8 Steps for Getting Out of Debt – Fast
Paying off large chunks of debt can feel like trying to summit a snowy peak in sandals. According to CNBC, the average American household is saddled with over $155,000 of debt, making the journey to better, debt-free living especially daunting. Unsurprisingly, many give up before covering any ground for their future financial security.
Knowing how to get help with bills and how to get out of debt can be overwhelming, but we’re here to offer you hope and help you attack your debt head-on. This article outlines different types of debts and multiple strategies and tips for getting out of debt you can use to squash your bills once and for all.
The main types of debt you should know about
From medical emergencies to car wrecks, life can toss plenty of unplanned expenses at us and sometimes, despite our best efforts, our emergency savings just can’t cover it. Below are the most common types of debt.
Credit card debt
Too many people aren’t sure how to get help with credit card debt. Credit card debt can also be some of the toughest to pay down. When paying only the monthly minimum, high interest rates often add years to payment plans, making it nearly impossible to get out of credit card debt. According to Credit Summit, the average indebted household in 2022 owed $8,942 in credit card debt.
Student loan debt
It’s nearly impossible for most borrowers to get out of student loan debt. Even after declaring bankruptcy, you are required to prove “undue hardship” to a judge in order to make your student loans disappear and there are limited to no student debt relief options. Americans currently owe $1.77 trillion in student loan debt, both federal and private, as of the second quarter of 2023.
For more resources on how to get out of student loan debt and paying for school, take a look at these related blog posts:
- Crowdfunding Student Loans to Pay Off Debt
- How to Pay for Medical School Without Living in Debt
- How to Pay for Grad School: Master’s Degree Funding
Medical debt
The truth about medical bankruptcy isn’t pretty. According to a report by the Kaiser Family Foundation, 46% of insured adults struggle to afford their out-of-pocket healthcare costs. A single accident or illness can leave people looking for financial help for out-of-pocket medical expenses for years afterward. It can make it extremely difficult to get out of medical debt and pay your bills in full.
8 steps for making a plan to conquer debt
Every successful goal starts with a plan. Thankfully, multiple resources show you how to get out of debt and create a budget for the first time. If you’ve ever wondered exactly how to get rid of debt but didn’t know where to start, we have eight initial steps to help you get started and set up for success.
1. Determine how much debt you have
This is the scariest part, but the most important. The best way to get out of debt is to compile all of your bills and credit card debt, look at all of your accounts, jot down interest rates, and list everything in a spreadsheet. Take a breath—knowing the balance amount of how much debt you owe is half the battle of getting out of debt.
2. Figure out what you should pay first
It makes sense to start paying the debt with the highest interest rate first. But if the balance will take years to pay off, we suggest starting with the smallest debt and paying it fast, motivating you to keep going. A credit card calculator will tell you how long it will take to pay off your credit cards. Set a calendar with your payment due dates for every debt so you don’t miss any and schedule minimum payments while you tackle the first debt.
Try the debt snowball method. Once you pay off one debt, roll that money over into the next debt you want to pay off. Reducing the number of creditors you owe will make finding help getting out of debt significantly more manageable.
3. Layout your budget and track spending
Try the 50/30/20 budget system, as it allows you to allocate your income toward three main categories: 50% for necessities, 30% for wants, and 20% for savings and debt repayment. It’s a great way to balance your expenses and pay off debts. You can use it as a starting point for the best budget that fits your lifestyle.
Managing your money can sometimes be challenging, but creating a budget can be a game-changer. A well-planned budget is the best way to get out of debt and eventually have some savings. Just remember to stay focused and keep working towards your financial goals.
4. Cut out the extras
After creating a budget, you need a way to track its success and how well you’re sticking to it. Use budget apps like Mint or YNAB to keep you on track. They easily connect to your bank account and can tell you how well you’re doing in every category and what you need to work on. Both apps also have resources with tips for getting out of debt and track your spending.
5. Cut out the extra unnecessary bills
It’s easy to forget all the online services you’ve subscribed to if you never take a peek at your credit card. Sign up for a subscription finder like Rocket Money to do a deep dive and unsubscribe from anything that isn’t a necessity. Do you really need seven streaming services? If you cut out many of these services, you’ll likely find that you’re saving more cash than you realized. Without these extras eating into your budget, you’ll be able to get out of debt fast.
6. Get a cheaper car
If your car payment costs are too high, you could explore options such as trading it in or selling it and purchasing a vehicle with a lower payment. Another possibility is buying a used car, which is often less expensive than a new one, reducing your expenses and helping you get out of debt fast.
7. Curb your spending by using cash
Paying with cash gives you a real sense of what you are spending. Also called the ‘cash stuffing envelope system’ on TikTok, the envelope system is a popular method for assigning portions of your income to different categories by placing cash in labeled envelopes.
Choose several envelopes and label them with specific expenses such as groceries, rent, or student loans. When you pay with cash, you immediately feel the impact of spending and become more mindful of your expenses. Plus, you can avoid the temptation of relying on credit cards and help you get out of credit card debt.
8. Stop using credit cards
Using credit cards can be a slippery slope. You can quickly lose track of spending and put yourself deeper into debt if you are not tracking your credit card spending. It’s best to cut up the cards or put them away where you can’t access them easily. Sometimes, recruiting an accountability friend who can hold on to them can work, too. The vital part is to avoid using them while you’re on your journey to getting out of debt.
4 debt relief options to explore
Getting out of debt for medical expenses, student loans, or credit cards isn’t always easy, but you don’t have to face your debt alone. Here are three ways to help you find out how to get out of debt fast.
1. Loan consolidation
If you have multiple loans to pay monthly, and some or all have high-interest rates, consider looking into loan consolidation. When consolidating loans, a lender issues a single personal loan with lower interest rates. NerdWallet offers resources on loan consolidation options to help you get out of debt fast. Be sure to check your new loan policy to ensure your interest rate will remain low and won’t increase over the life of your loan.
2. Credit counseling and debt relief services
Credit counseling and debt relief options could be a good starting point if you’re wondering how to get out of debt. However, being cautious about the credit counseling or debt relief services you choose is essential. Not all are trustworthy; some may offer services that worsen your debt situation. The Federal Trade Commission offers helpful tips for getting out of debt and avoiding scams so you don’t end up doing business with a company you’d rather avoid.
3. Transfer balance to zero interest credit card
Transferring your balance can save you money on interest by moving your debt to a new credit card with a low introductory APR. Strategically doing this can help you pay off your high-interest debt, especially if you transfer it to a credit card with a 0% introductory APR on balance transfers. It can help you pay off your balances without paying any interest and make it easier to get out of credit card debt.
4. Crowdfunding
People have found that crowdfunding is a fast way to tackle their debt when unexpected circumstances set them back financially. Through GoFundMe, you can easily reach out to friends and family members to get back on your feet and get out of debt. To help you get started, check out these simple fundraising ideas.
Every situation is worthy enough for crowdfunding, and people from around the world use GoFundMe for causes, both large and small. It’s important to remember that nearly everyone experiences a time in their life when they have to deal with some financial hardship. Your own experience might serve as a reminder to people that everyone deserves to receive help during tough times. Once you create your fundraiser, share it across social media through Instagram, TikTok, and via email to your network.
GoFundMe success stories of people facing debt
These are just a few folks who were able to meet their fundraising goals through GoFundMe when they experienced a financial setback:
HOLDING ON TO MY HOME
Charles experienced many unfortunate events after leaving his job due to health issues. He had a challenging time finding another job, so he decided to complete his B.A. and M.A. and some other training courses specific to his career. Unable to make mortgage payments, Charles fell into foreclosure and more credit card debt.
“Hardship is a part of living – we all experience it. I am thankful to those who’ve known my story and have given me support.“ Charles wasn’t sure how to get help with credit card debt or any other debt-relief options, but then he discovered GoFundMe. His family and friends rallied around him, donating over $20,000 to help him offset foreclosure costs and get back on his feet.
SECRETS STOLEN TRAILER
The members of the San Diego-based rock band SECRETS encountered a significant setback in their musical career a few years ago. While wrapping up a tour, their trailer containing every piece of their musical equipment was stolen, preventing them from recording their fourth studio album. “Without you, this band would not be here today.”
To keep their music dreams alive, the band members borrowed money and used their own credit cards—leaving them struggling financially years later. The band started a GoFundMe and raised over $5,000 to get back on their feet.
Feel empowered to tell your story and eliminate your debt
Thousands of people start fundraisers on GoFundMe every day to conquer their debt and the stress that goes along with it. You can find emergency financial assistance, too. If you’re one of the thousands of people who search for “how do I get out of debt,” take the next step in your journey. Learn how to get rid of debt, sign up to rally your community and start fundraising today.