A financial planner says most people fall into one of 2 categories, and the key to paying off debt is moving from one to the other

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Courtesy of Brian Face

If you want to start paying off consumer debt, says one financial planner, the first step is figuring out how to live within your means, or make more than you spend.
To do that and free up more money to put toward your debts, he recommends starting with behaviorial changes: first, choosing a system to track your spending, then staying away from whatever habit tempts you to overspend, then considering your options to earn more.
His advice is best suited for people with consumer debt caused or compounded by living above their means.

"Most people fall in one of two categories: either they make more than they spend, or they spend more than they make," says Brian Face, CFP, CRPC, and founder of Michigan-based Face 2 Face Planning.

The trick is moving yourself from the second category into the first one.

When you spend more than you make, you’re automatically in the red — and it’s hard to make any headway on paying off your debts. That’s why so many people who pay off large amounts debt start by taking extreme measures to cut costs: They’re trying to get to the point where they’re earning more than they spend, otherwise known as living within your means.

But the first few steps Face recommends to get to the point where you can live within your means and pay your debts aren’t complicated mathematical equations or intimidatingly big checks — they’re behavioral changes.

1. Figure out where your money goes

"Most people have no idea how much they spend where," says Face, and they’re "surprised where their money goes."

Online tools like Mint.com and Personal Capital are a great place to start, since they automatically download credit and debit card transactions from your bank to help you get a sense of where your money is going. You can sort them by transaction, and rely on the tech to keep you accountable. When an app is watching, there’s no way to "forget" to log a purchase.

Once you have some data on where your money is going, only then can you figure out what needs to change (and what doesn’t). As Face put it, "tracking your spending helps you manage the basis of all your financial decisions."

2. Stay away from bad habits that caused or compounded your debt

This is a step for people with consumer debt that’s caused or compounded by living above their means, not for people carrying student loan debt, medical debt, or other large debts incurred by extenuating circumstances. If you’re in that situation, you might want to skip right ahead to step three.

If you are tackling consumer debt from your everyday spending patterns, though, once you have that data, Face recommends taking a serious, honest look at your spending and ask yourself what you could have done differently, and what you could do differently going forward.

"Stay far away from what got you in debt," Face says. "Focus on changing the habit so you can pay the debt off now."

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3. Explore ways to increase your income

Many people focus on cutting expenses to help get out of debt, but be sure to look at the other side of the equation, Face says. Are there ways you could increase your income to pay off those bills faster? Think about if there’s something you love to do that could help you make money on the side, like teaching a skill or language, or taking care of kids or animals.

Are you in a good position to ask for a raise at your job? Are there opportunities to take on extra hours at your existing job, or do you have the bandwidth to take on another part-time gig? Investing some extra time and energy now so you can pay off your debt sooner could save you a lot of money in the long run.

"Nobody wants to talk about earning more," financial expert and bestselling author Ramit Sethi previously told Business Insider. "There are lots of ways to earn more. That is a huge part of the pie that no one thinks about,"

"The first thing is, ‘I don’t have any time.’ The second thing is, ‘I don’t have an idea,’" he continued. "So that’s a classic, but when they get it, it becomes really powerful because they’ve always thought of their money as a fixed pie and suddenly they’re like, wait, I can actually expand the pie. And that’s an amazing feeling."

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