How to get out of debt and save [Step by step guide]

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Start making habit changes in your life

To get out of debt, we must first change our mentality and certain habits. These changes will help us get out of debt quickly and it will be an experience that will enrich you and your family, as you will focus on what is most important. You must learn that there is happiness in frugality and more especially now that you have to tighten your belt.

The most important thing is that you stop getting into debt. It is of little use to get out of the debts you have now, if on the other hand you continue to generate others. Also, your mentality has to be focused on paying your debts and saving. For this you have to manage your finances and control your expenses with a magnifying glass. By making these changes, you will be ready to continue with the following steps.

Create an emergency fund

When we are trying to pay our debts, interest is one of the things that we worry about the most. That is why we want to get rid of the debt as soon as possible, so that the interests stop accumulating and the debt does not continue to increase.

However, we should not be tempted to try to pay off most of the debt or the entire debt by sacrificing all of our savings or our emergency fund.


If you get rid of your liquidity and an unforeseen event occurs, you will be in a great predicament because no matter how much you have paid off the debt, you do not have liquid money to face that unforeseen or emergency that has arisen.

Therefore, you must have saved as an emergency fund at least the amount of one month of expenses or € 1000. This emergency fund will provide you with the liquidity you need in case of unforeseen events.

Now is a good time to start storing food in your home in addition to having the emergency fund. As you go through the other steps, you should have 3 months of food in storage. This storage must be maintained (replenishing your warehouse as you consume the products) constantly. It will serve as a complement to your emergency fund to cope well with unforeseen events.

Use the snowball method to pay your debts (excluding the mortgage)


This is a simple to implement and effective method to pay off your debts. You can pay off your debts in almost half the time (depending on the loans you have as well as the interest on them).

The reason we exclude the mortgage is because what is pressing is to pay other debts that you must pay before, and that have a higher interest. We will deal with the mortgage later.

  • Order debts from lowest to highest amount to pay
  • Commit to pay all the monthly instalments of each debt
  • Determine how much you can pay extra each month (this will be the accelerator)
  • Pay the minimum amount on each debt every month and the accelerator allocates it to the first debt on the list until it is paid.
  • Once the first debt is paid, the amount you paid in the first debt + the accelerator, you use to pay the second debt on the list
  • Repeat the process until all the debts on the list are paid

Increase your emergency fund

Now that you have paid off all your debts except your mortgage, and your ability to save has increased, it is time to increase your emergency fund. As a recommendation, you should have at least 3 – 6 months of covered expenses.

This fund for emergencies, is as its name indicates, a fund for exceptional cases. As you start saving and have assets, it would be wise to consider increasing that amount.


If you want to know how much money you would need to have in your emergency fund, I have prepared this calculator that will help you find out.

In this way, you increase your liquidity to deal with unforeseen events. This will provide you with the security you need to start saving and on your way to financial freedom.

In case you haven’t completed your 3-month food storage in your home, the time is now. It is a perfect complement to your emergency fund

You can start the following steps at the same time, without having to wait to finish one to start the next. You must continue to manage your finances well now that you are more comfortable without so much debt and you have more capacity to save than before.


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