Dave Ramsey and Kevin O’Leary Recommend This Strategy to Get Out of Debt

Sometimes the simple methods are the most effective.

Debt is something that many people struggle with. It comes in all forms, from credit cards to personal loans and financing plans. And it can take a serious toll on your finances. In fact, recent data shows that the average American spends a whopping 9.5% of their income on debt each month.

Dave Ramsey and Kevin O'Leary are both well-known for their financial advice. Ramsey, in particular, is famous for helping people get out of debt. While O'Leary's main claim to fame is starring on Shark Tank and being a supporter of cryptocurrency, he also provides guidance on personal finance topics.

Although these two are extremely different in their philosophies (Ramsey would never recommend going anywhere near crypto), they share the same strategy to eliminate debt. If you've been trying to get your own debt situation under control, their advice could be a big help.

What Dave Ramsey and Kevin O'Leary recommend to get out of debt

Ramsey and O'Leary both recommend that if you have debt, keep nonessential expenses to a minimum. By cutting your spending, you won't go further into debt, and you'll have more money to put toward what you owe.

Ramsey provides a detailed plan for people who are struggling with debt. He advises that you:

• Get on a budget to take control of your money.
• Make sure your four basic needs are met first. These are food, utilities, shelter, and transportation.
• Cut back on nonessential items. Look for automatic payments that are draining your bank account, clip coupons, and get rid of discretionary spending, like going out to restaurants.
• Don't take on any new debt, which also means don't put any more expenses on your credit cards.

O'Leary recently provided his own advice through his Twitter account, and he kept it short and sweet. He said "Don't buy anything you absolutely don't need until you are free of debt."

Should you follow this advice?

If you have debt, then reducing or eliminating nonessential expenses is good advice. The more you cut from your spending, the faster you'll be able to pay off your balances. Once you do that, you'll be able to use the money you were spending on debt payments for saving or investing.

There are a couple of things to add, though. Some types of debt are more pressing than others. When financial advisors talk about eliminating debt, they're normally referring to high-interest debt and large amounts of debt. For example, if you have lots of credit card debt, that's worth prioritizing because of the interest it will cost you. The same is true if you have sizable debt balances compared to your income.

On the other hand, low-interest debt isn't as problematic. Mortgage debt is the best example. O'Leary says not to buy anything you don't need until you're free of debt, but he probably doesn't mean paying your mortgage in full before you buy anything you want. Auto loans are another type of debt that isn't always an issue. If you have a low-interest auto loan of a reasonable amount, you don't necessarily need to strain yourself to pay it off as quickly as possible.

There are also some good debt repayment strategies that can help you save money on interest. Depending on your credit score, you may be able to do either of the following:

• Balance transfers: Open a balance transfer credit card with a 0% intro APR. You can transfer over your debt, and you won't be charged any interest on it during the introductory period.
• Debt consolidation: Get a debt consolidation loan and use it to pay off your debt. If you have high-interest debt, a loan could get you a lower interest rate, and you'll be able to pay it off over fixed monthly payments.

Ramsey and O'Leary have smart advice for those who are having trouble with debt. In that situation, the best thing you can do is reduce spending as much as possible. Although that alone could be enough, it's also worth looking into ways to pay off debt faster and with less interest. For many consumers, a balance transfer or debt consolidation could make a big difference.