The Northwestern Mutual 2025 Planning & Progress Study found that 22% of Americans felt that personal debt was keeping them from becoming financially secure, and credit card debt was the biggest culprit.
According to money expert Ramit Sethi, debt can become a lifelong problem that leaves people stuck with stress, debt collection calls and extra costs. But the right strategy can help you wipe out debt in just six months. Here are eight steps Sethi suggested in a recent YouTube video.
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Face the Brutal Truth
To get anywhere, you must recognize your debt is there and not keep brushing it off as “manageable.”
Sethi said to start by listing all your debts with their current balances, interest rates and minimum payment amounts, which may be painful to see. He also recommended using AnnualCreditReport.com to get your credit report so you avoid overlooking any accounts.
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Pick Your Attack Method
You can now figure out whether the debt snowball or debt avalanche method is the right attack method. Sethi said either is fine and prioritized commitment.
The debt snowball approach, which Dave Ramsey prefers, focuses on eliminating your debts from the smallest to the largest amounts, which is motivating. The debt avalanche strategy targets debts from the highest to the lowest interest rates to boost your overall savings. You can use an online debt payoff calculator to compare the timelines and interest paid.
Also, consider negotiating your rates with creditors. Sethi suggested explaining your focus on debt payoff, emphasizing your time as a customer and mentioning that competitors have better offerings.
He added, “It doesn’t work every time, but when it does, you can often save thousands of dollars in interest alone.”
Take the ‘Lazy Genius’ Approach
Sethi said that willpower isn’t something to count on to successfully pay off debt. Instead, use automatic payments to guarantee that funds regularly go toward your balances.
First, make sure you’re automatically paying the minimum on everything to avoid late or missed payments. Next, set up a larger payment each month for your current target debt.
Sethi suggested scheduling these payments soon after you get paid so that you don’t splurge on something else.
Free Up Cash Without Excessive Sacrifice
According to Sethi, getting rid of debt fast doesn’t have to mean extreme sacrifice, like cutting out everything you love or eating disappointing meals.
He recommended focusing on cutting expenses in three specific areas and putting the savings toward debts. These include getting rid of unnecessary subscriptions, finding cheaper insurance and avoiding impulse purchases.
He added, “In my experience talking to tons of people, I found that most people can free up at least $500 a month by methodically going through those steps.”
Unlock the Cheat Code to Faster Progress
An important cheat code for faster progress is to boost your earnings while you reduce expenses. The extra money you make could help you become debt-free years sooner.
Sethi mentioned many options, so consider what might be right for you. An obvious step is getting a raise at your current job, but a second income source is also smart. You might offer freelance services, take on local side gigs or monetize hobbies. Sethi also recommended selling unwanted household items.
The income boost will vary, but any amount will help as long as you actually use the money for debts.
Gamify Paying Off Debt
If you’re someone who needs excitement to stay motivated, you’ll need to combat the boredom that comes with debt payoff. Reminding yourself to regularly look at your progress is key.
“A weekly check-in, not just monthly, keeps you engaged and helps you catch unnecessary expenses before they drain your spending,” explained Sethi.
For example, you might find you’re unnecessarily paying for a $60 gym membership and a $15 streaming service. Cutting those costs would save you $75 per month or $450 in six months.
Sethi outlined a simple weekly routine that involves using an app or spreadsheet where you track your debt payoff progress, looking for any hidden expenses in your statements to eliminate and then celebrating your progress.
Watch Out for Debt Traps
While handling your debt, watch for traps that can keep you stuck or even leave you in a worse place.
Sethi warned about moving debt using balance transfers, which often lure you with attractive promotional rates that eventually go up. Other traps include not changing your spending habits and making minimum payments, which leaves you in debt longer with more interest charged.
Plus, watch out for debt consolidation scams, which Sethi said can leave you with a longer repayment timeline and large fees. According to the Federal Trade Commission, debt relief scams often involve questionable promises and little actual help.
Avoid Going Back
After your debt is gone, plan to never get back in the situation. Sethi gave three tips that can help.
First, consider forgetting credit cards and trying cash envelopes, which will each have a label for your expense and the budgeted cash amount inside. Once you spend the allocated money, you can’t spend any more.
If you feel disciplined enough to keep using cards, avoid carrying a balance from month to month. This will require carefully monitoring your spending, including not buying things just to maximize rewards.
Finally, Sethi encouraged having an emergency fund of three to six months of your fixed expenses. Since many people go into debt for emergencies, this cash will help protect you.
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This article originally appeared on GOBankingRates.com: Ramit Sethi: 8 Steps To Pay Off Debt in 6 Months
