How to Reduce Debt - my story

I hesitate to explain how to reduce debt because everyone's situation is different. Here I'm going to tell you how I did it. My approach is probably a bit unconventional, but still worth exploring in some detail.

How I got into debt isn't important. Suffice to say that I had a lot of help.

What's important is that I was in debt up to my eyeballs and had to make some radical changes in order to keep my head above water. The challenge for me was considerable.

With the idea in mind that higher risks meant better potential for higher rewards, I took calculated risks to get myself out of debt.

It all turned out just fine because of good planning, hard work, and no one at home creating financial obligations or spending money while I was out working hard to make it.

Here is my story in the sequence in which I made it happen.

The Burden of Debt

After personal and corporate bankruptcy filings in 1998, I was left with an obligation to pay off more than $100,000 in debt through the bankruptcy trustee. This was non-dischargeable debt, mainly from taxes, and my Chapter 13 suit called for a 5 year payback.

It seemed that for the first few months or so the bankruptcy trustee would periodically request higher payments in order to make certain that I was staying "on plan" with respect to paying off my obligations. A year after the plan was filed with the bankruptcy court, I was making $3,000 payments each month.

It was clear that I needed to learn how to reduce debt in a serious way because I was on the hook for a serious pile of money.

Trimming the Fat

Staring down the barrel of such large monthly payments, I soon realized that I needed to cut out all unnecessary expenses. Here is what I did:

  • Moved to Wyoming to dodge taxes from California.
  • Rented a one bedroom apartment with all utilities paid.
  • Kept most of my personal belongings, but never for a moment thought about buying anything that wasn't necessary for my safety, security or success at work.
Spending for me wasn't normally a problem. I had always lived frugally. With the burden of debt hanging over my head, I had to make frugality a science, not just a sport.



Assessing Income Versus Expenditures

After I had trimmed back all the unnecessary spending, which wasn't much at all, I assessed where I was financially. Projecting my take-home income over the next 5 years with the demand on my take-home income, it became clear that my financial situation would run aground before I had my obligations paid off.

I knew that I wasn't going to get any help from others, so I had to develop a plan on my own. My pay wasn't going to increase. My company already thought that I was adequately compensated. I couldn't work more hours or get another job. I was already working too many hours as it was.

Another consideration was my assets. The only asset that I owned was some beautiful real estate on a mountain top in California. Before I had left, I cleaned up the place and got it ready for sale, and put it in the hands of a real estate agent. All I could do was wait for that to sell.

Leaving the Mothership

After some careful reflection, and a half bottle of wine, I decided in January of 1999 that the only way for me to keep my head above water was to start my own enterprise. It's something that I had been considering, but now there was an urgent need knocking hard on my door, and I was ready to answer.

After a little research, I gave notice that I was leaving the company and starting my own enterprise as of February, 1999. It was a risk, but it was the only way I could think of to generate enough income to pay off my debt. My answer to "how to reduce debt" was simply make more money, and my options were limited to starting my own enterprise (or winning Powerball, or winning the money on a game show).

Which one do you suppose I selected as most likely to succeed?

Any person who knew my financial situation would say that I didn't have enough money to seriously start a business, but I had run out of options and I was counting on the sale of my land to serve as an injection of seed money for my new business. It was a worthwhile investment in my mind. I had spent enough time making money for others, and it was time to make some for myself using those same skills that had served others so well.

Focusing on Success

I didn't know how to reduce debt because I was a first timer, but I knew how to work hard. And, I had a business plan in my head that had been simmering for many months. It was as good a place to start as any.

My focus was simply working hard, making as much money as I could, and staying "on plan" with the bankruptcy trustee. That's not only how to reduce debt, but also how to get rid of it over 5 years. My job was simply to stay "on point" and get it done.

If you're interested in knowing a bit more about my management consulting business, this is your chance.

Nail Biting

With an inadequately funded enterprise that required travel by a guy who was bankrupt, everything had to be done by cash and check. It was a pain in the ass to say the least. Imagine renting a car with cash.

More importantly, I was "floating" all my travel costs for my customers, waiting to get reimbursed. This wasn't how to reduce debt, this was how to run out of money.

Worse yet, having jumped into this so quickly, I hadn't established contracts with my customers. I wasn't worried at all because I had been working with these folks for many years, and the contracts were "in the bag." It was just a matter of time.

All the while, I had to keep paying the bankruptcy trustee. My adventure in how to reduce debt was turning into a tightrope walk. And, it wouldn't take much to cause me to take a fall.



Financial Success - at last

After holding my breath for a couple of months, my real estate sold in California. It was April of 1999. The cash from that sale gave me some breathing room. A few months later, my contracts were finalized and I was able to invoice for my work.

Now, all I had to do was wait for payment.

In September of 1999, my first check was received. Later, more checks started coming in. I finally stopped treading water, and I was now in a boat and on my way to financial success.

At that time I knew how to reduce debt and pay it off - just keep working as much as I could. My life wasn't fun, but it was rewarding in many ways. I was achieving success based on my own initiative.

My intense focus on success landed me more contracts and a wider range of customers. I even landed a small job right here in Cheyenne. I was over-employed, and that was a good problem to have.

Soon, I was able to put some of my earnings into a self-employed retirement program, and invest some of my after tax dollars elsewhere. I had "surplus" and that was a great feeling.

My planning and risk taking had paid off. I could definitely see the light at the end of the tunnel. I had turned the corner and I wasn't ever looking back again.

As I approached the end of my payment plan, I planned for my next phase - a place of my own in the country. When the day came that I knew I was "out of the woods" and on the cusp of paying off my debts, I phoned a real estate agent.

My Reward

After I received my notice of "payment in full," I made an appointment to see some real estate. After a few days of looking, I found my "future" and made an offer within an hour of seeing it.

While on a project in Los Angeles, I finalized the agreement, and when I was back in town a couple of weeks later, I signed the papers at closing. What a great feeling. I was on my way out to the country, a place where I always belonged, but just never had the chance to plant myself.

How to Reduce Debt - my summary

Many of us are trying to figure out how to reduce debt and get ourselves out of a financial hole. We're engaged in frugal living, we're trying to make more money and put that towards our debts, and we're in a tense situation.

My case is a bit different than most. I didn't know how to reduce debt, but I knew how to run a business. I used that strength to dig myself out of a hole. I pulled hard up on my own bootstraps, and things went well for me.

I assume that most other people are in a different situation - they aren't in bankruptcy, they don't have a pile of money to pay the government, and they don't have the skills and experience to run their own business.

For you folks, I'll suggest how to get rid of debt with guidance and a sample plan. It might not fit exactly with your situation, but it will come close. Adopt or adapt portions that make sense to you, and stay on the course of frugal living.

It's only a matter of time and focused effort, and you'll be free of your burden of debt. Figuring out how to reduce debt is important. Getting debt paid off is crucial. Staying out of debt is vital.

Good fortune to you, and may you handle your situation with courage and dignity.

Done with How to Reduce Debt, take me to Paying off Debt

There certainly is a broad scope of topics here at Frugal Living Freedom. When you think about it, money permeates so very many activities in our lives, therefore, being frugal encompasses a wide range of interests, from being employed to taking a vacation, and just about everything in between. Enjoy the variety, pick up some new ideas, and start making frugality a part of your signature.



I'm a big proponent of being debt-free, and I mean entirely debt-free - no mortgage payment. It's not essential for financial freedom, but you'll love the feeling once you get there. If you didn't have a rent or mortgage payment, how much more could you do for yourself with your current level of income? I suspect plenty.











If you ever hope to see an abundance of wealth, you need to plug the hole in your boat. The wealthy don't necessarily make lots of money, instead, they know how to hang onto what they make, and make it work for them.