By Melody C. Kerr, Founder, Centsible Finance

Eighty percent… Seventy-four percent… Forty thousand dollars…

That’s how many U.S. households are in debt, how many of us live paycheck to paycheck, and how much debt the average person’s in (not including a mortgage).

If something like a $1,000 car repair were to come up by surprise, most of us (60%) wouldn’t be able to afford it.

But those aren’t just the statistics on the working class. According to Nielsen, 25% of people who earn upwards of $150,000/year live paycheck to paycheck, too.

So, you can see two things here: One, debt is a plague that doesn’t discriminate. And two, you’re not alone…

The Plague

I like to call debt the plague. A plague much like a looming, dark cloud over our heads for what feels like an eternity. And a plague much like something we want to avoid. And I mean that in a couple ways: avoid as in, not facing debt, and avoid as in, not getting into debt, period. Whichever way you look at it, it’s a plague.

As you can see, though, debt is normal. Most of us are in debt and live paycheck to paycheck. This means, if (God forbid) we were to lose our jobs, or even if some glitch happened right on payday… we’d be out of luck. We wouldn’t be able to pay our bills, unless we borrowed (using a credit card, Amscot, a friend/family member).

So, no, it’s not a fun situation to be in. But don’t be ashamed. You’re not the only one. A lot of us are going through the same struggle.

This is normal. But we should all be encouraged to know that it doesn’t have to be the normal.

You can be freed from the shackles of “the plague.” Even if you have more debt than the average person, I still believe you can. Whether you are $40,000 in the hole, $100,000, or $300,000 (I’ve heard of someone having $600,000+ worth of debt–and I’m sure there are others with debt in the millions)… Just because this is your situation now, it doesn’t mean it has to be your situation tomorrow.

So, how do we make that happen? Well, we start with a plan.

Plan, Plan, Plan

I believe all good things begin with a plan. A plan is like your blueprint, your road map, your guide. It gives you clarity, understanding, and direction.

Before you can do anything–and do it the right way–you have to understand what your debts are first. You can’t properly handle a situation–whether it be debt or anything else in life–without first assessing the situation. Otherwise, how will we know where to start?

So, first, ask yourself:

• What are my debts? Do I owe friends/family? Do I have a car note, a student loan, any credit cards, or personal loans?
• How much do I owe for each one?
• What and how am I paying these back right now (monthly, quarterly, yearly)?

Once you know these things, write it all down. Write down how much you owe from smallest to largest. (If you have a mortgage, I’ll get to that later. You want to focus on debt not related to your mortgage in this step.)

Then, write down how much you’re currently paying on each.

For example, if you’re making car payments, write down how much you’re paying every month. Or, if you have a loan you pay once a year, like a property-assessed loan you pay through property taxes, divide your yearly payments by 12. That’ll tell you how much you technically pay every month.

Now, once you’ve finished that part, you can move on to the other things you pay for on a regular basis. But let me pause for a second…

After you’ve listed your debts, you may feel overwhelmed, discouraged, regretful… a number of emotions. But let me just say this: It’s spilt milk.

Could you have done things differently? Would you have done things differently? Should you have done things differently? The answer to all those questions is probably “yes.” But here’s the thing… I could have, would have, should have done a few things differently, too… And it doesn’t matter. It’s already done.

If I wasted my energy on my own “shoulda, coulda, wouldas,” I’d have gotten nowhere.

So, don’t pour your energy into beating yourself up about your mistake. Pour your energy into what you can do now to fix it.

Back to the next step. Write down everything else you pay for. That’s your food (groceries, dining out, etc.), your utilities (electricity, water, etc.), your rent/mortgage, your transportation (gas, highway tolls, travel expenses, etc.), and whatever else.

And when you’re done with that, write down how much you earn. How much do you take home every month? Do you make anything on the side? If so, how much? Do you earn any interest from your bank accounts? Write these amounts down.

Then, the last thing is to do the math. Add up what you earn every month. Next, add up what you spend every month. Then, subtract what you spend from what you earn.

If you have “leftovers,” you can use it to save for a rainy day (I’d recommend $1,000) or start chipping away at your debt. (In a future letter, I’ll explain why you should save first, then tackle debt second.)

And let me mention this: If you don’t have anything left over, or if you’re spending more than you earn, keep reading. In my next letter, I’ll show you how to turn that deficit into a surplus. But what you read now will be your plan when you do actually get there.

Get Chipping

If you have $200 left over after all your bills are paid and everything is said and done, remember the list of your debts I mentioned to write down? This is where that comes in.

Use the $200 to put toward your smallest debt. (Let’s call it Debt #1.) And keep doing that every month. You’ll still be paying your minimum on the other debts, but for now, you want to pour anything extra you have into Debt #1, until you get rid of it.

Then, you’ll move on to Debt #2, using the $200, plus the minimum you were paying on Debt #1, plus the minimum payment required on Debt #2.

For example, if Debt #1 was a $1,000 credit card balance and the minimum monthly payment was $30, with the $200 leftovers, you would’ve been paying $230, until that balance hit $0. If Debt #2 is a $1,500 personal loan, with a minimum payment of $50/month, now that you’ve cleared Debt #1, take the $230, add it to the $50 minimum, and pay $280 toward Debt #2.

Keep doing that until you see everything on that debt list of yours crossed off.

This is called the “debt snowball.” It’s the method the best financial gurus, like Dave Ramsey, Chris Hogan, and Howard Dayton teach.

Freedom Is the Goal

I understand this plan may sound painstakingly difficult. But, according to the Journal of Consumer Research, if you use the debt snowball, you’re more likely to become motivated and more likely to succeed at paying off all your debts.

Remember, though: You probably didn’t get into your situation overnight. So, you won’t get out of it overnight, either. That’s why I think getting out of debt is like chipping away at cement. It’s going to take a lot of effort.

It’s going to take sacrifice. It’s going to take perseverance. It’s going to take hard work. It’s going to take some time. But most importantly, it’s going to be worth it.

When we’re in debt, we’re shackled to it. It affects us emotionally, mentally, and, of course, financially (it affects us in other ways, too). And that’s not freedom.

Every single one of us has God-given talents and gifts we can use to do what we’re called to do. And we all should be free to live. Free to impact others’ lives, by treating them how we’d like to be treated–with love and kindness– and by being generous. But we can’t be free if we’re not financially well.

God designed us to be free to live life like no other, free to love one another, and free to give to each other.

So, let’s make it our goal to reach financial freedom. And with a plan, we’ll get there. One step at a time… and one cent at a time.