaurant meals, frivolous online shopping. You’ve obtained extra income. You’re on the path, attacking your debts with a debt snowball.

Now, it’s time to tackle the bigger, harder-to-cut expenses. The two major culprits for most people? Cars and housing.

I’ve placed this step later in the process because it’s not as simple as cutting a minor expense—it requires more thought and time. Selling a luxury car or downsizing your home takes effort, but if you’re serious about getting out of debt, these changes can make a massive impact.

I would argue that housing and transportation costs, particularly cars, account for 80% of success in personal finance. This is because they tend to consume a massive portion of people’s incomes.

Let’s talk about the car first.

Americans have a strange obsession with cars. Our minds have been cooked by a lifetime of watching car commercials, warping our thinking into thinking that a car is the ultimate expression of our worth as a human being. Pound that message into someone’s brain for decades, and they’re going to have some warped opinions about vehicles. Unfortunately, that’s pretty much all of us.

It’s time to flush that thinking down the toilet, where it belongs.

We love cars so much that many don’t hesitate to allocate 30%+ of their paycheck to a car payment. This is behavior that's completely insane. Your grandparents would not believe that this is normal behavior.

Decades ago, when someone wealthy drove a luxury car, it was a genuine symbol of their financial status because they generally paid for it outright. Today, however, the prestige tied to expensive cars has diminished since so many people simply finance them. Today, merely driving a flashy car no longer reflects real financial security. It no longer conveys “I’m successful.” Usually, it simply conveys “I’m terrible with money and live paycheck to paycheck.”

If you're borrowing money to buy a depreciating asset that consumes a significant portion of your paycheck, you are never going to be able to make financial headway.

We come up with all kinds of justifications, most of which are bullshit. One of the most common excuses is, "I need a reliable car,” and then they’ll use that as a reason to finance $70,000 on a new vehicle to avoid a $1,000 repair bill once a year.

If you’re driving an expensive vehicle, like a BMW or some ridiculous gas-guzzling luxury truck, it’s time to make a hard decision. Sure, it’s a fantastic car and may even feel like part of your identity. But it’s also a depreciating asset that’s eating up $1,000 or more from your budget each month. Borrowing money to buy something that loses value is never a smart move, no matter how wealthy you are. Is driving a luxury car worth staying in debt, constantly stressing about money, or worrying about job security?

If your car is costing you thousands a year (or month!), it’s time to sell it.

The average car depreciates around 15% annually. For a $50,000 vehicle, that’s $7,500 a year getting lit on fire. Can you afford to light $7,500 on fire every year?

If you’re close to paying off your car loan, roll it into your debt snowball and pay it off quickly. Once that’s done, consider selling the car anyway—even if it’s paid off, the ongoing depreciation still silently drains your finances.

Take the cash from the sale and buy a more reasonably priced car. I’m not saying you need to drive a clunker that will break down in a month, but you can find a reliable vehicle for $10,000 - $15,000.

Here’s my process for buying a car: Go to a site like AutoTrader and search within 50 miles for cars with under 75,000 miles. Sort by price, and you’ll find a solid car that will last for 5–10 years.

Here is an example of that sort of screen. Philadelphia area, $5,000-$15,000 in price, under 75k miles, model year 2017-present. Sort by lowest to highest. There are plenty of options that will get you from point A to point B, which is all a car is actually good despite what you’ve learned from decades of watching car commercials.

If you still owe a large balance on your current car, don’t wait—consider selling it now. You can trade it in at a dealership or sell it privately. Credit Karma offers a good guide on selling a car with an active loan.

For some, selling the car entirely might be an option. If you live in a city, where owning a car costs a fortune to park and maintain, it might make sense to stick to public transportation and then rent a car or hire an Uber for a longer trip.

In the future, I recommend sticking to cash when purchasing cars and avoiding financing altogether. This approach not only keeps you out of debt but also ensures that your car purchases remain within your financial means.

The truth is, if you can't pay cash for a car, it's a clear sign that you probably can't afford it. Paying upfront makes the purchase feel much more tangible than simply signing a loan agreement and driving off in a brand-new vehicle that dazzles with its looks and features and will drain your paycheck for the next 5 years.

Someday, when you have many years worth of income invested, you can indulge in expensive cars—when you have the cash and it's only a small fraction of your overall wealth. In other words, you'll buy luxury vehicles when you can truly afford them.

Next up is housing.

Housing is another area where Americans have had their brains cooked by commercials and the media.

From sitcoms to home improvement shows, we've been conditioned to believe that a typical middle-class family “needs” a 3,000-square-foot home with a two-car garage to be considered "normal." HGTV has further distorted our thinking, making us feel as though a kitchen from the 1990s is somehow unfit for cooking a meal. This obsession with housing is tied to the same status-driven mentality that we apply to cars—where your home becomes a reflection of your personal worth and social standing.

Like our warped attitudes with cars, our warped attitudes about housing also needs to be flushed down the toilet.

If you’re living in a luxury apartment or an expensive home, you need to ask yourself: can you really afford it? Even if you can technically manage the rent or mortgage, downgrading could free up significant room in your budget.

That fancy $5,000 apartment with amazing views? That’s a home for someone with money. It’s not for someone living paycheck to paycheck. There’s no shame in moving to a more affordable place to create financial breathing room.

If you’re truly committed, consider renting a room instead of a full apartment. When I was paying off debt, I rented a basement in someone else’s house, which made a huge difference in freeing up cash. Obviously, this is only possible if you’re single, but it’s worth doing in that circumstance.

If you own a home, particularly with today’s higher mortgage rates, moving may not make sense—unless you’re living in a high-end house you can no longer afford.

If you scoff at the idea of finding a home for less than $1,000,000, then it’s probably time to rethink your attitudes. Believe it or not, there are plenty of places in the U.S. where you can find a perfectly fine home for $250,000 or less. (Pittsburgh, Memphis, Cleveland, Delaware, Omaha, Des Moines, Columbus, Rochester, Buffalo, to name a few.)

Of course, moving needs to make sense with your income. If you work in a high-paying job in an expensive city like New York or San Francisco (or their surrrounding suburbs), moving might not be realistic. But for many people, relocating to a lower-cost area can have a huge impact on their finances. A $100,000 income in Charlotte, NC, stretches as far as a $200,000 income in San Francisco. The difference in cost of living could give you the financial cushion you need to eliminate debt faster.

NerdWallet has a great cost of living calculator to help you compare cities and see what makes sense for you. Often, packing a U-Haul and starting over somewhere new can make a lot of financial sense.

It’s easy to get attached to a particular lifestyle, but ask yourself: would you rather keep your favorite restaurant in Manhattan or finally live without the crushing weight of debt? I’d pick financial freedom and less stress every time.

Downsizing your car or moving to a cheaper location isn’t for everyone, but for many, these are powerful tools in the fight against debt. Take control, make the tough decisions, and free yourself from financial burden once and for all.

• Build your emergency fund.

You’ve tackled your debt—congratulations! Now it’s time to secure your financial future with a solid emergency fund.

Life is full of unexpected expenses. Whether it’s a broken major appliance, a car repair, a trip to the emergency room, or even job loss, these things happen. Wouldn’t it be a relief to know you have $20,000 sitting in a savings account, ready to cover any surprise? With a fully stocked emergency fund, the stress that usually accompanies these moments simply disappears.

Now that you have extra cash flow from eliminating debt—and the savings from cutting expenses—you can start building this safety net. The key is to set aside money specifically for emergencies, not for vacations, shopping, or splurging.

I recommend using a high-yield savings account to grow your emergency fund. These accounts offer better interest rates than traditional savings accounts, helping your money grow over time. They also offer instant liquidity, so you can move it to a checking account and spend it.

Before I had an emergency fund, I used to stress over the idea of my car breaking down. A major repair, like a transmission, could cost thousands—money I didn’t have. Many people live with this kind of anxiety for their entire life. What if the air conditioner breaks in the middle of summer? What if I can’t pay for it? With maxed-out credit cards and no savings, even minor emergencies can feel like crises.

I also used to worry constantly about losing my job and the idea of being homeless if it happened. That’s also a form of stress you can live without.

Once I built my emergency fund and was totally out of debt, those worries vanished. I no longer stress about unexpected expenses or job loss because I know I have a financial cushion to fall back on.

The same peace of mind can be yours. Start building your emergency fund today, and let those worries melt away for good.

One important note: your emergency fund should be kept in a bank account, not invested in stocks through a brokerage. The purpose of an emergency fund is to ensure instant access to cash with no risk involved. You don’t want to lose your job during a recession and see your emergency fund drop by 50% at the same time, which often happens simultaneously. You also don’t want to be forced to sell stocks in a panic when prices are at their lowest.

Yes, keeping this money in a savings account may not seem optimal, but that’s okay. Over time, six months' worth of expenses will become a small portion of your overall net worth, anyway.

• Putting it all together.

Everything I’ve outlined may seem difficult to achieve. It might even sound harsh. But I believe many Americans have developed distorted assumptions about what life should be like. Consider that nearly half the world lives on less than $5.50 a day. In contrast, the median American household sits comfortably in the top 10% of global earners.

People often complain about having to downgrade their car or move into a smaller home, but consider what your recent ancestors endured. I remember talking to my grandparents about life during the Great Depression, when they didn’t know where their next meal would come from and were grateful for jobs that paid very little. Just a few generations later, many of us feel entitled to luxury goods, expect all of our food to be delivered by DoorDash, and drive cars that are technological marvels.

Looking further back in history, you probably have someone in your family tree who crossed an ocean, leaving behind everything and everyone they knew for a chance at a better life. And yet, today, many people won’t even consider moving to a different state to lower their cost of living.

Yes, getting a part-time job or scaling back your lifestyle is hard. But if you’re truly serious about improving your financial future, these sacrifices are well worth it. Success requires hard work and sacrifice. If it were easy, everyone would do it.

• End game.

You’re debt-free, with a solid emergency fund in place. You’ve achieved the goal you visualized 1–3 years ago: now, when your paycheck hits your account, it’s all yours.

More valuable than the debt reduction itself is the discipline and confidence you've gained throughout the process. I know, because I’ve been there. This mindset will benefit your financial journey for the rest of your life. It’s a sense of accomplishment you wouldn’t have if some windfall event paid off your debt. You did this. You took control, faced the challenge, and succeeded. It’s an achievement no one can take away from you. You’ve proven that you're willing to do what most people won’t: make tough sacrifices and tackle difficult goals to secure your financial success.

Now that you're debt-free, you can allocate a significant portion of your income toward financial assets that grow and compound over time, building real wealth. Without the burden of debt, you’re not limited to contributing a paltry 3-6% of your income to a 401(k) or IRA. Instead, you can invest substantial sums (like 20-50% of your income outside of your retirement accounts), allowing your wealth to grow exponentially over time.

Now that you actually have serious money to invest, it’s time to get very serious about investing.

This is where most finance nerds argue about things. Value vs. growth stocks, stock picking vs. index funds, asset allocation—the list goes on.

Here’s the reality: if you’re in a position to worry about these things, you’ve already won the game. Most people contribute the bare minimum to their retirement accounts and spend their lives stressing over money.

But that doesn’t have to be you.

You’ve done the hard work to get out of debt and build a safety net. Without any debt, you can pile a huge percentage of your income into investing.

If you’re ready to start investing, my advice is to first educate yourself. There’s a lot of noise out there, but a good place to start is with some solid reading.

It’s crucial to educate yourself about investing. Too often, people rely on so-called experts, who frequently steer them toward costly options with questionable value. The best way to avoid this is by taking the time to educate yourself and make informed decisions.

One book I highly recommend is The Simple Path to Wealth by JL Collins. It’s straightforward, easy to understand, and covers the fundamentals of building long-term wealth. If you’re going to read one book about investing, that’s the book to read.

You could also check out my podcast with JL, right here:

Other books I recommend:

• Unconventional Success by David Swensen - https://www.amazon.com/Unconventional-Success-Fundamental-Approach-Investment-ebook/dp/B000FCKBT8

• The Permanent Portfolio: Harry Browne’s Long Term Investment Strategy - https://www.amazon.com/Permanent-Portfolio-Long-Term-Investment-Strategy-ebook/dp/B0097VBOHG/

• The Four Pillars of Investing by William Bernstein: https://www.amazon.com/Four-Pillars-Investing-Second-Portfolio/dp/1264715919

• A Random Walk Down Wall Street: The Best Investment Guide that Money Can Buy - https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/1324051132/

I also spoke to Craig Rowland, one of the co-authors of the Permanent Portfolio book above, right here:

If you're interested in investing in advanced investing concepts, there are plenty of resources available.

However, I believe the strategies outlined above form the essential foundation. Mastering these core concepts is crucial before diving into more advanced investing strategies - like security analysis, which is my typical focus on this website.

Disclaimer

Nothing on this substack is investment advice.

The information in this article is for information and discussion purposes only. It does not constitute a recommendation to purchase or sell any financial instruments or other products.  Investment decisions should not be made with this article and one should take into account the investment objectives or financial situation of any particular person or institution.

Investors should obtain advice based on their own individual circumstances from their own tax, financial, legal, and other advisers about the risks and merits of any transaction before making an investment decision, and only make such decisions on the basis of the investor’s own objectives, experience, and resources.

The information contained in this article is based on generally-available information and, although obtained from sources believed to be reliable, its accuracy and completeness cannot be assured, and such information may be incomplete or condensed.

Investments in financial instruments or other products carry significant risk, including the possible total loss of the principal amount invested. This article and its author does not purport to identify all the risks or material considerations that may be associated with entering into any transaction. This author of this website accepts no liability for any loss (whether direct, indirect, or consequential) that may arise from any use of the information contained in or derived from this website.