If you’re in debt, you are not alone. As many as 80% of people living in the United States have some type of debt holding them back. We’ve assembled some of the best free debt advice from three top finance gurus, to help you get on track to achieve financial freedom. Everyone’s situation is different, so if you don’t find the answers you’re looking for here, you can request personalized advice from a finance expert on JustAnswer.
When paying off debt, as with any personal struggle, it’s important to remember that ultimately, you are the expert on your own life. In fact, you will find that there is considerable disagreement among these experts. In order to take control of your finances, decide what works best for you, and own it.
Dave Ramsey: Baby Steps
Dave Ramsey is one of the most popular personal finance experts offering free debt advice. His radio show (The Ramsey Show) reaches more than 8.5 million listeners per week. Dave Ramsey encourages his listeners to use his seven-point “Baby Steps” plan to pay off debt and build wealth.
1. Save $1,000 for a starter emergency fund.
2. Pay off all debt (except the house) using the debt snowball.
3. Save 3-6 months expenses in a fully funded emergency fund.
4. Invest 15% of household income in retirement.
5. Save for children’s college fund.
6. Pay off home early.
7. Build wealth and give.
This plan definitely sounds like an “easier said than done” proposition, especially on a tight budget. But Dave’s philosophy doesn’t just focus on the mechanics of this plan. He also understands that for all of us, the way we manage money is psychological and emotional.
Here are a few tips that will get you in the right mindset to tackle your debt:
- Know yourself. To truly change the way you approach your finances, it’s important to understand your relationship with money. Most importantly, if you have a lot of consumer debt (aka. credit card debt), it’s important to understand how you got there. For example, was it because of a job loss that left you without other options, or was it because of impulsive spending habits?
- Accept that it’s not going to be easy. Nothing changes if nothing changes. To seriously pay down your debt, you will likely have to change your behavior. That could mean using public transportation when you’ve become accustomed to driving, or taking on a roommate when you’re used to living alone.
- Conventional wisdom about debt might not always offer the best options for your particular circumstances. Do you think refinancing student loans is always the best option? It might not be, for you. Are you saving for retirement while still in debt? Dave recommends halting 401k contributions until you’re debt free.
Dave Ramsey’s website contains a wealth of information about personal finance topics, and you can find more tips for paying off debt there.
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Suze Orman: Skip the Latte
You may know Suze Orman from her CNBC TV show, The Suze Orman Show. Suze takes a rather different approach to debt repayment than Dave Ramsey, focusing more on the duty one has to make good on their obligations. Suze also disagrees with Dave Ramsey on the importance of paying off debt vs. creating an emergency fund. As a result of the financial wreckage that the COVID-19 pandemic caused so many Americans, Suze has even suggested putting off debt payments, focusing on keeping cash on hand.
Whether Suze’s debt philosophy resonates with you or not, she also offers some debt advice that will help you take control of your finances.
- Is this a want or a need? This is a question that Suze asks us to consider every time we’re about to make a purchase, large or small.
- A dollar is more than a dollar: Suze has been known throughout the years for her advice to skip the Starbucks, and put the money saved avoiding small, frivolous purchases, to better use. A dollar put toward credit card debt with 18% interest now, is $.18 saved later.
- Filing for bankruptcy: Filing for bankruptcy is drastic, but it is an option for eliminating certain kinds of debt when your income is insufficient to make the minimum payments. When you file for bankruptcy, you will be denied credit for several years, but it is also an opportunity for a fresh start. However, bankruptcy almost never wipes out student debt, so consider this option carefully when you’re making your debt elimination plan.
Melissa Jean-Baptiste: Millennial in Debt
Melissa Jean-Baptiste knows a thing or two about paying off debt. Melissa’s $102,000 in student loans forced her to adopt a new approach to money. Today, Melissa is debt-free, owns her own home, and shares her experience to inform and inspire others to achieve financial freedom.
When Melissa overhauled her financial life, she says, she started doing her own nails, prepared her own lunches instead of buying them at inflated prices, cancelled subscriptions, and stopped going to social gatherings at restaurants. Melissa has some great tips for learning to reduce spending, including taking part in a “No Spend Challenge”, as she discusses in this interview.
Reducing her spending empowered Melissa to make larger loan payments.
The biggest move Melissa made was to create new income streams using all the skills and talents she had developed over the years. While working a full-time job as an English teacher, Melissa tutored after school, started a blog, and worked as a virtual assistant. Low Income Relief also has a list of creative ways to make extra money.
By maximizing her income and minimizing her spending, Melissa was able to pay down her debt faster.
The core lesson of Melissa’s philosophy is to understand how your money is working. Learning that paying her loans on time wasn’t enough to really reduce her debt was a wakeup call for her. When she realized that her $60,000 in student loans had ballooned to over $100,000 due to the accrual of compounding interest, she knew she had to take action.
For more tips from Melissa, check out her Youtube videos and follow her on Instagram.
The Bottom Line
While each of these experts has their own approach to paying off debt, they all agree on a few things:
- You can do this. You have the power to take control of your finances.
- Paying off debt isn’t easy. No matter what kind of debt you have, eliminating it will require significant lifestyle changes.
- Once you’ve decided to tackle your debt once and for all, do not take on any more debt.
- Don’t trust debt settlement companies. It’s not the quick fix that these companies claim, and it’s not worth the fees they charge.
These are just three of the finance gurus out there who offer free debt advice. While they each have their own approach to personal finance, you can learn from all of them and design your own path to financial freedom.
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Catherine Hall
Catherine Hall, LMSW is a therapist at a small group practice in New York City. She earned her master of social work degree at New York University.