skip to Main Content

How to get out of debt? Don’t make the same mistakes in 2018

Who isn’t in debt these days? With the increased use of credit cards and easy personal and other loans, debt has become an integral part of a Sri Lankan’s life. Nowadays, every one of us is in debt.

For a long time, I was blaming myself for not managing my money properly. After all, I consider myself a well-educated person (management to be exact). Now a “well-educated” person in Sri Lanka should know how to manage their money right? But like most of you, I sucked at it.

But after reading so many books and posts on money, I’ve realized that I shouldn’t blame myself so much. Even though I studied subjects on Finance and Accounting in university, no lecturer taught me things like “How to manage my credit cards” or “Personal Finance 101.” That’s the problem with our education system. I don’t wanna go and blame all the grandfathers who created our education system now. I have done it before.

We sort of had to “figure things out” on our own and it was all trial and error. That’s why basically every one of us is bad at managing our money. That’s fine. But you shouldn’t make it an excuse to continue sucking in your financial life. It’s time to take charge.

If you want to have a rich life, you need to know how to manage your money. Period. But how can you manage and invest money if you’re neck deep in a pile of loans?

So the first step is to get out of that nasty debts.

Step 1 – Find how much you owe

I know it sounds super cliché but this is your first step. Most of the time, we pay our debts from here and there without looking at the big picture. Getting rid of your debt is easy if you can be strategic about it. It is critical to know how much you owe and to where.

So stop reading and grab a piece of paper. Yes. I mean right now!

Now start writing down all the debts you have. This can be credit card loans, personal loans or anything else. If you have no idea how much you owe to each bank, start calling them. Get the exact amounts. If it is credit cards, get the minimum payment amount as well.

Step 2 – Decide what you have to pay first

Most of the time, you can’t pay everything at once. So you need to prioritize what you have to pay. How can you select what to pay first? Simple. Start with the smallest debt first. What?!!!!

Yep. You read that right. There is a common myth about selecting which loan to pay first.

Myth: You need to get out of the debt with the highest interest rate to get out of debt quickly.

Truth: You should knock out the smallest debt first to create momentum in your debt snowball.

Paying off your debt is more psychological than you think. Any rational person would try and pay the biggest loan with the highest interest rate first. But let’s say you have a car loan for 7 years (I’m talking about me!). You’re not going to finish it anytime soon and if you start tackling a big loan, you will feel like its never-ending.

You need small wins to keep your momentum going. So list down your loans from smallest to the biggest. Then pay off your first loan immediately. That will create enough momentum to tackle the next loan. This technique is called the debt snowball. Following is an example.

Step 3 – Don’t fall into debt again

This sounds like a no-brainer but who are we kidding? Don’t fall into debt again. This is so important so I’m gonna repeat. DON’T FALL INTO DEBT AGAIN. Like I said before, paying off your debt is more of a psychological game. You need to feel like you’re paying them off one-by-one. But if you keep on getting into loans, you will feel like it’s never-ending. That can frustrate you and make you feel hopeless (I was there for a long time!).

That’s why I suggested you to write them down on a piece of paper and keep track of how much you pay off each month. These small wins will help you to pay off even more.

If you don’t want any more loans, you have to be ruthless to yourself. That’s the only way.

If you’re going out, leave your credit cards at home. If you have no control over yourself (like most of us) you can even cut your credit cards and throw them away. Or you can give it to someone you trust.

Feel like buying the latest iPhone which has only 2 additional features than the previous version? Don’t buy it. How about that sexy handbag (that no one will even remember after a week)? Don’t buy that either. Until you pay off your debts, be really frugal. Don’t buy anything that will get you in more debts. That means bye, bye PlayStation 4.

Step 4 – Show me the money

You may think to yourself. All this is great Nishan but how can I find money to pay off my debts? Making more money to pay off your debts always drill down to two choices.

Save more money or earn more money.

Save more money – This is the easiest option. You can cut down all the unnecessary expenses in your life. That 100 meters Tuk Tuk ride to your office; why don’t you walk? Even though you don’t realize, we spend so much money on Tuk Tuks. What about your petrol expenses? Each week, go to work at least one day by the bus. How about that latest 3D movie at your favorite cinema? You can buy a DVD or download it online. If you deduct the comfy chairs and huge screen, it’s the same movie with the same story.

Earn more money – There is always a limit to saving more money. After all, you can’t live on the road. But there is no limit to earning more money. No one really talks about this option but you can really earn some extra money each month.

I still do assignments for others and make some extra bucks every month. You can even start a small side hustle (a business on the side) and make some money while having a job. You can learn more about side-hustling here.

Step 5 – Automate everything

When it comes to managing money, we are all poor managers. If you wait until the end of each month to pay off your debts, you’re not going to do it. When was the last time you saved money to pay off your debts? Never. Each month, we somehow manage to finish every Rupee we earn. That’s how our brain works.

You need to have a system in place where everything is taken care of itself. That’s where automating comes into play. As soon as you get your monthly paycheck, set off the amount you’re planning to pay your debts. Don’t wait until the last day to do this. Your job is to remove the number of decisions you have to make. The best way to do it before even you can touch your salary is, send whatever the amounts you have to pay each month to respective accounts. This has a lot to do with budgeting your salary. I’ll explain more about budgeting in the follow-up post to this.

We are also planning to launch a workshop on Personal Finance where we will help you to tackle your debts and help you to take control of your financial life. If you want to join the next workshop, go ahead and register by clicking this link.

If you liked this post and if you find any value, don’t forget to add a comment below and let me know what you think. If I have missed anything or if you want me to post on something that you’re struggling, add your suggestions too.

Now get rid of your debts.

If you want to start investing in Sri Lanka, we have practical workshop for you. It’s called Investing Essentials. To learn more and join the next workshop, click here.

Did you enjoy this?

Then sign up to our weekly newsletter so you won’t miss out on great posts like this. Add your favorite email and hit Submit.

Nishan De Silva

Nishan is the founder of He is a Blogger, YouTuber, Coach, Speaker, and Entrepreneur.

Back To Top