Deciding to become debt free is one of the most important decisions you’ll make for your financial life. I decided to embark on the journey in 2008. First, I got rid of my housing loan, a six-figure debt. Then, I became completely debt free living in 2019 when I paid off my car loan.

I can assure you 100% that while the journey is challenging and not quick, it is absolutely worth it. However, you’re probably thinking: where do I even begin? Can I even unload this massive load off my shoulders? 

The most important step to take is to make the decision. Then, you can take the following steps to eliminate your debt completely:

1.  Change your mindset

Before you even implement a budget or even formulate a plan to earn more to get rid of your debt, you need to change your mindset. Meaning, you need to understand why you got into debt in the first place. Your current mindset has gotten you into this mess, so it’s time to change it so that it can support your debt free journey.

First, you need to understand why you want to get rid of that debt. Trust me, you’ll need to hang on to your “why” as you pay off your debt.

Then, address the beliefs you have about money, possessions and wealth.

For me, the number one belief I got rid of was the belief that stuff could make me happy. All the books, DVDs and gadgets that I bought will not make me permanently happy. It is because of this that I ended up adopting a minimalist mindset and lifestyle.

To me, being a minimalist is not about deprivation. Being a minimalist is to find more joy in less things. And when stuff doesn’t control you anymore and you don’t have the desire to buy more stuff to fill that void in you. 

As a result, you can save money quite a bit! Sales like Black Friday and 11.11 will just pass you by because you realise that you already have what you need. 

This is just a personal opinion, but I think us Malaysians are obsessed with climbing the wealth and social leader. We want more and more and more.

It’s not enough for us to have one house, we need to the second one for investment purposes, of course. And maybe a third just in case. We need to flash the latest iPhone and we want to have an expensive car because, well, doesn’t it have better safety features?

I’m not saying that you need to be a miser. I’m just saying that Malaysians need to embrace the concept of “enough”. What is your enough?  

2. Create a budget

You’d need to spend less than you earn. It’s really simple. Give every ringgit a job — that’s essential, especially when you have a small salary. 

Cut out unnecessary expenses like subscriptions you no longer read or watch. Only keep the very essentials. Remember, you’re trying to pay down the debt as fast as you can. And that means giving up things that are not necessary. Find free options to entertain yourself — go walk in a park instead of staring at Netflix or hang out with friends at a mamas store instead of a hipster cafe. There are many creative ways to spend less and still have a life.

Then, write your a budget – having one will help give you an idea the amount you need to spend to get to your financial goal – whether it be paying down debt or saving more money.

Some people go to the extend of tracking every cent they spend to ensure that they stay on budget. I don’t do that – here’s what I do instead – but having a rough idea what my expenses should be each month still helps.

3. Save an emergency fund.

You’re probably thinking — shouldn’t I pay off the debt first before saving that emergency fund? Truth is, emergency expenses could dig you deeper in debt. If you don’t have that emergency fund for emergencies like when your car breaks down or when your kid needs to go to the clinic (touchwood) you’d end up reaching for that credit card. The emergency fund is there to prevent you from sliding deeper into debt and for peace of mind. 

I would recommend at least RM2000 or at least a month’s expenses to begin with. Then, aim for six months of expenses.

4. Eliminate debt aggressively 

Once done, you’re ready to cut down your debt. I used Dave Ramsey’s snowball method to get rid of mine. Here’s how it works: What’s your smallest debt? Pay that off first. Then use the money that would’ve gone to that debt and “snowball” it to the next debt. Try paying more than the minimum repayment limit if you can. 

Another method is to pay off your highest interest debt first. While this makes financial sense, the snowball method gives you the motivational boost on your journey.

5. Earn more money

When I was trying to aggressively pay down my debt, I took on a side hustle. I was fortunate enough to work in a company that would pay us money if we did extra jobs. So I’d sometimes work overtime just to get that money. 

I use that money to pay off the debt, of course, and also to save up for my emergency fund. 

Try side hustling or try ask for a promotion or a better paying job.

6. Be accountable

When I was paying off my debt, I blogged about it. (Now I keep an occasional Money Diary on this blog.) Because I was telling people I was doing this, I wanted to show that I was making progress.

However, do this with caution. There are some people who would discourage you from doing this and would even think that you’re being silly. When I was paying down my car loan, I was repeatedly told that I was being silly for paying it down so fast, especially since the “interest was so low”. 

Here’s where your why comes in. For me, I wanted to stop my money going to debt as fast as I can so that I can funnel it into investments, so I didn’t care about saving a few ringgit on interest.

So, find a way to be accountable. Record your journey, so that you can have a nice side benefit to see how far you’ve come when you reach the end. You can read my money diaries below:

7. Don’t get in debt again.  

I actually went back into debt after paying off about RM20,000. The next thing I knew, I had RM4000 of credit card debt. I paid that off quickly and never went back into credit card debt.  

Relapses happen, so do forgive yourself. But don’t let the debt balloon to the point where it’ll require months of work to clear off.

You’d have learned good money-management skills during your journey. Keep practicing it. In fact, challenge yourself once in a while by tightening your budget despite having wriggle room in your budget.

Being completely debt free means that I no longer have to worry about paying off a certain amount every month without fail. It means not worrying if I’ll survive if I lose my source of income.

Let me assure you that once you’ve tasted the debt-free life, you do not want to go back. 

The debt free lifestyle is a freeing one. It is one of freedom and choices. You can now take more risks and would feel less afraid of what the future will hold. For one, I’m so grateful that I had paid off most of my debt when I began my career change journey.

So I hope that you will take on this journey in 2020. It may be a tough and long journey for some. But it’s worth embarking on.