How I Removed All My Debt in Less Than 3 Months: A Step-by-Step Guide

Is it really possible to be out of debt in just a short time?

Debt can feel like a dark cloud hanging over your head. You know, that scary feeling when you saw credence caller id appear on your screen. 

Or perhaps, getting those “final notice letters” in the mail.

I know this feeling all too well. 

When I was younger, I was drowning in debt—credit cards, student loans, medical debt, personal loans—you name it. It seemed like every time I took a step forward, I got pushed two steps back. 

But then, something changed. 

I decided to take control of my financial situation and, with a clear plan, I managed to remove all my debt in less than three months.

Sounds impossible, right? I thought so too. 

But by sticking to a strategy, cutting out unnecessary expenses, and adopting a new financial mindset, I was able to achieve what I once thought was impossible. 

In this guide, I’ll take you through the steps I used to clear my debt fast, sharing personal tips along the way to help you do the same.

Step 1: Facing the Numbers (The Scary Part)

Before I could even start tackling my debt, I had to confront the problem head-on. 

It’s easy to ignore those statements that keep piling up or the credit score alerts that send shivers down your spine, but trust me—ignoring your debt only makes things worse.

What I Did:

1. Gathered All My Debt Information: I went through every account—credit cards, personal loans, student loans, etc.—and listed them out in detail. I included:
• Total balance owed
• Minimum monthly payments
• Interest rates
2. Calculated My Debt Total: The total amount shocked me, but it was necessary. If you don’t know the full picture, it’s hard to make a plan. Once I knew the total, I could set a realistic goal for how I’d approach paying it off.

Personal Tip: It’s okay to feel overwhelmed at this stage. I sure did. But seeing the numbers helped me focus on a solution instead of the stress.

Step 2: Changing My Mindset (From Scarcity to Abundance)

Once I had all the numbers laid out, the next thing I did was change my mindset around money.

Up until this point, I had a scarcity mindset, always thinking, "I’ll never have enough to get ahead" or "I’ll always be in debt." This kind of thinking can trap you in financial stress.

What helped me was reframing my thoughts to focus on abundance and opportunities.

What I Did:

1. Affirmations: I started using positive affirmations to change how I viewed my finances. Every morning, I repeated to myself: “I am capable of becoming debt-free,” and “I am in control of my financial situation.”
2. Gratitude: Focusing on what I did have instead of what I lacked helped ease some of the anxiety around my debt. Even though I was in a tough spot, I had a job, a supportive network, and access to resources that could help me succeed.

Personal Tip: Changing your mindset isn’t easy, but it makes a world of difference. When you believe you can succeed, you’re more likely to follow through on actions that lead to financial freedom.

Step 3: Creating a Bare-Bones Budget

Next, I had to create a strict, no-frills budget.

This budget was temporary, but it was necessary if I wanted to get rid of debt quickly. I had to prioritize debt repayment over any non-essential spending.

What I Did:

1. Listed Out My Monthly Expenses: I wrote down everything I was spending money on: rent, groceries, utilities, subscriptions, eating out, entertainment, etc.
2. Separated Essentials from Non-Essentials: This was a hard part because it meant cutting out almost all of my non-essential expenses. Things like dining out, Netflix, and impulse shopping had to go. Essentials like rent, food, and utilities were, of course, non-negotiable.
3. Cut Back Where I Could: I found creative ways to reduce my essential expenses. For example, I started meal prepping to cut down on grocery costs, and I switched my phone plan to a cheaper option.
4. Allocated Every Extra Dollar to Debt: After covering my essentials, every remaining dollar went toward debt repayment. There were no extras, no “fun money,” but it was only for three months. Keeping my eyes on the prize made it easier to stay disciplined.

Note: It’s hard to live on a strict budget, especially if you’re used to spending more freely. What helped me was remembering that this budget was temporary and every sacrifice I made brought me closer to financial freedom.

Step 4: Choosing the Debt Payoff Strategy (Snowball vs. Avalanche)

When it came to paying off my debt, I had to choose a strategy.

There are two popular methods for tackling debt: the debt snowball method and the debt avalanche method.

• Debt Snowball: Focuses on paying off your smallest debts first, regardless of interest rates, to gain quick wins and momentum.
• Debt Avalanche: Focuses on paying off your highest-interest debts first to save money on interest in the long run.

What I Did:

I chose the debt snowball method. I needed the psychological boost of seeing debts disappear quickly, even if it wasn’t the most mathematically optimal method. Once I knocked out the smaller debts, I had more money to put toward the larger ones.

Personal Tip: There’s no right or wrong method here—choose the one that works best for you. If seeing small wins will keep you motivated, the snowball method might be for you. If you’re more concerned with saving on interest, the avalanche method could be better.

Step 5: Earning Extra Income

A strict budget helped me free up some money for debt repayment, but I needed to boost my income if I wanted to clear my debt in three months. So, I looked for ways to earn extra cash.

What I Did:

1. Picked Up a Side Hustle: I started freelancing in my spare time. Whether it's dog walking, driving for a rideshare service, or offering freelance services online, side hustles are a great way to earn extra money.
2. Sold Unnecessary Items: I sold things I no longer needed—old clothes, electronics, furniture—through online platforms. You’d be surprised how much extra cash you can make from stuff just lying around your house.
3. Used Windfalls Wisely: I also received a tax refund during this time, and instead of spending it, I put the entire amount toward debt. Any extra income I received went straight to my debt repayment plan.
   Personal Tip: Even if you can only dedicate a few hours a week to a side hustle, that extra income adds up fast when you put it all toward debt repayment.

Step 6: Automating Payments and Tracking Progress

Once I had my strategy in place, I set up automatic payments for all my debts. Automating made it easier to stay on track because I didn’t have to remember to manually make each payment.

What I Did:

1. Set Up Auto-Pay: I set up automatic payments for the minimum payments on all my accounts. This ensured I never missed a payment and avoided late fees.
2. Made Extra Payments: Whenever I had extra money—whether from my budget or my side hustle—I made additional payments toward my current target debt.
3. Tracked My Progress: Every week, I’d check in on my progress to see how much I had paid off. This helped me stay motivated and allowed me to adjust my plan if needed.
   Personal Tip: Seeing your balance go down is one of the best motivators. Keep track of your progress, and celebrate every milestone along the way.

Step 7: Staying Motivated

Getting out of debt isn’t easy, and it requires a lot of discipline and sacrifice. 

There were times when I wanted to quit or give up. But I found ways to keep myself motivated through the process.

What I Did:

• Visualized My Goal: I created a vision board where I posted images and words that represented my debt-free future. This helped me stay focused on the end result.
• Rewarded Myself (Inexpensively): Every time I paid off a debt, I allowed myself a small reward—something inexpensive but meaningful, like a movie night at home or a new book.
• Joined a Debt-Free Community: I joined an online community of people who were also working toward becoming debt-free. Being part of a group of like-minded people kept me motivated and gave me a support system.

Personal Tip: Don’t underestimate the power of community and accountability. Sharing your progress with others and celebrating their wins can keep you motivated.

Step 8: Becoming Debt-Free and Staying That Way

After three months of hard work, I paid off all my debt. The feeling of freedom that came with it was indescribable. But getting out of debt is only half the battle—the other half is staying debt-free.

What I Did:

1. Built an Emergency Fund: I immediately started saving for an emergency fund. Having a cushion of savings means I won’t have to rely on credit cards when unexpected expenses pop up.
2. Created a Sustainable Budget: Once I was debt-free, I adjusted my budget to allow for more flexibility while still prioritizing savings and investments.
3. Focused on Building Wealth: Now that I’m not putting all my extra money toward debt, I’m focusing on building wealth through investing and saving for long-term goals.
   Personal Tip: Don’t go back to old spending habits once you’re debt-free. Establish new financial habits that will set you up for long-term success.

Step 9: Fixing My Credit Score (Rebuilding After Debt)

Paying off debt was a huge accomplishment, but there was one more important step I couldn’t ignore: fixing my credit score. 

After months of struggling with debt and making late payments, my credit score took a serious hit. So, once I became debt-free, my next priority was rebuilding my credit.

Here’s how I repaired my credit after removing all my debt, and how you can too.

What I Did:

1. Checked My Credit Report: The first thing I did was request a copy of my credit report from all three major credit bureaus (Equifax, Experian, and TransUnion). You’re entitled to a free copy of your credit report once a year, and I took advantage of that.
   I reviewed my report carefully, looking for any errors, outdated information, or fraudulent activity. If you find anything that doesn’t look right, you can dispute it with the credit bureau to get it corrected.
   Personal Tip: Don’t assume everything on your credit report is accurate. Mistakes happen, and fixing even small errors can improve your credit score.
2. Set Up Payment Reminders and Auto-Pay: Even though I was debt-free, I still had bills to pay (like utilities, rent, and insurance). I made sure to pay every bill on time, without fail. Timely payments are one of the biggest factors affecting your credit score, so I set up auto-pay for recurring bills and used calendar reminders to ensure I never missed a payment again.
3. Applied for a Secured Credit Card: Since I was starting fresh with my credit, I needed to build up my credit history again. I applied for a secured credit card—a type of card where you put down a security deposit as collateral, and your credit limit is equal to that deposit.
   I used this card for small purchases, like gas and groceries, and made sure to pay off the full balance each month. This helped me establish a positive payment history without racking up new debt.
   Personal Tip: A secured credit card is a great tool if your credit score has been damaged by debt. Just make sure you use it responsibly and pay off the balance in full each month.
4. Kept My Credit Utilization Low: Another factor that affects your credit score is your credit utilization ratio, or how much of your available credit you’re using. Experts recommend keeping your utilization below 30%, but I aimed for less than 10%.
   Since I was rebuilding my credit, I didn’t want to rely heavily on credit cards anymore. By keeping my spending low and paying off balances in full, I was able to improve my credit score faster.
5. Didn’t Apply for New Credit Unnecessarily: I avoided applying for too many new credit cards or loans during this time, since each application resulted in a hard inquiry on my credit report. Too many hard inquiries can lower your credit score, so I only applied for credit when absolutely necessary.
6. Monitored My Credit Regularly: Once I started rebuilding my credit, I kept a close eye on my progress. I signed up for a free credit monitoring service, which alerted me to any changes in my credit score and reported any suspicious activity. This helped me stay on track and protect my growing credit score from potential fraud.
7. Focused on Building Long-Term Credit History: Over time, I continued to build my credit by using my secured credit card responsibly, making timely payments on all my bills, and avoiding unnecessary debt. As I built a positive payment history, my credit score steadily improved.
   Personal Tip: Don’t expect to fix your credit overnight. It takes time, but by practicing good financial habits consistently, you’ll see progress.

How My Credit Improved

In the months following my debt payoff, I saw steady improvements in my credit score. While the impact wasn’t immediate, I managed to boost my credit score by 100 points in less than 90 days. Within six months, my score had risen significantly, going from a “poor” credit rating to “good.” This opened up more financial opportunities, including better interest rates and higher credit limits.

Final Thoughts: Becoming Debt-Free AND Credit-Smart

Becoming debt-free in less than three months was one of the hardest things I’ve ever done, but it was also one of the most rewarding. It required sacrifice, discipline, and a lot of hard work, but the freedom I now have was worth every bit of it.

If you’re working to become debt-free, don’t forget about your credit. It’s just as crucial to your financial journey, and by taking the right steps, you can not only clear your debt but also rebuild a solid credit score. The key is to make a plan, stick to it, and stay motivated. I hope this guide inspires you to take the first step toward financial freedom.

Remember, your journey may look different from mine, and that’s okay. The important thing is that you take control of your financial situation, one step at a time.

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