Debt Destroyer Method – Debt Free in 6 Simple Steps

Debt Destroyer Method

Debt Destroyer Method - Debt Free in 6 Simple Steps

Table of Contents

Being in debt sux. I know I was in debt nearly $40,000 at one point in my life. I had $35,000 in student debt and $5,000+ in credit cards debt.

But I worked my way out of it because I was knew the strategy of how to get out of debt and I gamified the process. What I mean is, by using then right strategy I stacked the odds in my favour. These quick wins gave me the dopamine-induced motivation hits I needed to stay on track.

If you want a quick birds eye of the exact amounts per month to pay down on a 10% per annum personal debt or a 5% per annum house loan check out my Debt Destroyer grid below. 

This gives you a crystal clear birds eye view of how to destroy debt easily. 

So, what is this dopamine inducing game that helps people to get out of debt?

Below is, my 6 steps to destroy deb, in the Debt Destroyer Method…

Debt Destroyer Planner

Step #1 - Cha-Ching

Scrounge up $1,000 and deposit into your ‘Rainy-Day Reserve’.

The most important step is the first as they say. And this Step #1 in the Debt Destroyer Method is no different.

The first step is to deposit $1,000 into a high-interest savings account, separate from everything else.

But hang on, what’s this got to do with getting out of debt?

Well, it’s simple. The $1,000 is a positive first step in setting up your ‘Rainy-Day Reserve’.

If you don’t have a rainy-day reserve, this is the top priority.

A rainy reserve is the lowest form of safety net for any household or individual.

If you do not even have $1,000 available for an emergency then this really this is the absolute most important thing to do.

Everyone needs at least $1,000 easily accessibly cash sitting around for those irregular minor rainy days that come along., e.g. like a broken windscreen, a punctured tyre or an accident where you accidentally reverse into another car and you need to cover the excess on your insurance.

Okay, so step #1 is to get $1,000 into a rainy reserve. How?

Well, it is remarkable how quickly you can make this happen.

Option (a) Make a decision that you are paying yourself $1,000 (no questions) out of your next paycheque into this new high-interest savings account.

Option (b) Sell some stuff from around your house on Facebook market place, eBay or Gumtree. The bank I recommend for high-interest savings is Xinja.

Xinja currently offer the highest interest rates in the market and with no conditions!

You don’t need to deposit regularly, you don’t need to make a purchase weekly, and you do not have to give your first-born child to their CEO on the date of her first anniversary.

Check out my review of Xinja in the link below.

Related Post: New #1 Bank for Explosive Savings

Once you have deposited the $1,000 into the Xinja account, Celebrate!

Get that dopamine hit!

This is really important because it gives your brain a positive reinforcing message that the debt destroyer method is pleasurable, not painful!

Rainy Reserve

A ‘Rainy Reserve’ is your first safety net against financial set back.

Step #2 - Categorise

Line ‘em up! Line up those debts and categorise into a list with the following:

  1. Who do you owe the debt to?
  2. How much do you owe?
  3. What is the minimum repayment?

Write them down onto a piece of paper and keep that piece of paper.

Include the really small ones, like owing your mum and dad $50 for that tool you bought, and the $200 you owe your mate for the trip to Hawaii.
Cool, that was an easy step!

Work out the Pay-Off Ratio. To work out the pay off ratio simply divide how much you owe by the minimum repayment. 

That is, No#2/No#3.

Determine the Pay-Off Priority and then re-list in terms of pay-off priority. The lower the ratio from the ‘Pay-Off Ration’ the higher the priority. 

Well done you nailed the second step. Celebrate with a piece of chocolate!

Step #3 - Call

Call the bank! Before you call the bank, get onto google and search for the ‘best credit card offers out at the moment’.

Look for credit card offers that have a 0% interest rate for 18 months on balance transfers.

Cool, now that you have this ‘alternative’, you have some negotiating power!

Now you can call the bank and ask for them to match this deal what the other bank is offering or you will have to transfer over to the new bank. Most of the time the banks will offer you the deal or at least a much better rate than what you are on.

The reason why banks will give you a free 18-month interest rate period is that they know most people will probably end up spending more. And, when the interest rate free period runs out the Bank knows it will be getting the interest again.

However, this is not you, because you are on a mission to destroy your debt and you have the Entrefineur on your side!

That’s Step #3 in the debt destroyer method done!

Great, so you negotiated an interest-free 18-month window for your debts! Now celebrate!

Step #4 - Cut

Cut the plastic! Grab all your credit cards and cut ‘em up! Make a ceremony out of it, film it and put it on Facebook!

That’s Step #4 in the debt destroyer method done, now Celebrate!

Again, the celebrating is sooo important for your brain to get the message that taking these actions is pleasurable!  

Even better celebrate while cutting the plastic to make sure the brain makes the connection between cutting the plastic and the sweet taste of that bevvie!

Step #5 - Check 'em off!

Now allocate 10% of your gross income + the minimum monthly payment to paying off the highest pay-ff priority debt first and and start checking those debts off your list, one by one.

But, remember that while you focus on paying 10% of your gross income on paying down the top pay-off priority debt, you must also be paying the minimum on all the debts, including the one you are focusing on.

Then each time you pay off a debt, roll the 10% gross income debt destroyer payment onto the next debt plus the minimum repayment from the last debt + the minimum repayment from the new debt you are focusing on.

Keep rolling the money from one debt to the next, destroying them as you go. 

Again, this is a gamified process whereby you are giving your brain a dopamine hit each time you achieve a small goal of destroying a debt.

Now it’s worth explaining my method here because it differs from the purely mathematical approach you may have heard of.

Often the advice you will read or hear is to consolidate your debts into one lender and negotiate a lower rate.  

This is great advice however I believe in adding some neuroscience and behavioural science into my methods because they work in real life.  

Humans are not robots and so often purely mathematical choices are not the most efficient way of getting something done.

By keeping the debts separate and checking ‘em off one by one you will get a surge of dopamine and motivation each time you reach a new goal. 

This is a lot better for maintenance of the habit that having one massive debt to go after with no end in sight.

One more thing, it is imperative that you do not incur anymore debt during this pay down process!

Okay. So, once you have knocked off the last debt guess what, it’s time to…

Step #6 - Congratulate!

Ha tricked you, yes congratulate yourself and celebrate! This requires no further explanation.

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The EntreFIneur
The EntreFIneur

EntreFIneur is a passionate frugalist, FI enthusiast, experimenter, ideator and entrepreneur. He's also a family man and when he has time, an active fitness fiend and outdoor hobbyist.

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