We understand the suffocating weight of debt. It’s stressful, feels inescapable, and can cause sleepless nights. You might be searching “how to get myself out of debt”.
But here’s the good news: there absolutely is a way out. We’ve been in your shoes, and we’ve emerged on the other side. It took hard work and dedication, but the rewards of financial freedom were absolutely worth it. Now, we want to share the steps we took to transform our situation, guiding you from debt to taking control of every cent.
Imagine a life free from bill-related anxieties. No more living paycheck to paycheck. No more feeling like you’re drowning in debt. It is possible! Are you ready to embark on this journey towards financial freedom with us? Let’s conquer this together, step-by-step, rather than asking than asking “How to Get Myself Out of Debt”.
Understand Your Current Debt Situation
Americans’ credit card debt reached $1.02 trillion in the second quarter (Q2) of 2023, according to Experian data. That marks the first time credit card balances have ever surpassed the $1 trillion mark.
Overall debt levels are also up 4.5% from the same time last year, according to Experian data. Credit card debt and personal loan debt are two primary drivers of the rise: Credit card balances grew by 16.3%, while personal loan balances are up 21.3% since mid-2022.
Both these types of debts tend to have the highest interest rates when compared to other types of debt, including mortgages and student loans. Finding yourself in high-interest debt can be overwhelming. Large balances accruing interest can feel difficult to overcome, but the good news is getting out of debt is possible. Here are five steps to get out of debt—and stay debt-free.
1. List Everything You Owe
To get out of debt, the first step is to understand your current debt situation. Make a list of everything you owe, including credit card debt, car loans, student loans, personal loans, and any money owed to debt collectors. Write down the total loan balances and the interest rates for each debt.
2. Determine How Much You Can Pay Each Month
Look at your budget and determine how much extra money you can put towards paying off your debt each month. Factor in your net income and subtract essential expenses like housing, food, utilities and transportation to see how much is left over for debt repayment.
3. Create a Realistic Debt Payoff Plan
You’ll need a plan for which balances to prioritize paying down first. Keep in mind that your mortgage is one debt that may be impossible to pay off in a short period of time—instead, focus on debts such as credit card balances and other loans that you can pay down more quickly. Consider these strategies for paying down debt:
Debt Snowball Method
The debt snowball method involves paying off your debts from smallest to largest balance, regardless of interest rate. You make minimum payments on all debts except the smallest one, which you attack with the most money possible. Once that debt is paid off, you roll that payment into paying off the next smallest debt, and so on, creating a “snowball effect.”
Debt Avalanche Method
The debt avalanche method prioritizes paying off the debt with the highest interest rate first (like credit cards), while making minimum payments on the others. Once the highest interest debt is paid off, you focus on the debt with the next highest interest rate. This method saves the most money on interest over time.
Use a Debt Consolidation Loan
A debt consolidation loan allows you to combine multiple high-interest debts into a single loan, often with a lower interest rate. This simplifies repayment since you only have one monthly payment to manage. Make sure to shop around for the best rates and read the fine print carefully before signing up for a consolidation loan.
Use a Balance Transfer Credit Card
If you have good credit, you may qualify for a balance transfer credit card with a 0% introductory APR period. This allows you to transfer high-interest credit card balances to the new card and pay them off interest-free during the promotional window, which can last 12-18 months. Be aware that most cards charge a balance transfer fee of 3-5%.
4. Adjust Your Budget and Find Ways to Make More Money
Paying off debt is challenging. As you make progress toward paying off your debts, be sure to reward your progress and take pride in how far you’ve come.
Cut Unnecessary Expenses
Go through your budget carefully and eliminate any unnecessary spending. Cut out discretionary expenses like dining out, subscriptions, streaming services, expensive hobbies, etc. Redirect the money you free up in your budget towards paying off debt faster.
Start a Side Hustle
Consider starting a side hustle to bring in extra income that you can use for debt repayment. Some options include freelancing, driving for a ride-share service, delivering food, pet sitting, tutoring, or selling items online. Even a few hundred dollars per month extra can make a big difference in your debt payoff timeline.
Sell Unwanted Items
Sell things you no longer need or use, like old electronics, furniture, clothes, sports equipment, etc. Have a yard sale or sell items online through sites like Craigslist, Facebook Marketplace, eBay or Poshmark. Use the money you earn from selling your stuff to pay down debt.
Getting out of debt starts with understanding what you owe and creating a plan. Cut unnecessary costs, consider side hustles, and explore methods like the debt snowball or avalanche. Remember, paying off high-interest debts first saves money in the long run.
5. Consider Debt Relief Options
When you’re drowning in debt, it can feel like there’s no way out. Trust us, we’ve been there. But here’s the thing: there ARE options. And they can be total game-changers.
Let’s break down a few of the heavy hitters:
Debt Consolidation Loans
Picture this: instead of juggling multiple debts with sky-high interest rates, you roll them all into ONE loan. That’s the magic of debt consolidation. It can mean lower interest and a single, manageable payment. The key? Shopping around for the best rates and reading that fine print like a hawk.
Now, if your credit score isn’t exactly in rockstar territory, don’t panic. It’s still possible to snag a debt consolidation loan. Avant, for example, works with borrowers with lower scores and keeps their origination fee at a reasonable 4.75% or less.
Debt Settlement Programs
Debt settlement is all about negotiation. The goal? To convince your creditors to accept less than what you actually owe. It can be a solid option if you’re dealing with some serious debt and can’t see a way to pay it all off.
Fair warning though: debt settlement companies do charge fees. And the process can do a number on your credit score. So it’s worth exploring other avenues first before diving in.
Credit Counseling Services
Sometimes, you just need a pro in your corner. That’s where credit counseling comes in. These nonprofit agencies are all about helping consumers get a handle on their debt.
A credit counselor will sit down with you, comb through your financial situation, and help you craft a budget. They can even enroll you in a debt management plan to pay off your debts over time, often with reduced interest rates and fees. The best part? The advice is usually free or low-cost.
Avoid Common Mistakes When Paying Off Debt
Paying off debt is no cakewalk. And there are some classic missteps that can really trip you up. Let’s talk about a few biggies to watch out for.
Not Changing Spending Habits
Here’s the hard truth: if you don’t change the habits that got you into debt in the first place, you’re going to have a tough time climbing out. Continuing to overspend and lean on credit while trying to pay down balances? Recipe for disaster.
The fix? Commit to living below your means and making debt freedom your top priority. Trust me, the short-term sacrifices are worth the long-term payoff.
Trying to Pay Off Multiple Debts at Once
Mistake 5: Trying to pay off multiple debts at once. At the risk of overstating things, getting out of debt is like going to war. If you try to wing it, you’ll probably end up waving the white flag. (Source)
The smarter play? Focus on one debt at a time. Either tackle the smallest balance first (the debt snowball method) or the one with the highest interest rate (the debt avalanche). Spreading yourself too thin will only slow your progress.
Closing Accounts When Paid Off
It’s SO tempting to close a credit card account the second you pay it off. But pump the brakes. Keeping those accounts open can actually give your credit score a boost by increasing your available credit and length of credit history.
As long as you can resist the urge to rack up new debt, there’s no harm in letting paid-off accounts ride. They’re proof of your hard work.
Not Setting Aside Emergency Savings
We get it: when you’re laser-focused on paying off debt, saving can feel like an afterthought. But having a little cushion for unexpected expenses is CRUCIAL. Otherwise, you risk sliding back into debt the minute an emergency pops up.
Aim to squirrel away at least $1,000 in a starter emergency fund, then attack your debt. Once you’re debt-free, you can beef up your savings to cover 3-6 months’ worth of expenses. It’s all about balance.
Stay Motivated and Track Your Progress
Real talk: paying off debt is a marathon, not a sprint. And staying motivated for the long haul can be TOUGH. But there are some tricks to keep your eye on the prize.
Celebrate Small Victories
Knocking out a credit card balance? Finally hitting that halfway point? Those are HUGE wins. Don’t be afraid to celebrate them. Treat yourself to a small reward (within reason) or share the good news with your cheerleaders. Recognizing your progress will give you the fuel to keep pushing.
Visual Debt Payoff Tracker
I’m a big fan of visual reminders. Grab a marker and draw out a debt payoff thermometer. Or create a spreadsheet to track your shrinking balances. There’s something SO satisfying about coloring in a little more of that thermometer or typing a smaller number in your spreadsheet each month.
Seeing your hard work pay off in living color? It’s a powerful thing. And it might be the extra motivation you need to stick with your debt payoff plan when the going gets tough.
Accountability Partner
Paying off debt can feel like a lonely road. But it doesn’t have to be. Enlist a trusted friend or family member to be your accountability buddy. Check in with them regularly to share your progress, struggles, and wins.
Just knowing someone else is in your corner and cheering you on? It can make all the difference. Plus, having to report your progress (or lack thereof) to someone else can be a powerful motivator to stay on track.
So don’t be afraid to lean on your people. Chances are, they’ll be more than happy to support you on your journey to debt freedom.
Debt doesn’t have to be a life sentence. You can fight back with debt consolidation, settlement programs, and credit counseling. Avoid common pitfalls like not changing spending habits and trying to tackle all debts at once. Keep motivated by celebrating wins, using visual trackers, and finding an accountability partner.
The Bottom Line
Dealing with debt can feel like being stuck in quicksand—the harder you try to get out, the deeper you sink. But fear not! With a strategic approach and the right tools, climbing out of debt is possible. Several financial tools offers a financial wellness solution designed to help you manage your budget effectively, minimize interest fees, and automate smarter budgeting decisions.
Create a Budget That Works for You
First things first: understanding where your money goes each month is crucial. Crafting a budget that accounts for all your expenses—including those pesky debts—is step one towards financial freedom. There are plenty of budgeting techniques available; find one that fits your lifestyle and stick to it.
Tackle High-Interest Debt First
Sometimes referred to as the “avalanche method,” paying off high-interest rates first can save you tons in interest payments over time. This strategy accelerates the repayment of debts with higher interest rates while making minimum payments on others. It’s an effective way to reduce overall owed amounts more quickly.
Earn More, Spend Less
- Earn More: Consider side gigs or freelancing opportunities that align with your skills set—every extra penny counts when it comes to paying down debt faster.
- Spend Less: Scrutinize every expense. Can some subscriptions be canceled? Are there cheaper alternatives for services you use? Small savings add up over time!
Negotiate Your Interest Rates Down
If negotiating isn’t already part of your game plan—it should be now! Sometimes simply calling creditors and asking for lower interest rates works wonders. Here’s how to start this conversation.
Remember, you don’t have to navigate this journey alone. Several platforms automate many aspects of personal finance management—from tracking spending habits, identifying areas for improvement, and even helping negotiate better terms on existing loans. Getting ahead starts with taking control—and we’re here to help every step of the way.
Conclusion
Getting out of debt is no walk in the park, but it’s not impossible either. By understanding your current debt situation, creating a realistic payoff plan, adjusting your budget, considering debt relief options, avoiding common mistakes, and staying motivated, you CAN achieve financial freedom.
Remember, this is a marathon, not a sprint. Celebrate your victories along the way, no matter how small. And don’t be afraid to lean on others for support and accountability. You’ve got this!
So, are you ready to kick debt to the curb and take control of your financial future? Let’s make it happen, together. One step at a time, one day at a time, until you’re debt-free and living the life you’ve always dreamed of.
FAQs in Relation to How to Get Myself Out of Debt
How do I get out of debt I can’t afford?
Tackle this by listing all debts, cutting expenses sharply, and talking to creditors about lowering payments or interest rates.
How can I get out of debt fast?
Prioritize high-interest debts with the avalanche method or start with small balances using the snowball approach. Cut costs aggressively.
How to pay $30,000 debt in one year?
Raise your income through side gigs, slash spending ruthlessly, and apply every extra penny towards your debt. It’s tough but possible.
How do I get myself out of bad debt?
You will find several answers when you search for “How to Get Myself Out of Debt”. But you can always contact a credit counseling agency for guidance on managing it better. Consider consolidation loans or settlements if necessary. Change spending habits pronto.
