This article was last updated on July 31
Debt is as American as apple pie. It is estimated that 80% of Americans live with debt and that includes $8 trillion in home mortgage debt. Many of us go to work every day simply to pay for products or services that we’ve already received. We can’t help our children with college, fund our retirements, participate in charitable giving, or simply go on that dream vacation we’ve always dreamed of.
Debt is the financial equivalent of obesity. Most people have it but that doesn’t change the fact that it’s deadly. It’s time to break the debt cycle and we’re here to help. Here are 10 ways to get out of debt.
1) Pay the minimum…really?
Yes, pay the minimum on all of your debts except for one and for it, pay as much as you can each month. Once that debt is paid, go on to the next one and pay as much as you can PLUS the minimum you were paying on the debt you just paid off. With each new debt that you address, you will pay more and more. This was made popular by Dave Ramsey who wrote a book titled, “The Total Money Makeover” where he describes this system.
2) You don’t NEED a credit card
If you’re working hard to pay off your debt but you still have a credit card, you probably aren’t getting very far. You don’t NEED a credit card. Cash still works. In order to get out of debt, you have to develop the mindset that if you don’t have the money to buy it, you can’t have it.
3) One Word: Coupons
A lot of work for very little reward, right? Wrong! Coupons can realistically save you 10%-25% on your grocery bill each month. That’s $100 per month for a 4 person family. Also watch for restaurant coupons and many businesses run specials where you can buy a $120 gift card for $100. Working to save money like this each month can add up to huge savings.
4) Work online or some place you enjoy
Do you like fashion? Cars? Computers? How about making a part time job out of something you enjoy? Work at a clothing retailer if you enjoy fashion or work from home as a freelancer if you enjoy writing. There is a part time job out there that fits your interests and the amount of hours you want to work. This finance blog for example is something I spend a few hours a week on and over time I have built it to a point where it provides with me $1,500 passive income per month. Not too bad I say.
Student loans, credit cards, and car loans can be consolidated or refinanced to get a lower interest rate. If you don’t know the interest rates of your loans, you’re probably paying too much. Talk to your local bank or credit union about ways to consolidate and lower your interest rates.
6) Stop going to school!
Have you ever heard that student loan debt is “good” debt? This was the popular thinking for decades but we now know that it has a lower ceiling than we thought. If you have $60,000 in student loans in a degree program that will earn you $30,000 your first year, you’ve probably spent too much on education. The new rule is to not take out more loans than your first year of projected income. It is better to get a degree, get some experience and then, go back to school.
7) Live poor
Until your debt is paid off, live like you did in your 20’s. Ramen noodles, peanut butter and jelly, and an old car will help you get out of debt. Is it drastic? Yes, but how serious are you about losing the weight that your debt is putting on your life? Much easier to live poor now than to retire broke.
8) Sell your stuff
Look around. How many closets are full of things you don’t use? Have a garage sale. You could realistically make a few hundred dollars for a day or two of work. How about Craigslist or eBay? Do you have a lot of books? You have a lot of money tied up in rarely used items that others are willing to pay you for and there are dozens of online sites and apps you can use to quickly sell your stuff.
9) Get rid of the options
Can you live on basic cable (or just Netflix or Hulu), slower internet, and less features on your cell phone? Get rid of the frills. If you’re serious about getting rid of debt, you’ll find a way to do it.
10) Steer clear of quick fixes
First the good news: By making these changes, you’ll see immediate changes. You’ll have hundreds of dollars a month to put towards your debts and those smaller balances will quickly vanish. The bad news? For most, it will take a few years to get out of debt. You’ll find a lot of online offerings saying they can help you get out of debt fast. This simply isn’t true. Don’t invest money in to these services. Instead become the master of your own destiny and start getting out of debt now.