15 Best Ways To Get Out of Debt

couple discussing debt

Debt can feel like an overwhelming situation you can’t escape. Fortunately, there are several best ways to get out of debt.

This article will explore how you can easily get out of debt and regain control over your finances.

From taking simple and practical steps to understanding financial and debt concepts, this article serves as your guide to a debt-free life.

 

The Compounding Problem of Debt

Before we dive into the solutions, let’s take a moment to understand the compounding problem of debt. When you carry debt, the interest you owe can accumulate over time, making it even harder to pay off your balance.

This compounding effect can trap you in a cycle of debt if you don’t take proactive steps to address it. 

Some debtors try to pay off their existing debt by taking another larger one, thinking it's better since they're closing past debt and accumulating hefty interest.

This works as a short-term solution if you expect a consistent income that could cover the loan you incur. Otherwise, you’re bound to repeat the same debt cycle over again.

 

What Are the Best Ways To Get Out of Debt?

Before getting on the topic, it’s vital to understand that debt is not inherently a terrible idea. Some people leverage debt or credit to acquire properties or boost their credit scores.

The debt problem is complex; various factors affect a person's likelihood of plunging into deep debt. Understanding your financial situation and being honest is your first step towards financial control.

The following sections will explore the best ways to get out of debt and regain a stable financial footing. Here are some steps to help you get started.

 

1. List Down All Your Debt

Start by creating a comprehensive list of all your debt, including credit cards, loans, and other outstanding balances. Knowing the exact amount you owe will help you prioritize your payments and develop a repayment plan.

In this step, it's vital, to be honest and acknowledge your debt situation as it is. Many individuals are discouraged from compiling a list of their debt because they get overwhelmed seeing how much they owe.

 

2. Make a Monthly Budget

Creating a budget is crucial for managing your finances and getting out of debt. Track your income and expenses to determine where your money is going and identify areas where you can cut back, such as:

  • Luxuries (gadgets, cars, accessories, etc.)
  • Indulgence (eating out, vacation, etc.)

Establishing a monthly budget gives you a vision of where your money goes regularly. This gives you a realistic idea of how much money you can set aside for debt repayment without sacrificing essential expenses.

 

3. Decide How Much You Can Pay Monthly

Once a regular monthly budget is established, figure out how much you can realistically afford to pay toward your debt each month. 

Be honest and avoid overcommitting, which could lead to financial strain and potential setbacks. The key here is to cut back or temporarily eliminate expenses you can survive without.

You can also make minor changes to your everyday living. This could result in significant savings without compromising your needs, such as taking a bike to work or preparing a meal.

 

4. Try To Negotiate With Your Lender

Feel free to reach out to your lenders and discuss potential options for reducing your debt. They may negotiate a lower interest rate or offer a repayment plan that suits your financial situation better.

Some lenders might even waive future interests if they understand your situation. Some might even work with you to create a flexible and realistic repayment plan.

 

5. Try To Get a Side Hustle

Boosting your income can significantly accelerate your debt repayment journey. Here are some side hustle ideas to get you started:

  • Freelancing
  • Dropshipping
  • Affiliate marketing
  • Answering paid surveys

Use these additional funds solely to pay off your debt, and you’ll see progress sooner than expected. If your primary source is only enough for your monthly needs, you could open a new income stream.

 

6. Sell Your Old Stuff

You can always hold a garage sale if you have trouble finding a side gig or job.

One great thing about sales events like these is that you don't need capital. You can do this inside your house or hold a virtual garage sale.

Look around your home and identify items you no longer need or use. Selling these belongings online or hosting a yard sale can generate extra cash to put toward your debt.

Plus, decluttering your space is a bonus!

 

7. Cut Up on Your Credit Cards

While having a credit card for emergencies is helpful, using it recklessly can contribute to your debt problem. In fact, it’s one of the leading reasons why most Americans plunge deeply into debt.

According to CNBC, the country hit $930 billion in credit card debt last May 2023. According to the news report, most credit card debtors are younger adults, ranging from 18 to 29 years old.

Consider cutting up your credit cards or leaving them at home to resist the temptation of overspending. Focus on paying with cash or a debit card instead.

 

8. Don’t Focus on Investing

When you’re in debt, it’s generally more beneficial to focus on paying off your debt rather than investing your money. While investing can be profitable in the long run, the interest you’re accruing on your debt typically exceeds the returns you make from investments.

Focus on eliminating your debt before starting your investment venture. This is essential to financial security

Also, you need all the money you have right now to pay off your debt and meet your needs, not wait for it to grow in the future.

 

9. Involve Your Family

Getting out of debt is a team effort. Involve your family members and loved ones in your journey, as their support and understanding can make a significant difference.

Communicate your goals and enlist their help to reduce expenses and increase income. Explain to your children that you must compromise on certain parts of your lifestyle and save as a family.

Ask your partner if they could help pay the debt or look for a side job to meet your family's needs.

Communication works wonders, and you might be surprised at how cooperative your family members can be.

10. Consider a Debt Consolidation Plan

A debt consolidation plan might be viable if you have multiple forms of debt with high-interest rates. Debt consolidation involves combining all your debt into a single loan with a lower interest rate, making it easier to manage and pay off.

In hindsight, it is a reasonable and excellent option, streamlining all your debt into one manageable payment plan. You still owe the same money you did when you started.

Moreover, you'll also face a more extended debt payment plan and, potentially, a higher interest rate. Consider its pros and cons and scrutinize if it's the right option for you.

 

11. Create a Debt Repayment Strategy

Developing a strategic plan to tackle your debt is critical. You can utilize several popular debt repayment strategies based on your situation, like the following:

  • Debt snowball
  • Debt avalanche
  • Debt settlement
  • Debt management

A game plan gives you control and clarity on how to repay. It also allows you to set achievable goals and earn satisfaction whenever you reach your debt repayment milestone.

 

12. Understand the Debt Snowball Method

The debt snowball method works on the low-interest and manageable debt first and tackles the larger amounts later. As you pay off smaller debt first, you gain momentum, uplifting you to continue your debt repayment journey.

Another evident advantage of this method is the emotional satisfaction of seeing your debt diminish gradually. This reinforces excellent and sustainable debt repayment habits and motivates you to continue.

 

13. Learn About the Debt Avalanche Method

Another debt repayment strategy is the debt avalanche method. With this approach, you start eliminating high-interest debt first and work to lower amounts.

The debt avalanche method is the complete opposite of the snowball method. By tackling the most expensive debt, you minimize the interest you pay overall, potentially saving more money in the long run.

 

14. Consider Speaking With a Debt Counselor

Sometimes, seeking professional guidance can provide clarity and expertise in dealing with your debt. 

Debt counselors can help you assess your financial situation, explore various options, and create a customized plan that aligns with your goals. They can also provide valuable advice on managing finances and avoiding future debt.

Debt repayment is a challenging process, but the guidance of a professional helps you navigate through it, take a step, and achieve your desired outcome.

 

15. Declare Bankruptcy as a Last Resort

Bankruptcy should be considered a last resort when all other options have been exhausted. It can provide a fresh start for those overwhelmed with debt, but it comes with serious and long-term consequences.

Declaring bankruptcy lasts on your credit report for up to 10 years, making it difficult to get credit for a considerable amount of time. 

It’s also important to note that bankruptcy won’t erase all your debt; certain kinds, like student loans, alimony, and child support, remain even after the filing.

Exploring other debt repayment options before declaring bankruptcy is essential, as it can have long-term effects on your financial health. If you need clarification, you can always turn to a reputable debt counselor or financial advisor for help.

 

Different Ways Work for Different Situations

Remember, each person’s financial situation is unique, and what works for one may not work for another. Experiment with different strategies and find the combination best suits your circumstances and preferences.

This guide is meant to help you get started, but if you found a method that works well for you, don’t be afraid to stick with it. Ultimately, the ultimate goal should be to get out of debt and stay out of it permanently.

 

The Takeaways

Clarity and vision are essential before starting any debt repayment strategy. You can quickly do this by listing all your debt and creating a monthly budget to manage your finances efficiently.

Once you have clarity on your finances, you can work with your lender to negotiate or propose a repayment plan. Sometimes, they can waive interest and other fees associated with your debt.

Another excellent way to ease your debt burden is to open up a new income stream by finding a side gig or starting a garage sale. This extra income can be allocated solely for debt repayment or to help meet your regular expenses.

Remember, getting out of debt is a process that requires time, discipline, and perseverance. By implementing these strategies and staying focused on your goal, you can take control of your financial future and enjoy the freedom of a debt-free life.

At 121 Financial Credit Union, we provide Jacksonville residents with a personalized financial solution to help them find their way out of debt. Contact us now to learn more about our products and solutions and live a financially healthy life.

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