Tips for Getting Out of Debt
These ideas can help you win the biggest fight of your financial life.
You’ve finally seen the light — you realize that debt has made a slave of you, and you’re ready to start fighting your way back to freedom. But getting out of debt can be so intimidating. How do you possible begin to chip away at those giant balances?
drastic steps.” prompt=”tweet this!” username=”godmoneyme”]Getting out of debt can feel like a monumental task, especially if you owe tens of thousands (or even hundreds of thousands) of dollars to various lenders. Making minimum payments is no way to go — it will take many years if you go that slowly. To get out of debt quickly, within the course of a few years, you’re going to need to take some drastic steps.
To get out of debt quickly, within the course of a few years, you're going to need to take some drastic steps. tweet this!
If you have already stopped borrowing money, freedom from debt is within reach. These five tips will help you reach that victory more quickly.
1) Make a budget and stick to it.
Many people get into debt unintentionally — they don’t keep track of their money and slowly end up spending more than they make. They use credit cards to make up the shortfall. After a few years, this kind of practice leaves them with thousands of dollars in debt that they never intended to have.
The solution is to make a budget — a detailed plan that accounts for all the money that comes into your household every month and allocates it to pay for your expenses. Good budgets can show you exactly how much money you can use to pay down debts each month. Budgets also show you if there are lifestyle areas that you can trim to speed up your debt pay-off.
2) Grow your income.
The bigger your income, the more ammunition you have in your fight against debt. So if you want to get out of debt quickly, it’s worth asking if there are ways to grow the income that you get from your primary job.
Even a few hundred dollars a month will go a long way to getting you out of debt quickly. tweet this!
Are you working at your full potential or languishing in a job that doesn’t take advantage of all your skills and training? Changing jobs or careers is a lot of work, but it can be worthwhile if it brings a big bump in pay. And you may not have to change jobs to grow your income. Ask for a raise, volunteer for overtime or take on additional assignments and responsibilities that come with extra pay. If you’re in the midst of a fierce fight with debt, you need to do whatever it takes to win.
3) Get a second job.
If you’re in a deep debt hole and have a limited income at your main job, you may need to get a second job in order to have more money to pay your debts. You can wait tables, take on side projects or mow lawns. Try babysitting, cleaning houses, or driving for Uber. You probably won’t make as much at this work as you do in your regular job, but even a few hundred dollars a month will go a long way to getting you out of debt quickly.
This is going to eat into your downtime, your nights and weekends, and your time with your family. But making these small sacrifices in the short term will help you achieve long-term freedom.
4) Break bad habits.
Our bad habits often cost us huge amounts of money. Some of these are obvious — smoking, drinking, gambling, etc. — but others aren’t. If you have a daily habit of going out for lunch or swinging through the Starbucks drive-through, those expenses add up quickly.
Whatever your habit, decide to break it now. It will likely save you hundreds or thousands of dollars each year, money that you can apply directly to your debt pay-off.
5) Sell stuff and downgrade.
Sometimes the things that get us into bad financial situations are life’s big purchases — things like cars and houses. If you bought more house than you could really afford, your big mortgage payment may be putting too much pressure on your budget. And if you bought a new car on credit, that loan may represent a large chunk of your debt.
If you’re really radical about getting out of debt, you need to consider selling those items and getting out from under their debt burdens. Sell the car, pay off the loan, and buy an inexpensive vehicle with cash. Sell the house and buy a smaller home in a less prestigious neighborhood. You can always upgrade your home or car once you get out of debt.
Getting out of debt may be one of the biggest struggles you ever walk through in life. If you sacrifice and persevere, though, it can also be one of the biggest victories you ever win.