8 Steps to Get Out of Debt Fast!
Paying off a large debt can be like climbing a snowy mountain in sandals. According to CNBC, the average American household is over $155,000 in debt, making it particularly daunting to get out of debt and live a better life. Unsurprisingly, many people give up before they’ve laid the foundation for future financial security.
It can be overwhelming to understand how to get help with your bills and how to get out of debt, but this article will give you hope and help you tackle your debt head-on. This article outlines different types of debt and multiple debt-free strategies and techniques that you can use to solve your bill problems once and for all.
First, the main types of debt you should know about
From medical emergencies to car accidents, life throws up a lot of unexpected expenses, and sometimes, despite our best efforts, your emergency savings just can’t cover them. Here are the most common types of debt.
•Credit Card Debt
Too many people are unsure how to get help with their credit card debt. Credit card debt can also be one of the hardest debts to pay off. When only the minimum monthly payment is made, high interest rates often extend the length of a repayment plan, making it nearly impossible to get out of credit card debt. According to Credit Summit, the average credit card debt for an indebted household in 2022 was $8,942.
•Student Loan Debt
It’s nearly impossible for most borrowers to get out of student loan debt. Even after declaring bankruptcy, you’ll need to prove “undue hardship” to a judge to make your student loans disappear, and there are limited to no student debt relief options. As of the second quarter of 2023, Americans currently owe $1.77 trillion in student loan debt, including federal and private debt.
•Medical Debt
The truth about medical bankruptcy isn’t pretty. According to a report from the Kaiser Family Foundation, 46% of insured adults have trouble affording out-of-pocket medical expenses. One accident or illness can lead to people seeking financial assistance to cover out-of-pocket medical expenses years later. This can make it extremely difficult to get out of medical debt and pay your bills in full.
Then, Create a Plan to Overcome Debt
Every successful goal starts with a plan. Thankfully, there are multiple resources that can show you how to get out of debt and create a budget for the first time. If you've ever wondered how to get out of debt but didn't know where to start, here are eight initial steps to get you started and set yourself up for success.
1. Determine How Much Debt You Have
This is the scariest part, but it's also the most important. The best way to get out of debt is to round up all your bills and credit card debt, look at all your accounts, write down the interest rates, and list everything out in a spreadsheet. Take a deep breath - knowing how much you owe on a debt balance is half the battle to getting out of debt.
2. Figure Out How Much You Should Pay First
It's smart to pay off the debts with the highest interest rates first. But if the balance will take years to pay off, it's recommended to start with the smallest debt and pay it off quickly to motivate you to keep moving forward. A credit card calculator will tell you how long it will take to pay off your credit cards. Set up a calendar for each debt with payment due dates so you don't miss any, and schedule minimum payments when you tackle the first debt.
Try the debt snowball method. Once you pay off one debt, move that money toward paying off the next one. Reducing the number of people you owe will make it easier to find help getting out of debt.
3. Create a budget and track your spending
Try the 50/30/20 budget system, as it allows you to allocate your income into three main categories: 50% for necessities, 30% for wants, and 20% for savings and debt repayment. It's a great way to balance spending and debt repayment. You can use it as a starting point for a budget that best fits your lifestyle.
Managing money can be difficult at times, but creating a budget can be a game changer. A well-planned budget is the best way to get out of debt and eventually get some savings. Just remember to stay focused and keep working toward your financial goals.
4. Cut out the extraneous bits
Once you've created a budget, you'll need a way to track how well you're following it and how well you're doing with it. Use a budgeting app like Mint or YNAB to keep track of your budget. They easily connect to your bank account and can tell you how you’re doing in each category and where you need to improve. Both apps also offer resources with tips for getting out of debt and tracking your spending.
5. Cut back on unnecessary spending
If you never check your credit cards, it’s easy to forget all the online services you’re subscribed to. Sign up for a subscription finder like Rocket Money to dig in and unsubscribe from any unnecessary services. Do you really need seven streaming services? If you cancel many of them, you may find that you save more money than you thought. Without these extras taking up your budget, you’ll be able to get out of debt fast.
6. Buy a cheaper car
If your car payments are too expensive, you may want to consider trading in or selling your car and then buying one with a lower payment. Another option is to buy a used car, which is usually cheaper than a new car, which can reduce your expenses and help you get out of debt fast.
7. Use cash to control your spending
Paying with cash allows you to really understand how much you’re spending. The envelope system, also known as the "cash-stuffed envelope system" on TikTok, is a popular method of allocating portions of your income to different categories by placing cash in labeled envelopes.
Choose a few envelopes and label them with specific expenses, such as groceries, rent, or student loans. When you pay with cash, you'll feel the impact of your spending immediately and be more mindful of your spending. Additionally, you can avoid the temptation to rely on credit cards and help you get out of credit card debt.
8. Stop using credit cards
Using credit cards can be dangerous. If you don't keep track of your credit card spending, you'll quickly lose track of it and get yourself deeper into debt. It's best to cut up your credit cards or put them somewhere you can't easily get to them. Sometimes, it's also feasible to find an accountability friend who can keep your credit cards for you. The most important thing is to avoid using credit cards while you're on your way out of debt.
Finally, four debt relief options worth exploring
Getting out of medical bills, student loans, or credit card debt isn't always easy, but you don't have to face it alone. Here are three ways to help you figure out how to get out of debt fast.
1. Loan consolidation
If you have multiple loan payments each month and some or all of them have high interest rates, consider loan consolidation. When you consolidate your loans, lenders issue one personal loan with a lower interest rate. NerdWallet offers resources on loan consolidation options to help you get out of debt quickly. Be sure to check your new loan policy to make sure your interest rate stays low and doesn't increase over the life of the loan.
2. Credit counseling and debt relief services
If you're wondering how to get out of debt, credit counseling and debt relief options can be a good place to start. However, it's crucial to choose a credit counseling or debt relief service carefully. Not all services are trustworthy; some can make your debt situation worse. The Federal Trade Commission offers helpful tips for getting out of debt and avoiding scams so you don't end up doing business with companies you'd rather avoid.
3. Transfer your balance to a zero-interest credit card
Transferring your balance can save you money on interest because you can transfer your debt to a new credit card with a lower introductory APR. Doing so strategically can help you pay off high-interest debt, especially if you transfer it to a credit card with a 0% balance transfer introductory APR. It can help you pay off your balance without paying any interest, and make it easier to get out of credit card debt.
4. Crowdfunding
People are finding that crowdfunding is a quick way to solve debt problems when unexpected circumstances put them in a financial bind. With GoFundMe, you can easily reach out to friends and family 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 worth crowdfunding, and people around the world use GoFundMe to raise money for causes big and small. It’s important to remember that almost everyone goes through a period in their lifetime when they have to deal with financial hardship. Your own experience may serve as a reminder that everyone deserves help during tough times. Once you’ve created your fundraiser, share it on social media via Instagram, TikTok, and email.
Success Stories of People Facing Debt on GoFundMe
Holding My Home
Charles went through a lot of misfortune after quitting his job due to health issues. It was hard for him to find another job, so he decided to complete his bachelor’s and master’s degrees, as well as some other training courses related to his career. Unable to pay his mortgage, Charles fell into foreclosure and took on more credit card debt. "Hardship is a part of life—we all go through it. I'm grateful for the people who understood my story and supported me." Charles wasn't sure how to get help with his credit card debt or other debt relief options, but then he discovered GoFundMe. His family and friends rallied around him, donating more than $20,000 to help him offset foreclosure costs and get back on his feet.
Secrets Stolen Trailer
A few years ago, the members of San Diego rock band SECRETS suffered a major setback in their music career. While wrapping up a tour, their trailer, which contained all of their music equipment, was stolen, preventing them from recording their fourth studio album. "Without you, this band wouldn't be here today." To fulfill their musical dreams, the band members borrowed money and used their own credit cards - a few years later, they ran into financial trouble. The band launched a GoFundMe campaign, raised more than $5,000 and got back on their feet.