Robert Kiyosaki: How To Get Out of Credit Card Debt in 8 Steps
Robert Kiyosaki, the bestselling author of “Rich Dad, Poor Dad,” frequently shares personal finance advice on his website, Rich Dad. On the website, the Rich Dad personal finance team published an article outlining how to get out of credit card debt.
There are many different strategies for getting out of debt, and you can find many ideas from other finance experts online. The article covers Kiyosaki’s take and a strategy that worked for him. It details eight specific steps you can take to pay off your credit cards one by one.
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These eight steps are meant for people who are ready to reach financial freedom. The article explains that you will need planning and discipline to accomplish this goal. However, if you follow the steps below and complete them the way Kiyosaki suggests, you can be well on your way to financial freedom.
Step 1: Stop Accumulating Credit Card Debt
The first step to getting out of credit card debt is to stop using your credit cards. It’s hard to get out of credit card debt when you’re still accumulating it.
So whether you have to cut up your credit cards or freeze them for a certain period of time, stop carrying them around with you. Instead, use cash or debit cards to pay for what you need.
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Step 2: List Your Consumer Debts
After you make a conscious decision to stop using your credit cards and accumulating debt, it’s time to list out your debts.
At one point, the article explained, Kiyosaki had over $1 million in debt. He and his wife actually had to live in their car for a short period of time. So these steps don’t come from someone who hasn’t gone through the process.
The article explained that listing your debts is often the hardest part because confronting your spending habits can be challenging. It’s even harder if you have a partner you have to tell about your debt.
Even though it’s hard, list your debts and put them on a spreadsheet. List all of your debt, including student loans, personal loans and credit cards.
Step 3: List How Much You Owe on Each Debt
Now that you have a list of all your debts, add more detail to your spreadsheet. For example, write down the minimum monthly payment on each one. Then, use the minimum payment to calculate how many months (or years) it will take to pay off your debt.
As you work through this process, you’ll likely pay off your debt faster than you think initially, but it’s good to get a ballpark idea of how long it would take if you made only minimum payments.
Step 4: Prioritize Your Credit Card Debt
Even if your other debts — like student loan debt and personal debt — are smaller than your credit card debt, Kiyosaki suggests paying off your credit card debt first.
Your credit cards will typically have much higher interest rates than your student loans, personal loans and mortgage. So paying off your credit cards should be a priority.
The Kiyosaki team suggested you start with the credit card debt that will be paid back the quickest, or the debt with the lowest month number (the number of months it will take to pay back the debt). Then you can pay off the others one by one until you tackle the one with the highest month number.
Step 5: Find Extra Income
The next step is to find additional income to accelerate your debt payoff plan, whether you take on a side hustle or cut back on some expenses.
There are so many ways to earn extra money, and many of them can be done at home.
Step 6: Pay Off the Lowest Month Number of Debt
With the extra money you make, work on paying off your debt faster. The article explained that finding an additional $150 to $200 a month can go a long way in helping you pay more than the minimum payments on your debt.
Once you pay off your first debt completely, take what you were paying toward that debt and roll it into the next debt. Continue the process until all of your debt is paid off.
Step 7: Celebrate!
The Kiyosaki team recommended celebrating each little win. Even if you pay off a $200 credit card, make sure to celebrate. Paying off debt can take months or even years in some cases, depending on how much you have. That’s why it’s important to look forward to the little things. Small celebrations can help keep your spirits up.
Step 8: Continue To Pay Off Your Other Credit Card Debts
Once you have mastered your debt payoff system, keep going until all of your cards are paid off. Keep rolling your payments from one card to another until they are all paid off. Then, the real celebration begins, and you can take the next steps toward financial freedom.
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