How to Get Out of Debt and Become Cash Rich

I’ve gone through many ups and downs in life. At my worst, I was over $5,000 in credit card debt and a car loan which was over $20,000 of debt. Luckily, I never took student loan debt, but that’s another story. The amount of debt I’ve had isn’t even that bad. I’ve heard horror stories of people in debt over six figures. There are all sorts of things people get into debt for like an expensive college education, a car or multiple cars, a house, expensive toys, or just random stuff they bought on their credit card.

I’m writing this blog post to tell you guys how you can go from having loads of credit card debt (consumer debt), a car loan, and other types of debt, to having zero debt and being cash rich. This isn’t some sort of get rich quick scheme, it’s just a bunch of simple and actionable tips that will help you go from rags to riches.

Tip #1: Stop Spending So Much

Any purchase over $20 should be heavily scrutinized. Most things you want are things you don’t really need. The more stuff you buy that you think you will use, the more likely you’ll wind up with a pile of useless stuff someday and just end up giving it away to Goodwill. Save yourself the hassle and just don’t buy those things anyway.

Tip #2: Put Off Purchases Over $100 For At Least 24 Hours

Consider any purchasing decision over $100 a “major” purchasing decision. Don’t pull the trigger right away. Unless you’ve already sold this item to someone else or you’re buying it for a business and it’s required to run the business, put it off. By giving yourself at least a day or two to think it over, you’ll get beyond the initial emotion of wanting it and you’ll get down to the brass tax of whether you actually need it or not.

Tip #3: Don’t Spend Money You Don’t Have

Consumer debt is one of the worst types of debt. If you only take home $2,000 a month from your job, after taxes, spend $500 on rent, another $500 on food, $500 on bills, and another $500 for a car, then you don’t have any extra money to go out and party with. That’s the sad truth. Living in the good old US of A means you have lots of opportunities but you also have a very high cost of living. Having a dead-end day job that pays you $10-$15 an hour 40 hours a week also means you don’t have much money to spend after all your expenses are paid. Don’t go buy stuff with your credit card if you don’t have the cash to pay for it. The only things you should use a credit card to buy are things you would normally pay for like food and any bills that allow you to pay with a credit card.

Tip #4: Make A Personal Income Statement

There are some great free tools you can use to have a personal income statement that will tell you how much cash you have and how much debt you have on any particular day. is my favorite one. It’s free to use. If you want to do one on your own, just follow these steps: get your checking/savings account statements and credit card statements. Get all your loan statements. Add them all up. The amount of cash you have minus debt is your net worth. Take your income (monthly) and divide by your debt, and you’ll get your debt to income ratio. These are the same thing that a bank looks at before they decide to offer you a credit card or a loan. You can figure out for yourself what you can afford before you consume by running some simple math.

For instance, you should only pay at most 1/3 of your total income on rent. Even that is high if you’re considering owning a car and living in a high cost-of-living city like Los Angeles. If this is the case, you’ll end up spending 1/3 on your car and the other 1/3 on your food and the rest of your bills. Anything left over that you want, like a new skateboard, a new bicycle, a weekend vacation, will all go onto the credit card and you’ll eventually end up in debt.

Tip #5: Get Ahead In Life

Instead of just sitting around waiting for a 10% raise or hoping to get a new job that pays a higher hourly rate, get to work making your own business. There are all sorts of businesses you can start, but the one I highly recommend is an online-only business. These types of businesses are the best, in my opinion, because you can be location independent. You can travel around the world, work from your laptop in any internet cafe or co-working space, and you can make a lot more money than you would at a day job.

Become A Freelancer:

There are all sorts of internet-based businesses you can start. If you have no idea where to begin, just start offering your services online as a freelancer. Figure out what you are good at or start learning how to do something on your computer that you can offer as a service. This can be graphic design, web design, copywriting, or data entry. There are online job aggregators like which allow freelancers from around the world to compete for jobs.

Teach People Online:

If you have a specific skill-set, you should consider being an online teacher. Communities like allow people from any part of the world to create online video courses and offer them to their community from $10 to $200. You don’t need to be certified to be a teacher for, you just need the willingness to create a great online course. You’ll basically be speaking to a camera just like you would a student or a friend. Better yet, you can create slideshows and just do voice overs. These are common and perfectly acceptable.

Start a High Ticket Drop Shipping eCommerce Store:

If you want to create a bigger business, consider a type of business where you’ll be able to scale easier. An online retailer is one such business model. Using the drop shipping business model, you can secure wholesale accounts with manufacturers and sell their products online but have them ship the product for you when you sell it. No warehousing is required on your end, you’ll just need to take action.

Write Books and Self Publish with Amazon:

Other models exist like writing books for the Amazon Kindle ebook program. You can self-publish a book you write yourself or you can hire writers to create a book for you. Either way, you’ll put more money or time upfront to produce the book, then you own the book and you get to reap the profits as it sells over time. This type of business model is great for passive income, but if you want to replace a day job with it, you’ll need to produce hundreds of e-books.

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