How to Get Yourself Out of Debt

Woman uses calculator while working on a computer

Your debt may have been with you for so long that you have come to accept it and live with it. However, you do not have to live a life of debt where you are constantly borrowing from one place to pay another with higher balances each month. Debt reduction is a real possibility when you get to the bottom of your situation and commit yourself to new habits to pay it back.

Learn the Extent of Your Debt

The first step toward getting out of debt is to realize the scope of your problem. This requires sitting down with all of your debts and a calculator. Then, you can get a handle on your exact situation. It is impossible to fix your finances without knowing what they are.

Next, you will need to devise your own plan for getting out of debt. Improving your personal financial situation takes some intention as saving money and cutting debt are a mindset. Improving your own balance sheet does not happen overnight. Instead, you need to strategize and figure out a plan to tackle your own situation.

Prioritize Your Debts for Repayment

Once you've sat down with all of your account statements and added everything up together to get your total amount of debt, try to get organized by compiling everything in one place. Use any one of a number of apps or programs to tabulate and track your debt.

One of the most important things that you can do when it comes to debt repayment is to categorize and prioritize your debt. While you should repay all of your debts, not every type of debt is the same. There are two different but effective ways that you can approach prioritizing your debt.

The first way is to prioritize by interest rate. For example, credit card debt will cost you much more money than student loans because they carry a much higher interest rate. Without your continuous attention, credit card debt can balloon out of control and threaten your financial future. Thus, you should take care of the most expensive debts first.

Some experts will tell you to prioritize your debts from smallest to largest instead. They would advocate that you pay off the smallest debts first. Then, you should turn your attention to the bigger debts, taking the money that you save from paying off the smaller one and using it to make a dent in the larger debt. Either method is a step in the right direction toward getting out of debt.

Use Savings to Pay Off More Debt

As you begin to pay off your debt, you will also begin to notice your monthly expenses go down because you are paying less in interest each month. You never quite realize how much you pay in interest until you no longer have to pay it.

You should view the money that you are saving on lower interest payments as positive momentum. Do not take the extra money and go out and spend it. Before you know it, your debt will increase back to what it was before you started cutting it. Instead, you should take the money that you save on interest and use it to pay off even more debt.

The word "snowball" is popular in the debt payment lexicon. Here, we will add another usage of it. When you begin to make progress in paying off your debt, it can be like a snowball rolling downhill. In other words, progress begets more progress because reducing your debts progressively adds more to your budget each month that you can devote to debt repayment.

Get the Money Necessary to Repay Your Debt

For many people, the difficulty that they face in beginning the debt repayment process is just making the first step. When your budget is stretched and you are swimming in interest payments, it is not always easy to find the first dollars to devote to debt repayment. There are a couple of possible ways for you to begin the process.

The easiest way to find the extra money to start debt repayment is by putting yourself on a budget. When you get your spending under control, you can begin to save a few dollars here and there that you can use to pay back what you owe.

Here, discipline is key. You should honestly and objectively review your spending each month, taking the time to track where every dollar goes. While you do not need to cut everything extra out of your life, you should turn a critical eye to figuring out which types of spending are unnecessary. Even cutting out unwanted subscriptions can save you some money. In some cases, you can switch to less expensive alternatives to reduce your expenses.

Earn Extra Money to Repay Debt

You can also earn some extra money for debt reduction by selling some of your old and unwanted items. There are so many apps these days that allow you to turn old possessions into cash, even while you are standing in your closet. You just need some money to start getting yourself out of debt, and selling things you no longer need is a perfect way to get it.

Another way to get the funds necessary to attack your debt is to take another job on the side. It has never been easier to monetize your free time and earn extra money taking small jobs here and there. Even working a few additional hours a week can give you the money that you need to get started.

You can take control of your situation, and your high debt load can be a thing of the past. All you need to do is commit to starting and work according to a plan.