Practical Steps to Get Out of Debt
End the Excess
In general, experts recommend keeping your debt obligation payments to less than 36% of your monthly income to stay within comfortable repayment limits. This benchmark helps ensure your financial situation remains manageable, especially when dealing with high-interest debt like credit card balances or auto loans.
Whether it’s job loss, medical expenses, or other unexpected events, people go into debt for many reasons. Carrying total debt can often feel like a weight, but with the right strategies, it’s a burden you can lift.
If you’re struggling to get out of debt, these practical steps can help put you back in control—no matter your credit score or financial goals.
Unravel Your Debt
The first step to effective debt management is understanding your entire financial situation.
- Add up all sources of income, including your paycheck, side hustle, or any extra money like a tax refund.
- List your expenses—both fixed (like rent or car loans) and variable (like gas or groceries).
- Subtract your total expenses from your income to see what you have left for debt repayment.
Use that insight to explore a repayment plan. You might consider the debt snowball method, which focuses on paying off the smallest debt first for quick wins, or the debt avalanche method, which targets the highest interest rate to save money over time.
No matter the method, track your progress and stay committed. Small steps can lead to massive debt reduction.
Lay the Foundation for Debt-Free Living
Good money management starts with a smart budget. The 60-20-20 budgeting rule—60% for essentials, 20% for saving or debt payoff, and 20% for fun—is a helpful guide.
Want to stay motivated? Try this:
- Pay more than the minimum payments on your credit card debt.
- Use any extra cash to chip away at your total amount owed.
- Set a target debt-free date and celebrate milestones.
For some, balance transfer offers, personal loans, or debt consolidation loans can streamline monthly payments and secure a lower interest rate, especially when working with trustworthy lenders.
Consolidating Debt
Debt consolidation combines multiple debts—like student loans, credit cards, or auto loans—into a single loan, ideally with a lower interest rate and simpler monthly payments.
You can consolidate using home equity, a personal loan, or a balance transfer credit card. But make sure to avoid predatory credit card companies and understand the risks if you’re using your home as collateral.
This strategy works best when paired with new habits that prevent future debt, like better spending habits, a healthy emergency fund, and professional credit counseling.
Seeking Relief
If you’re overwhelmed, talk to your lenders before you miss payments. Many offer debt settlement options or hardship plans.
If necessary, work with a nonprofit credit counseling agency to build a debt management plan. Avoid scams by checking their legitimacy through your state’s consumer protection agency or LinkedIn profile.
Ask for a written contract outlining the financial services, fees, and timeline involved.
Fix Your Financial Future
From using the avalanche method to leveraging a debt consolidation loan, the path to becoming debt-free is about progress—not perfection.
Set clear financial goals, stick to your repayment plan, and monitor your credit report regularly. Use your cash flow wisely, and consult a financial advisor if needed.
Getting out of debt isn’t easy—but it’s absolutely worth it.
Stand Against Scams
Fraudsters prey on those seeking debt relief. Always verify any provider’s credentials. Remember: if it sounds too good to be true, it probably is.
For more resources and tips, visit Blue University to explore our financial education library, including our latest course on Debt Consolidation.