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For many, debt is not a tool leveraged to get ahead but a trap that prevents them from moving forward. If you dig yourself a big enough hole, you may feel like you’re constantly trying to dig yourself out, all while attempting to juggle the host of basic living expenses that you need to survive.
But no matter what your current situation might be, there is hope. This is evidenced by the many others who thought they’d never be able to escape their crushing debt yet found ways to do so. But what does this look like? How can you join the league of those who have gotten out of debt and have managed to be more financially secure afterward?
In this guide, we’ve carefully researched some of the top 25 tips for getting out of debt forever that have been leveraged by people just like you to see tangible results. More importantly, the tips in this guide aren’t just tips that will help you proactively pay off your debt. You will also find strategies to help you avoid the debt trap in the future.
Find Ways to Live Below Your Means
Living in debt means having to find room in your budget so that you have the funds necessary to pay off existing debts. The first and most crucial step in your journey to getting out of debt forever is revisiting your budget and finding ways to reduce your expenses. Living below your means reduces your overall financial stress and is essential for avoiding debt in the future.
Granted, there’s only so much you can do here, so pairing this tip with our next one is important.
Secure a Second Job or Side Hustle
Paying off debt faster requires you to have more cash. Spending less is one way to support your debt repayment efforts, but generating more income is the second part of the equation that will prove invaluable in helping you pay off your debts. Whether you have time for a second job or you can take on a side hustle, find ways to bring in more money that can be used to eliminate your debt.
Consolidate Your Debt
Debt consolidation is a strategy where you use one debt tool, like a personal loan, to pay off other debts and then work on paying back the new debt. This can be advantageous for many as it allows them to start fresh with a lower interest rate and a debt instrument that they haven’t defaulted on yet. Consolidating your debt can be one effective way to make your debt easier to pay and manage.
Use a Balance Transfer Credit Card
If your debt is primarily credit card debt, you can use a balance transfer credit card to make things easier on yourself. This is a specific type of debt consolidation, helping you transfer multiple credit card debts onto one new card with lower interest rates and even beneficial introductory promos. You may need stellar credit to take advantage of these tools, but you should do so if you have a credit score that card issuers will approve.
Try the Debt Snowball Strategy
Debt repayment strategies typically involve the debt snowball strategy or the debt avalanche strategy. The snowball method involves organizing your debts by balance and paying off the smallest debt first. This can help you feel more confident about paying off your debts and allow you to wipe your debts away gradually. This strategy may take longer, but it has proven useful for many looking to get out of debt.
Or, Try the Debt Avalanche Strategy
Are you the type who prefers an “eat that frog” approach? If so, you might want to tackle debt repayment with the debt avalanche strategy. With this strategy, you first focus on tackling the debt with the highest interest rates. This lets you get the most expensive debt out of the way, saving you money on interest charges.
Always Pay More Than the Minimum
Paying the minimum might seem like a good way to keep your head above water, but that’s rarely true. Interest rates on owed debts are high, which means that your outstanding balance is continually growing if you’re not paying enough to cover the interest and more. Always pay more than the minimum where possible to ensure your debt is falling rather than rising.
If You Can Refinance, Do It
Do you have a loan that you can refinance? Refinancing allows you to extend the life of a loan, reduce monthly payments, and even reduce interest rates. You may have to have a high credit score to do this, but it’s still worth looking into if your debt is weighing on you and you want to manage it with greater ease.
Settle Long-Standing Debts if Creditors Are Open to It
Debt collectors and those who issued the credit want their money and are often willing to negotiate on long-standing debts. Debt negotiation isn’t the best option if you’re looking to improve your credit, but it can be the best option to essentially pay far less than what you owe and settle your debt. Some companies specialize in this, so contact them if you have older debts you think you can reduce.
Speak With All of Your Lenders
Do you have recent debts that you’re falling behind on? One strategy that people rarely pursue is talking to their lenders. Lenders understand financial hardship and may be willing to work with you to draft a repayment plan better suited to your needs. Sometimes, they may lower your interest rates to help you catch up.
Find Ways to Keep Tabs on All of Your Debts
If you have unpaid credit cards, personal loans, and other debts, tracking your payments and debts can be a major hurdle to organizing and eradicating your debt entirely. A helpful tip that has made it easier for individuals to get out of debt is using tools that show all their accounts at a glance. When you see your progress and know what you still owe, you’re less likely to get disorganized and fall behind again.
Pay the Lower Amount When Offered
Some lenders, such as those that issue payday loans, may offer you a lower repayment amount if it’s been a significant amount of time since you’ve made any progress in making payments toward your loan. In this situation, you don’t have to reach out to any debt settlement companies. You can just take the reduced payment, pay it off, and then have one less thing to worry about when it comes to clearing your debts.
Establish Regular Weekly Payments
Paying off your monthly debts can feel like you’re not making tangible progress. This is why many will make regular payments throughout the month, often every week. This helps you feel like you’re achieving more and allows you to set small milestones to build confidence about paying off your debts.
Avoid Taking on Any New Debt
When you’re working on getting out of debt, it’s a no-brainer that you shouldn’t take on any new debt. You likely already know this, but signing up for a new credit card can be so easy, especially if money is tight. If you’re struggling with this, consider the long-term consequences rather than the short-term rewards.
Take a Proactive Approach to Saving
Your savings can mean the difference between being able to handle life emergencies and immediately falling back into debt because you’re unable to pay for them. Take a proactive approach to saving and develop an emergency fund that can help you cover several months’ expenses. You should also put your money into a broader savings account to help you meet specific goals or access more funding when needed.
Spend Only What You Can Realistically Pay Off
Treating credit cards like cash is an excellent way to develop debt you can’t easily pay off. Always assess any purchase you plan on making to see if you can afford it. If you can’t pay for it outright, you shouldn’t pay for it with your credit card.
Use Better Budgeting Strategies to Stay on Top of Your Bills
Are you overwhelmed by all of your bills and have difficulty tracking them? If so, establishing a budget now is crucial to avoiding debt in the future. Whether you’re a fan of the zero-based budget, where you allocate every dollar to some spending/saving category, or the 50/20/30, budgeting will help you stay on track so you don’t fall behind and need to lean heavily on debt instruments.
Understand Various Debt Instruments Before You Sign Up
Given how many tools are available and how talented salespeople can be, it’s very easy to get into debt. This is especially true given the prominence of buy now, pay later services. Take the time to understand every line of credit you’re considering signing up for. You’ll likely run into more than a few with predatory terms or hidden fees that can prevent you from staying out of debt.
Always Pay Off Credit Card Balances in Full
The best way to stay out of debt forever is to ensure credit cards are paid off as soon as possible. Pay off your balances in full each month so they don’t accumulate interest. You should also aim to keep balances low, which is crucial for your financial health and credit score.
Limit Your Credit Cards and Other Loan Types
The more lines of credit you open up, the easier it is to spend and get in over your head. Limit the number of credit cards and other loans you sign up for. Even if there are stellar terms and other rewards and incentives, ask yourself, do I really need this?
Beware of Lifestyle Creep
If you’re starting a new job and getting a significant pay raise, you might feel as though you need to spend more to adjust to the new lifestyle shared by those around you. However, this is a common way to end up in debt and put yourself in a precarious financial position. Keep spending below your means, even if everyone else is spending more or you have access to more money than you did in the past.
Create a Plan of Action for Larger Purchases
Larger purchases like new vehicles, homes, or furniture require financing. If you’re looking to remain debt-free, it’s up to you to figure out how to get the best financing terms that will allow you to keep monthly payments low and affordable until you pay off your loan. Think smart when you absolutely have to depend on debt to get ahead.
Invest in Insurance
Insurance is a must-have in today’s world, whether discussing health, home, or auto insurance. While it might seem like a major cost now, being in an accident without insurance is one of the fastest ways to get into massive amounts of debt. Insurance protects you in more ways than one!
Address Spending Compulsions Now Rather Than Later
For some, spending money on a whim is a compulsion they can’t help. If you can relate to this, find ways to prevent yourself from accessing money as easily as possible and consider seeking help to deal with the compulsion. You’ll thank yourself later when you’re debt-free.
Work With a Professional to Organize Your Finances
All the tips above are wonderful, but they’re a lot to take in. If your financial literacy isn’t up to par or you need a little extra support, consider reaching out to a professional organizer to help you figure out how to best manage your money moving forward. This will set you on the path to financial success and allow you to avoid any unnecessary debt in the future.
