I know the struggle of looking at piles of bills and feeling like you can’t catch a break. It’s a lot to handle. My own debt story started when I was fresh out of college. I had student loans, credit card bills, and everyday expenses piling up.
It felt like I was stuck in quicksand — no matter how hard I worked, I couldn’t pull myself out. But let me share how I finally figured out how to get out of debt.
Key Takeaways
- Knowing your total debt is the first step to financial freedom.
- A debt repayment plan can give you a step-by-step guide on how to get out of debt.
- Certain debts might be written off if you meet specific qualifications.
- Debt consolidation loans can simplify multiple payments.
- Increasing your income can speed up getting out of debt.
1. Count All Your Debt and Stop Taking New Ones
Before you do anything else, grab a piece of paper (or a spreadsheet) and list every debt you owe. Many people don’t fully grasp how much debt they owe. That could be one reason why in mid-2023, the U.S. household debt hit $17.06 trillion — a $2.9 trillion jump since 2019.
So, to avoid debt from spiraling, write down your student loans, credit cards, car loans, and even small family obligations. Seriously, don’t skip anything — you need to be crystal clear about where you stand if you want to discover the best way to get out of debt.
2. Create a Debt Repayment Plan
Now that you’re fully aware of your debts, the next step is building a plan. There are a few methods, but one of the most popular is the “debt snowball” method. You tackle the smallest balance first, then roll what you were paying on that debt into the next one.
Another method is the “debt avalanche,” where you focus on the debt with the highest interest rate first for the quickest long-term savings.
Whichever option you choose, set realistic goals. Decide how much you can put toward debt each month. This amount should fit your budget so you can still handle essentials like rent, groceries, and gas.
3. Try to Write Off Your Debt
Some debts — like tax or medical — can be reduced or eliminated if you qualify for certain programs or meet specific criteria. For example, the IRS Fresh Start Program allows taxpayers who struggle with federal taxes to set up more manageable monthly payments. Participants benefit from lower penalties and interest if they meet income requirements and file all their returns on time.
When it comes to paying medical bills, CommonWealthFund.org found that half of working-age adults say it is difficult to afford healthcare costs. On the bright side, many hospitals offer discounts or bill forgiveness to those who qualify.
Now, it’s true that not all debt can be scrapped or forgiven. But if you’re overwhelmed and searching for ways to get out of debt, these options to erase your debt might be worth looking into. Even partial forgiveness can make a difference.
4. Consider the Debt Consolidation Option
Debt consolidation loans can help you merge multiple debts into one payment. It’s like taking all those credit card balances, medical bills, and personal loans and rolling them into a single monthly bill.
Your APR depends on your lender, credit score, debt-to-income ratio, and employment history. If you have a good credit score, you may have a better shot at a lower APR.
However, some debt consolidation loans also come with origination fees calculated from the amount you transfer. So check whether debt consolidation still makes sense after factoring in these fees.
5. Find Options to Boost Your Income
If you want to get out of debt fast, you’ll probably need to earn more money. That could mean asking for a raise, picking up a side gig, or switching to jobs that allow you to work from home to save on transportation.
If your schedule is tight, consider freelancing or weekend work. According to ZipRecruiter, freelancers make an average of $99,000 per year. So, if you have skills in writing, graphic design, and software development, why not use them to increase your income?
I know it can be tough to juggle extra work, family time, and relaxation. But keep your eyes on the prize: getting out of debt.
6. Cut Unnecessary Expenses
If you want to know how to get rid of debt fast, you also need to trim your spending in addition to increasing your income. In fact, the average person spends around $219 on subscription fees. So, take a serious look at your monthly spending.
You can start by canceling subscription services you don’t use often, cooking more at home instead of dining out, and downgrading your phone plan. The goal is to free up as much money as possible to pay off credit card debt.
7. Build an Emergency Fund (Yes, Even While in Debt)
A recent survey showed that 42% of Americans don’t have an emergency fund, and 40% couldn’t cover an unexpected expense. The tragedy for those of us in this situation is that we can’t cover an emergency expense, so our debt grows.
That’s why financial experts like Dave Ramsey suggest building an emergency fund — even if you are in debt. In fact, Ramsey’s Seven Baby Steps strategy for getting out of debt and building wealth starts with step one — save $1,000 for your starter emergency fund.
I used to think that saving money while in debt sounded impossible. But trust me, having even a small cushion can stop you from swiping that credit card next time your car breaks down.
Automatically move $50, or as much as you can, from each paycheck to a “rainy day” savings account. You’ll appreciate having that safety net. This is to avoid future debt.
8. Consider Professional Help
If your debt feels like a heavy chain you can’t shake off, it might be time to call reinforcements. Nonprofit credit counseling agencies can help you create a detailed plan for debt management. They might even negotiate lower interest rates or monthly payments on your behalf.
Bankruptcy is a last-ditch option for some, but definitely talk to an attorney or a credit counselor to understand the full impact before going that route.
Getting out of debt may not be easy, but it is definitely doable. If you slip up, don’t beat yourself up. We’re human. What matters is getting back on track. The next time you feel tempted to overspend, remember you’re on a mission to learn how to get out of debt for good. One day, you’ll look at your zero balance and realize you took control.
Frequently Asked Questions
How Do I Get Out of Debt if I Have Bad Credit?
Focus on making all payments on time to gradually improve your credit score. Also, consider talking to a credit counselor.
Can I Go to Jail Because of Unpaid Debt?
No, you can’t go to jail for unpaid debt, but ignoring a court order in a debt lawsuit could lead to legal trouble. Debt collectors can’t threaten arrest—report them if they do.
Does Debt Follow Me to Another Country?
Yes, debt follows you abroad. Creditors can still collect, and unpaid debt damages your U.S. credit score. It may affect legal status, taxes, and financial access.
How Do I Get Out of Debt When My Income is Low?
Look for government assistance programs, local charities, or side gigs that fit your schedule. Also, prioritize your debts carefully and cut expenses to the bone.
What if I Can’t Afford the Monthly Payments on My Debt Management Plan?
Contact your credit counselor or lender right away. Ignoring the problem leads to bigger trouble. Lenders might be willing to revise your plan or suggest another option.