Chances are you’re making this #1 money mistake in your quest for financial freedom, if you have debt. What’s the mistake?

Believing that getting out of debt equals financial freedom.

I get that it seems like the right goal, to get that debt completely gone. But here’s where it all goes wrong. (Make a little mental check for yourself if either of these scenarios apply to you or someone you know.)

A. Every month, you get the bills, look at the money you have on hand and throw everything you possibly can at your debts that month. A week or so later, you are forced to use credit for some expense that occurs. Which is how you stay stuck in the never-ending debt cycle (they call it “revolving” debt for a reason, yes?).

B. You get so rigorous about paying off all debt as fast as you can, you make Ebenezer Scrooge’s lean budget look like a shopping binge at Neiman Marcus. You’re allowed to do nothing until you’ve cleaned your debt plate. Like the summer vacation when I was 11 and had to stay at the dinner table until I finished all my liver and onions — and wound up missing out on a once-in-a-lifetime moonlight catfishing trip. (True story.)

Neither of these approaches are sustainable long term as empowering money management tools.

Do you want to be truly financially free? Then make ‘creating a positive net worth’ and ‘breaking the debt cycle’ your primary goals for the next 12 months.

Financial freedom is about being financially fit, not necessarily about being debt free.

Let me explain with an analogy that’s easy to understand, especially if you’ve ever had a goal to lose weight.

If you really wanted to do everything you could to lose 35 pounds as fast as you as possible, for example, you could cut off your arm or leg and instantly achieve that weight loss. But taking that action wouldn’t achieve your true goal and would leave you facing other, possibly bigger challenges as a result.

When we say we want to lose weight, what we really want is to get fit in some way. We want the permanent feeling that our weight doesn’t define us, or our ability to do the things we want to do.

Ask yourself which do you truly want? Do you want to get rid of the sense that there is never enough, that you are never enough? Or do you just want to get out of debt?

Focusing on getting out of debt keeps you on high alert about every expense, keeps you chasing the next great way to get passive income, keeps your mind focused on what you don’t have and what you can’t do as you funnel every spare dime toward paying off debt. This track puts everything you desire “out there” in the future, for the day when you’re finally debt free.

In my 30 years of working with people to become financially fit, thousands have come to me after they’ve gotten debt free, because they suddenly find themselves in serious financial trouble. What happened? In their zeal to get out of debt, they never developed any lasting financial strategies. The most common scenario? The newly debt-free beings bought a house, and the house needed some work and furnishings. Because they were debt free except for their mortgage, they were offered credit at the checkout — those lovely “make no payments for 90 days,” or “12 months interest free” offers — next thing you know, they were back in debt.

Ready for a new plan that actually creates peace of mind from the first day you start? A plan that brings a smile to your face every time you see your account balances? It’s an eight step plan, so let’s call it the “Effortless Eight-Step Financial Freedom Plan.”

The only catch? You must do all the steps to see results. I promise you that these painless steps are well worth the minimal time commitment.

1. Stop taking on any new debt. Not even accepting someone’s offer to buy your lunch and “you can get it next time!” Zero new debt.

2. Add up everything you paid last month toward revolving debts. Write that number down really big on a piece of paper. Let’s say you paid $1,000 toward all those debts last month.

3. Reduce all payments on credit cards and other debts to literally the minimum payment. If you’re paying on personal loans, or have set up other payment plans for unsecured debt that are stretching you, renegotiate them, and drop them down to no more than $50 a month. Whatever the minimum is that you can pay. Any debts you’re not currently paying on, pay $5-$10/month on those debts.Write down all these amounts on a list or spreadsheet so you can see how much this new number will be. Let’s say it’s going to be $400.

4. Look at all your statements and see what monthly charges are running through your credit cards. This includes any memberships, any of those “credit reporting watch” type items. All of ’em. Cancel anything you truly don’t use any more, even if it means you might get socked with a termination fee. Be honest with yourself. Let’s say you pay $30 for a monthly gym membership and you hit the gym twice a month last year. That means you paid $360 for your gym membership. They charge walk-ins $10 a visit ($20/mo.), which means you would have spent $240 if you’d paid out of pocket for each visit. So you gave them $120 as a nice little bonus gift. Time to start gifting that money to yourself!

5. Go to your bank and open a savings account where you have no access to that money. And I seriously mean no access, including no debit card, no online banking. Open an account where you literally have to go into the bank and show the teller your ID to get your balance, make a deposit or withdraw money. An account where you get a quarterly savings statement. Pick the one that has the smallest or no monthly fee. We’re not interested in how much measly interest you can get at this point. We’re only interested in setting up some barriers to you getting access to that money, fair enough?

6. How much are you going to deposit when you open this savings account? You’re going to deposit the difference between the amounts you wrote down in Step 1 ($1,000) and in Step 3 ($400). That means you’re going to deposit $600 to open your account this month.

7. Move any remaining essential monthly recurring expenses to be paid through your new savings account for now. Most creditors will let you set up an EFT or ACH payment using your account number.

8. Add up the value of everything you own (your assets), subtract what you owe (your liabilities), and write down the final number really big somewhere you can see it every day. This is your current net worth. Do this the same time every month. Your initial net worth number may be a negative. No worries.

Our goal is to create a positive net worth, and these eight steps will accomplish that sooner than you can imagine.

Every month, when you pay your debts, continue to pay the new lower amounts you set up. Continue to put at least that same amount into your savings account. Immediately. Pay bills, visit bank. Lather, rinse, repeat.When an unexpected true emergency comes up, you’ll then have the money in the bank to cover it. And when you want to take a vacation, or buy something you desire, you get to decide to tap into your savings or not.

Now that you know the physical steps to take, let’s talk about the psychological steps that will ensure your success. Think of them as “stop and goal.”

Stop: Whenever you think, “Ooh, I need that!” simply tell yourself that you’ll buy that tomorrow, not today. Each day, tell yourself that. You’re not saying no. You’re simply saying you’ll think about buying it tomorrow. Most often, the thing we’re about to spend money on is something we believe will solve a problem we have. Cut out the middleman and focus your intention directly on the problem being solved. You will be surprised at how often the solution appears with a much more economical option.

Goal: While you’re easily and effortlessly creating balance in your financial world, give yourself an initial savings goal. Set it for a specific amount that’s just slightly higher than an amount you’ve saved before. It could be $100, or $10,000. Just make it something empowering and enticing for yourself. When you reach that amount, you can rachet things up a bit if you want to continue to build a positive net worth faster.

It’s important to remember — you have options. You can look at the amount of interest you’re being charged and add that amount to your minimum payments. Or pick the debt that charges the highest interest rate OR has the lowest remaining balance, and double down on what you’re paying on that debt. If the balance is less than $200, consider simply paying it off in full this month and making that your gift to yourself!

There’s a handy “DebtBuster Strategy” sheet you can fill out in my Break the Debt Cycle — For Good! workbook. You’ll find the entire audio recording and workbook for free on my Resources page.

Say it with me: “True financial freedom isn’t about being debt free. It’s about creating a positive net worth.”

A side benefit of playing the positive net worth game is that you also build a positive self-worth. As you take each step, drop me a line. Having an accountability buddy can make the difference between failure and success. Here’s to your success!

PS: Did you see the little star on #3? If all your debts are old debts that you haven’t paid on for at least 5 years, don’t start making payments on those debts without talking to a financial professional first. You could accidently reset the collections clock on those old debts. Sometimes, releasing yourself from the burden of all unsecured debts is your best choice for financial freedom. If you’re wondering if this is your situation, grab yourself a copy of How to Know if It’s Time to File Bankruptcy.