If you are drowning in debt, it can feel like you are simply in over your head. The good news is that it is completely possible to get out of debt quickly. At the beginning of your debt-free journey, it can seem like a mountain too high to climb. But with the right strategies and focused effort, you can eliminate your debt for good. Although the road to debt-free might not be easy, it is possible for anyone to achieve. Let’s explore what action steps you should take if you are drowning in debt.
Here’s how to get out of debt ASAP
When you decide that you are in over your head in debt, it’s time to make some big changes. If you take the right steps, you could be on your way to a debt-free life. Here’s how to tackle your debt quickly.
Consider why you want to be debt-free
When you decide that you want to be debt-free, the realization that your debt is holding you back will likely be crystal clear. The general goal of becoming debt-free is an exciting choice with emotional benefits. But determining how eliminating your debt could change your life will help you stay on track when you run into bumps in the road. Unfortunately, it could be a long road to reach your debt-free goals. With that, understanding why you want to tackle this major undertaking is key.
You can always look back on your reason why to find the motivation to continue moving towards your goals. If possible, put pen to paper and write down how becoming debt-free will change your life. It might mean moving forward with your first home purchase, switching to a lower-paying job that makes you happier, or spending more time with the people that matter most.
Seek assistance if you can’t pay bills
If you feel like you are drowning in debt and can’t pay your bills, then reach out for help. Start by canceling any subscriptions that you can live without. Next, contact your creditors to ask for a helping hand. You might be surprised how many creditors are willing to find a solution for you. Although not every creditor will be accommodating, it never hurts to ask. Once you catch up on your bills, you’ll be better prepared to eliminate your debts for good.
Don’t take on any more debt
It can be all too easy to keep digging deeper into debt. After all, a swipe of your credit card here or there doesn’t seem to hurt - until you check your credit card statement. Resist the urge to add anything more to your debts.
Build a saving stash
While you are paying off debt, it can be tempting to throw every last penny towards your debts. However, it is important to build a stash of emergency savings to help you throughout the process.
An emergency fund can be there to fund unexpected expenses without taking on any more debt. For example, let’s say you get a flat tire and need to cover a $100 expense. An emergency fund will be there to cover the costs without resorting to debt.
Create a budget
To pay down your debt efficiently, creating a budget is key. A well-made budget will allow you to allocate more money towards your financial goals - such as paying down debt.
Without a budget, it can be difficult to stay on track towards your goals because you won’t know where your money is going. If you need help creating a budget that works for you, then check out our free course.
Pause extra spending
Extra spending on discretionary purchases can make it more difficult to pay down debt quickly and keep you drowning in debt. With that, it is a good idea to pause any extras in your budget. A few examples of unnecessary spending that might be taking up space in your budget include streaming platforms, new clothes, travel, dining out, and more.
You can make this task a little bit more fun by trying a no-spend challenge. Essentially, a no-spend challenge means that you can’t spend money on anything except the basics. You’ll keep paying for housing, utilities, groceries, healthcare, and gas. But anything that isn’t truly a need will have to wait.
Increase your income
If you want to pay down debt quickly, then increasing your income is an obvious solution. Although increasing your income can be a challenge, it is completely possible. With countless side hustle opportunities and business ideas, boosting your income is something that you can start working on today.
It will take time and effort to increase your income. But it can be worth the rewards. Not sure where to get started? Take our free course to help you build multiple streams of income.
Try the debt snowball method
As you look to pay down your debt, one of the best ways to get started is by exploring the debt snowball method. Essentially, the debt snowball starts by focusing your effort to pay off your smallest debt. After that, you move on to the next largest debt. At that point, you’ll have freed up at least the minimum payment from the first debt to funnel towards debt repayment. As you eliminate debts, your debt snowball will continue to grow.
If you are drowning in debt, finding the motivation to keep moving forward is critical. The debt snowball method provides small wins along the way, the debt snowball is a great option to keep your motivation high as you tackle your debts.
Refinance your debt
Another strategy for efficient debt repayment is to refinance your debt. When you refinance, the goal is to find new loan terms that offer a lower interest rate. With a refinance, it could be possible to save thousands over the course of your loan.
However, it is important to keep fees in mind when considering a refinance. If the new loan charges any additional fees, you’ll need to make sure that you are still saving money overall. If you aren’t able to save money with a refinance, it is better to stick with your original loan.
Even if you are able to save money through a refinance, it might not be the best option. For example, if you refinance your federal student loans then you will lose some of the benefits offered such as income-based repayment options. With that, refinancing is not the right solution for every situation.
What should you not do when in debt?
When you are drowning in debt, it can be easy to feel overwhelmed. But don’t panic! Although facing a mountain of debt is a stressful prospect, coming to terms with the reality of the situation is critical for moving forward. Instead of panicking, come up with a plan to pay down your debt. Once you have a plan in place, take action! It's all about being intentional with your finances.
The bottom line
Drowning in debt is not an enjoyable financial position. But it is completely possible to eliminate your debt for good. Need help creating your debt repayment strategy? Take advantage of our free course.