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Two Steps to Get Out of Debt

clip0001Hey, Frugal Farmer friends!  I’m excited to share this article with you from fellow debt-hating colleague, Douglas Goldstein, whose new book will be released soon. 

By Douglas Goldstein, CFP®, co-author with Susan Polgar of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing

You can absolutely get of debt. However, you need to use the right strategies and tactics in order to crush that debt. Based on research from the world’s greatest strategists… chess grandmasters… you can get yourself on the right track fast. Here’s how to do it:

When chess players battle it out on the chessboard, one of them often seems to be in an precarious situation, on the verge of losing a valuable piece, if not the game.
Yet, even though they may be treading on thin ice, about to lose the shirt off their back (or at the very least the game), they often choose to adopt standard tactics to help them turn the game around and come out ahead.

So too, when it feels as if you are drowning in debt, follow these two tried-and-true steps to turn debt on its head and become financially successful.

Steps to Get out of Debt

Step one: realize that managing money requires strategy, not just good luck

When running your finances, you need both a goal (like a well-funded retirement) and an effective strategy to achieve it (i.e., save 10% of salary every month in a mutual fund). But how do you make the transition from setting a financial goal to actually achieving it?

On the financial level, you may be working hard and trying to save but you can’t get ahead because of your debts. Even seemingly ‘good debt’ like student loans or a mortgage can be difficult to repay when faced with a limited salary. (And don’t get fooled by the phrase ‘good debt.’ Ask anyone in debt–no one ever smiles about how good it is.)

Recognize that a limited salary is not the only hindrance towards getting out of debt. Often people in debt have many self-imposed obstacles (lack of motivation, limited perseverance, or no true desire to change) that have nothing to do with the bank.

Imagine that you’re playing chess. If your pieces are trapped behind each other, you yourself are guilty of holding your position back. However, if you carefully move your pieces out of the way, then you allow all of your chessmen the freedom to maneuver, work together, and win. If you find yourself emotionally unable to change your bad money habits, then no matter how hard you try, you’ll never fix your debt problem. Try this exercise: Look at one, relatively minor financial mistake that you know you’re making, like buying expensive coffee, not brown-bagging your lunch, or even spending too much on your cell phone plan. It’s easy to alleviate these mistakes. Fix them over a period of 21 days and you’ll realize that you can, in fact, fix your financial situation. Building financial self-confidence starts one step at a time. In just three weeks, you’ll begin to change your outlook, and that will get you rolling so that you can crash through all of the emotional obstacles that have been stopping you from changing your bad money habits.

The first step to getting out of debt is understanding how you got into it in the first place, and then realigning your money habits.

Step two: Slow and steady

Like the pawn slowly plodding one square at a time across the chessboard in an effort to transform himself into a ‘better’ chess piece, you need to navigate the minefield of debt reduction one at a time.

Start with the smaller ones first. Focus on one debt, rather than making miniscule payments on many debts at once. This way, you can see debts end, and the light at the end of the tunnel gets closer.

The first debt you should attack is credit card debt

Even if your credit card debit is small, pay it off first. High interest rates make credit card debt grow exponentially. While paying off credit card debt, change your spending habits and use cash or perhaps a debit card. This way, you can only buy things if you can afford them now. And when you pay in cash, there are no interest payments to make your expenses even higher.

Paying off debts is the first step towards financial freedom. While it may seem as if all is lost, there is always the chance to turn your fiscal situation around. You can use chess metaphors and strategies to turn your financial board around, just like a chess grandmaster will surprise her opponent and turn around a seemingly lost game.

Step beyond your self-imposed limitations and become a grandmaster of investments.

Douglas Goldstein is both a Certified Financial Planner™ professional and an avid chess player. He and World Chess Champion, Grandmaster Susan Polgar are co-authors of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing. Available for sale online as well as at www.richasaking.com.


  1. Jay @ Thinking Wealthy says:

    People simply don’t realize how long it takes to get out of debt and get discouraged. If people knew that it takes years then maybe they’d be more prepared. Slow and steady wins the race.


  2. I can see how doing things step-by-step like this really pays off. I know that my mother used to put a certain amount of money each month into savings bonds decades ago and they really paid off for her big time. I wish I’d followed her example. But we can only start today. Great advice! Thanks! 🙂

  3. Even Steven says:

    I like the idea of paying off the credit card first, not so much for the high interest rate behind it but for the incentive to get started on paying with cash and correcting your budget.

    I chose to pay off the debt that I hated most(also a great motivation), it just happened to be a credit card.

  4. I like the analogy with chess. (My husband just posted an analogy with karate on my site : ) Debt-reduction is really a play-by-play effort. Sometimes a bad month – or even several bad months in a row – can make us want to give up. But if we play the tough times well, if we apply the best strategy we can think of for that situation, we’ll come out of it well – in a good position to make the most of better months. I like what you say about chess players who look like they’re about to lose: “Yet, even though they may be treading on thin ice . . . they often choose to adopt standard tactics to help them turn the game around and come out ahead.” I’m glad that statement is also true for those of us in too much debt.

  5. Katie A says:

    I love the simplicity – when you break it down into just these two steps, it provides focus and makes debt elimination so manageable. Thanks for sharing – great post.

  6. I like this straightforward approach! And, I think this is a great suggestion for changing almost anything in life “The first step to getting out of debt is understanding how you got into it in the first place.” Seems so simple, but it’s challenging to analyze ourselves–especially our shortcomings.

  7. Myles Money says:

    I agree that paying the credit card off first is the best way to go about it (unless you have other debts with a higher interest rate) as it’s the most cost-effective way of paying off your loans. I also understand the “psychology” argument of paying off smaller debts first (ignorning the interest rates) because you feel encouraged when you have fewer debts. It’s a bit like crossing the minor jobs off your to-do list first. I guess it’s horses for courses.

  8. Credit card interest rates are ridiculous…it definitely should be the first debt that should be paid off, and sworn off forever. Never use credit if you can’t pay off the balance. The 21 days is pretty interesting concept. I think many people think they can’t do something like quitting the daily latte…but I guess if you keep it up for 21 days, then you’ll realize that you can.

    • Laurie says:

      True, Andrew! So many don’t even look at how much interest they’re throwing away each month. Once we started to analyze that figure, it was very easy to change our spending habits.

  9. Kim says:

    I’m almost to 21 days on my no soda quest, and I think it’s going to stick. I really hate when people blame luck for being in debt. If you have an emergency fund and back up plans, you really can control most of your own luck.

  10. I think taking a “slow and steady” approach is important. We have a lot of student loans, but I keep telling myself if we just keep plugging away making payments month-after-month, eventually they will be completely gone. Kind of hard to imagine right now, but a few years down the road we should get there.

  11. Alexis says:

    I think starting off slow and steady is definitely one of the most important steps because people are quick to want to get things done with but that creates a ton of pressure and stress.

  12. JD says:

    Glad I found your site. I would like to say that after three years of mega-concentrated focus on paying off our only debt (mortgage) the results are beginning to show. Slowly…cough but there. This next week our mortgage will be beat down below the $100,000 mark. Woo Hoo!!!! Lots of focus and determination but it will pay off.

  13. marty preston says:

    When I start saving money and try to fix my money problems I always want the quickest solution but after reading this I am no sure thats the best

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