How to Get Out of Debt: A Step-by-Step Guide
The 9 best debt-relief tips you can use right now
Debt can be a major burden, both financially and emotionally. If you're struggling to get out of debt, there are a few things you can do.
Tip 1: Create a budget
The first step to getting out of debt is to create a budget. This will help you track your income and expenses so you can see where your money is going. Once you have a budget, you can start to make adjustments to free up more money to pay down your debt.
Tip 2: Prioritize your debts
Not all debt is created equal. Some types of debt, like credit card debt, have high interest rates. This means that you'll be paying more in interest charges the longer you wait to pay them off. Other types of debt, like student loan debt, may have lower interest rates and more flexible repayment options.
When you're prioritizing your debts, you'll want to start by paying off the debts with the highest interest rates first. This will help you save money in the long run.
Tip 3: Collect small
Just as each snowflake contributes to a snowstorm, each small amount can make a big difference in debt. Anytime you find yourself with a little extra cash—even if it's just a dollar or two—apply it directly to your debt. It might be the change from your morning coffee or a small rebate, but over time, these "debt snowflakes" can add up and make a significant dent in what you owe.
Tip 4: Make more money
Another way to get out of debt faster is to make more money. This could mean getting a part-time job, starting a side hustle, or asking for a raise at your current job.
If you can make more money, you can put more money towards your debt each month. This will help you pay off your debt faster and save money in interest charges.
Think beyond your nine-to-five. Can you rent out your car during hours you're not using it? Participate in research studies? Walk dogs in the neighborhood? Sometimes, unconventional income streams can provide a boost in paying off debts faster, and they might introduce you to hobbies or interests you hadn't considered before.
Tip 5: Consider debt consolidation
If you have multiple debts, you may want to consider debt consolidation. This means combining all of your debts into one loan with a lower interest rate. This can make it easier to manage your debt and pay it off faster.
However, it's important to note that debt consolidation isn't always the best option. You should talk to a financial advisor to see if debt consolidation is right for you.
Credit counselors can also help you negotiate with creditors and get on a debt management plan. A debt management plan is a program that helps you pay off your debt over a period of time, typically 3-5 years.
Tip 6: Get help from a credit counselor
If you're struggling to get out of debt on your own, you may want to get help from a credit counselor. A credit counselor can help you create a budget, prioritize your debts, and come up with a plan to get out of debt.
Tip 7: Debt visualization boards
We often visualize our dreams—like a new car or vacation. Why not visualize our debt journey? Create a board mapping out your debts. For every milestone you achieve in paying it off, add a celebratory image or sticker. It might seem juvenile, but the act of visually tracking and celebrating progress can be a profound motivator.
Tip 8: Debt-Free affirmations
The mindset is a significant part of the debt-recovery journey. Start each day with a debt-free affirmation, such as "I am taking control of my finances" or "Every step I take is one step closer to being debt-free." Over time, these positive affirmations can change your mindset, making you more proactive and diligent in your debt repayment strategy.
Tip 9: Host a debt-busting party
This might sound odd, but gathering friends for a "swap meet" can be fun and financially savvy. Everyone brings items they no longer need, and trades ensue. This way, you can get items you might need without spending money, and you can sell the remaining items and use the proceeds to pay down debt.
Getting out of debt can be a challenge, but it's possible. By following these steps, you can get on the road to financial freedom.
Here are some additional tips for getting out of debt:
Avoid taking on new debt. This includes not using credit cards unless you can pay off the balance in full each month.
Make more than the minimum payment on your debts. This will help you pay off your debt faster and save money in interest charges.
Live below your means. This means spending less money than you earn. When you live below your means, you have more money to put towards your debt.
Be patient. Getting out of debt takes time. Don't get discouraged if you don't see results immediately. Just keep following your plan and you'll eventually get there.
If you're struggling to get out of debt, there are resources available to help you. Talk to a financial advisor or credit counselor to get started.