21 Practical Steps to Break the Debt Cycle and Build Toward Financial Freedom

We really are living in crazy times. I know it can be difficult to be positive and forward-looking when everything seems uncertain and messed up, but I want to encourage you to face your debt troubles and set up a plan to build towards financial freedom.

Today, I want to share a few practical steps to help you break the debt cycle and build toward financial freedom.

You have the power to do it! With a little planning and a bit of work, you can turn your financial affairs around.

A habit is something that, if practiced and regularly repeated, becomes a way of life. Good habits usually lead to success, while bad habits lead to destruction. Today, I want to look at a few options that you can consider to get out of the debt trap.

“Rather go to bed supperless than rise in debt.” – Benjamin Franklin

“Never spend your money before you have it.” – Thomas Jefferson

“When you get in debt, you become a slave.” – Andrew Jackson

“Owe nothing to anyone—except for your obligation to love one another.” (Romans 13:8)

Let’s face it. Debt leads to a lot of unnecessary stress. When you add up all your debts (your home mortgage loan, car loan, store cards, loans, and a few credit card repayments), it can leave you with that sinking feeling.

As debt levels rise, they seem to devour your cash flow. Spare cash evaporates, making it increasingly difficult to make ends meet, let alone break the debt cycle. When in debt, it can feel like there is no way out.

“The rich rule over the poor, and the borrower is slave to the lender.” (Proverbs 22:7)

If you are battling to make ends meet and regularly need to use your credit card to cover your monthly expenses without being able to settle the debt in full the following month, interest is going to eat up a lot of your hard-earned income. Surely, your hard-earned money could be better utilized to save for a new home, your children’s education, your retirement, holidays, and making good memories.

Remember, no matter how challenging things may seem today, there is always a way out. You have the potential to get out of debt and regain your financial stability. You can replace poor financial habits with new, beneficial ones. You can redefine your financial priorities. You have the power to turn things around.

Over the next two weeks, we will explore 21 practical steps that can help you break the debt cycle, pay off your debt faster, and build toward financial freedom.

Today, we are going to look at  14 PRACTICAL STEPS TO BREAK THE DEBT CYCLE. Next week, we will look at 7 STEPS TO BUILD TOWARDS FINANCIAL FREEDOM.

14 Practical Steps to Break the Debt Cycle

• 1. Get determined to break the debt cycle:

Be honest about your current financial situation. Where are you now? You can face your fears and set a goal to be debt-free by a certain date. Where do you want to end up? With a decent plan, you can turn your financial affairs around. Get disciplined. You can form good habits, set up a plan, and commit your plan to God. He will help you! Break the cycle! Be weird and say no to debt!

“I can do all things through Jesus Christ who strengthens me.” (Philippians 4:13)

• 2. Review your budget:

Why not consider cutting wasteful expenditures and possibly eliminating certain items in your budget so that you can use the extra cash flow to eliminate your debt? If you are aware of what your budget looks like, you will be more aware of your spending and more likely to break the debt cycle. You can plan ahead. This will help you in breaking the debt cycle.

Jesus said, “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?” (Matthew 14:28)

• 3. Study your bank statements:

In order to break the debt cycle and get your finances back on track, you need to establish where your hard-earned money is going. Where are you spending your money? According to your credit card statements, where are you racking up debt? You need to review your statements. Analyze your spending. Once you know where you are spending your money, you can take action to change your habits and stop your debt from spiraling out of control. Are you spending too much on clothing or entertainment? Are you buying things you don’t need or really use? What is your weakness? Avoid these areas. It may be hard, but a little short-term pain will lead to longer-term gain.

Jesus said, “Seek, and you will find.” (Matthew 7:7)

• 4. Get advice:

If you are battling to get your finances in order, get some advice. Chat with your friends or a respected family member who has gotten it right. Seek wisdom. With a little help, you can analyze your current position, hopefully, learn some good habits, and construct a realistic plan to break the debt cycle.

“Fools think their own way is right, but the wise listen to others.” (Proverbs 12:15)

• 5. Stop trying to keep up with the “Kardashians”:

A lot of people get caught up in looking at other people’s lifestyles and attempt to keep up with them. Don’t live like this! Many people buy things they don’t want, with money they don’t have, to impress people that they don’t even like! Don’t follow the crowd. Be the best you can be. Many go out and buy new cars, bigger homes, or brand-name clothing and items just to fit in with others. First, cover your basic needs. Don’t get deeper into debt to keep up with the Joneses”. Wow, it may be nice to drive that brand-new BMW, but what about the huge monthly repayment over the next 6 years, not to mention the cost of the insurance? You may think you need that thing to fit in, but the truth is that more people are too absorbed in their own lives even to notice what you do or don’t have. If your friends are so image-conscious, maybe you should relook at your friendships.

“You must not covert (be envious) of your neighbor’s house.” (Exodus 20:17)

• 6. Differentiate your “wants” from your “needs”:

Every time you buy something, ask yourself if it is a want or a need. If it is a necessity, then buy it. But if it is just a “nice to have” that you can live without, then rather don’t buy it. Rather, think it over. Ask yourself if it is worth it or if it would be better to hold off and save up for it. Sometimes, we buy things without thinking. Take a step back and assess whether buying that item is going to add to your long-term happiness or if the extra debt will add stress to your life.

“You say, “I am allowed to do anything”–but not everything is good for you. You say, “I am allowed to do anything”–but not everything is beneficial.” (1 Corinthians 10:23)

• 7. Set up a shopping list:

Make a goal of only going to the shops when you need to go and ensure that you have a shopping list of what you need to buy. You can resist unnecessary purchases and will be surprised at how much you will save if you don’t set foot in every shop.

“Good planning and hard work lead to prosperity.”  (Proverbs 21:5)

• 8. Cut up your store and credit cards:

Credit cards can be great if used correctly. They can help you track your spending. But if your credit cards (or store cards) are a temptation that keeps you in debt and causes you unnecessary stress, then grab a pair of scissors and cut them up! This simple step can protect you from the stress of extra debt and help you gain control of your spending while getting rid of the temptation.

“A person without self-control is like a city with broken-down walls.” (Proverbs 25:28)

• 9. Pay more into your debts:

Do your best to pay more than the minimum on your debt repayment. This way, you will reduce your liability, save on interest repayments, and help you settle your debt faster. If you do the math and see what you are actually paying back on your loan, overdraft, or credit card, you will be shocked! By settling your debt as soon as possible, you can save yourself a lot of stress and wasted money.

“The prudent see danger and take refuge, but the simple keep going and pay the penalty.” (Proverbs 25:28)

• 10. Use extra cash windfalls and other lump sums you receive to squash your debt:

If your debt is eating into your cash flow, why not use any bonuses, tax refunds, or cash gifts you may receive to attack your debts?

“The fool spends whatever he gets.” (Proverbs 21:10)

• 11. Sell assets you don’t need or no longer use: 

If your debt is too high, consider selling your unused assets and unwanted goods to free up extra cash to pay off your debts.

“But those who want to get rich fall into temptation and are caught in the trap of many foolish and harmful desires, which pull them down to ruin and destruction.” (1 Timothy 6:9)

• 12. You could try to earn extra income:

If you want to break the debt cycle faster, why not use your talents to create an extra source of income? Consider taking on some extra work, selling something, or doing freelance work to bring in additional income that you can use to reduce your debt liabilities.

“Lazy people are soon poor; hard workers get rich.” (Proverbs 10:4)

• 13. Only buy what you can afford:

You may be surprised at how much credit your bank is willing to lend you. I want to encourage you not to overspend. Just because you have access to credit does not mean you have to take it up. Debt will add stress. So, rather than buy what is affordable, increase your savings and build up your own Wealth Portfolio. Don’t let others convince you to buy something that will add financial strain. 

“The wise are cautious and avoid danger; fools plunge ahead with reckless confidence.” (Proverbs 14:16)

• 14. Review your expenses:

Why don’t you take a look at what you are paying for the regular items in your budget? Maybe you can review your insurance premiums or bond loan rates. Maybe you can consider downgrading the car you drive or reviewing certain lifestyle expenses in order to reduce your monthly expenses. You may just be able to get a better deal that will lead to a reduction in your expenses. Maybe you can cut back on your electricity or water consumption, which will lower your expenses. These extra savings in your budget can be used to tackle your debt.

“The borrower is slave to the lender.” (Proverbs 22:7)

7 Steps to Build Toward Financial Freedom

• 15. Learn to be content with what you have:

Money and things do not make you happy. Learn to live a simple life. Be content with what you have. This alone can go a long way to breaking the debt cycle. Do you really need a brand new car on finance? Do you really need to add to your financial strain by upgrading your property? Rather, save up the spare money so that you can live stress-free.

“I know what it is to be in need, and I know what it is to have plenty. I have learned the secret of being content in any and every situation, whether well-fed or hungry, whether living in plenty or in want. I can do all this through Christ who gives me strength.” (Philippians 4:12-13)

• 16. Save up an emergency fund:

Part of the never-ending debt cycle is attributed to not planning ahead. From time to time, you will face financial storms. It may be your car that breaks down or the fridge that conks in. Plan ahead! Budget for emergencies. Save up at least 3 months of income as quickly as you can and keep it in an accessible bank account. Make sure that you only use these funds for emergencies. Do not dip into this account when you see that item on sale. Make sure that you set these funds aside for the unforeseen events that will occur from time to time. If you have funds set aside, you will not need to rack up your credit card debt to cover your emergency expenses. This planning ahead will help you break the debt cycle and alleviate a lot of unnecessary stress.

“Take a lesson from the ants, you lazybones. Learn from their ways and become wise! Though they have no prince, governor, or ruler to make them work, they labor hard all summer, gathering food for the winter.” (Proverbs 6:6-8)

• 17. Build up an opportunity fund:

Set up an investment to fund your future dreams and set aside funds for opportunities that may come your way. Plan ahead! Budget for your dreams. Set funds aside to fund future opportunities.

“The wise man saves for the future.” (Proverbs 21:10)

• 18. Save before you spend:

Make sure that you save and invest before you spend your money. If you spend first, you will never have anything left to save.  Let your savings and investment come off a debit order before your other expenses. This way, you will always save first, and you will build up your investments.

“A wise youth harvests in the summer, but one who sleeps during harvest is a disgrace.” (Proverbs 10:40)

• 19. Save up for your dreams:

You will be surprised how easy it can be to save up for something that you really want. It is highly rewarding to know that after all that hard work you put into building up your savings, you can finally achieve your dream debt-free!

When you really want something, and you reorder your priorities by cutting out wasteful expenditures to realize your dream, you will have joy instead of stress. You may end up spending less on entertainment or on takeaways to save up so that you can accomplish your dream. What is your dream? Is it a new car? Or an overseas holiday? Whatever your dream, let it spur you on to save.

When you save for something you want and work hard to acquire it, instead of feeling guilt, you will feel a sense of accomplishment and joy, knowing that you worked hard and saved for something meaningful that would add value to your life and that you paid for in cash.

“Hope deferred makes the heart sick, but when dreams come true, there is life and joy.” (Proverbs 13:12)

• 20. Pay it forward:

Once your debt is settled, avoid future debt. Build up your savings and set aside money for your future goals and dreams. By delaying your purchases and saving for the item, you will improve your cash flow, reduce your stress levels, and save a truckload on interest repayments. Instead of paying interest, you can earn interest if you pay it forward and build up your savings and investments!

”He who gathers money little by little makes it grow.” (Proverbs 13:11)

• 21. Consult God:

God is interested in you. He wants to help you break the debt cycle and walk the journey with you. So, consult Him. Trust Him.

“Trust in the LORD with all your heart; do not depend on your own understanding. Seek his will in all you do, and he will show you which path to take.” (Proverbs 3:5-6)

With a little planning and a bit of work, you can turn your financial affairs around.

There is a solution. With God at your side, nothing is impossible, and no situation is so far gone. There is hope. There is a way out!

YOU CAN BREAK THE DEBT CYCLE.

YOU CAN BUILD TOWARDS FINANCIAL FREEDOM.

“Commit your work to the Lord, and your plans will succeed.” (Proverbs 16:3)

What Does God Have to Say:

It is so easy to get despondent when looking at the crazy times in which we live. It’s easy to live in fear and to worry. We are living in tough and uncertain times. But I need to tell you to look up, even when everything is down. Don’t give up! Don’t give in. There is hope in God.

Keep your eyes up. Look up!

“The Lord is good, a refuge in times of trouble. He cares for those who trust in him.” (Nahum 1:7)

“I will lift up my eyes to the hills— From whence comes my help? My help comes from the LORD, Who made heaven and earth.” (Psalms 121:1-2)

Keep your eyes on Jesus!

“Therefore, since we are surrounded by such a huge crowd of witnesses to the life of faith, let us strip off every weight that slows us down, especially the sin that so easily trips us up. And let us run with endurance the race God has set before us. We do this by keeping our eyes on Jesus, the champion who initiates and perfects our faith. Because of the joy awaiting him, he endured the cross, disregarding its shame. Now he is seated in the place of honor beside God’s throne.” (Hebrews 12:1-2 NLT)

We all paid a debt we could not repay. It is called sin.

“For the wages of sin is death, but the gift of God is eternal life in Christ Jesus our Lord.” (Romans 6:23)

But God made a way out…

“For God so loved the world (THAT IS YOU) that he gave his one and only Son (JESUS), that whoever believes (PUTS THEIR HOPE IN HIM) in him shall not perish (IN HELL) but have eternal life (IN HEAVEN).” (John 3:16)

If you are not in a relationship with God, I want to encourage you to invite Jesus Christ into your life to be your Lord and Savior…

We were cut off from God due to our sins, but Jesus paid the full price on the cross so that we could be reconnected to God. God loves you so much that He made a way for you to become part of his family. He wants to share forever with you.  

“Yet to all who did receive him, to those who believed in his name (Jesus), he gave the right to become children of God.” (John 1:12) 

You can start or restart your walk with God as His beloved child.

What are you waiting for?

Let’s Pray:

Dear Heavenly Father,

Today, I surrender my life to you. I ask you to please set me free from debt, protect me, and lead me. I give you my life along with my burdens and failures. Lord Jesus, I ask you to be my Savior. Be the central part of my life. Today, I acknowledge that I need you. Lord, I put my life in your hands and want to please you in all I do. In Jesus’ name. Amen.

If you have prayed this prayer, please let us know. We would love to pray for you and send you an incredible eBook to help you on your journey with God.

In Conclusion…

You can deal with your debt. With God’s help, you can break the debt cycle and build towards financial freedom.

God bless you.