When I was looking at getting out of debt, I was depressed at how long it would take and I started an intense research to find that hidden gem, that needle in a haystack, that best kept secret carelessly tossed out into the internet. Unfortunately, I couldn’t find what I was looking for. Everything I found simply echoed or validated the all the basic tenants of what it takes to get out of my average American debt.
While the concepts don’t change, our approach to getting out of debt can be unique as our situation. Here are some ideas to get your started:
How do I get out of huge debt?
- Determine if you can afford to pay the Total Monthly Payment until your debt is paid off. Depending on your monthly income, this might not be a stretch at all… or it might take scraping together every penny to pay the minimum payments. Making the minimum payments will be the payments is the slowest way, but it’s still a way out of debt. Paying extra on your debt will only accelerate the process.
- If not doable, contact a credit counseling agency and/or bankruptcy attorney for advice. If you can’t pay the minimum, it’s best to seek out the advice of a professional so that you can avoid negative repercussions to avoiding repayment of your debt. A conversation with them will give you insight into what your options are and what you can expect o happen on the other side of this whole thing.
- If doable, decide which debt to pay off first (highest interest rate or lowest balance?) — “target debt.” If you can pay more than just your minimum payment is great news! You’ll be able to accelerate your loan payoff and get out of debt real fast. Using calculators can help you determine which loan should get all your extra money, however, from my own experience, putting extra money towards my loan with the highest interest rate was the fastest. Paying off the loan with the lowest balance would have been the slowest pace at getting out of debt.
How can I lower my monthly bills?
Lowering monthly bills and regular expenses can help drum up some extra cash every month that you can put towards your debt to accelerate getting out of debt sooner, rather than later.
- Refinance your car/home – Refinancing your car or home gives you the opportunity for a lower payment, but you’re also resetting the loan term.
- Install programmable/smart thermostat – This is a long term savings to reduce utilities cost in your home. The way you’ll save money here is to know how much you currently spend on average for utilities and then track utilities after using the new thermostat for several months.
- Utilize timers and power strips – Depending on how you approach this, it can be extremely expensive getting timers, but the concept is to save energy when you don’t need it, as opposed to leaving whatever on all night long.
- Reduce or eliminate your cable bill – With online streaming, there are so many great alternatives to getting all of your favorite content for so much less. My friends are currently in love with YouTube TV for $50/month that gives them access to sports, local tv, and movies.
- Cancel newspaper/magazine subscriptions – If you can get the same or similar content in other places, you’ll be able to let these go without much struggle. Or, you can sign up for Apple’s new News+ program for $15/month that gives you access to a lot of premium content.
- Reduce/eliminate other paid services – This could be unlimited car wash passes or premium credit cards. Anything that takes extra money and is considered as a want, instead of a need, could and should be re-evaluated for alternate options.
- Shop around for insurance – I’m always shopping for cheaper insurance… especially when the renewal comes up and rates are increased for now reason. Chances are you’ll find someone who is wiling to earn your business by offering your original/old rate.
- Reduce/eliminate consumable habits – This would the constant trips through the coffee shop drive through or going to lunch with your co-workers everyday and then going out to dinner because you worked really late and don’t want to cook.
Take a look through your financial situation and determine what is possible. What you can cut out or switch to for extra money that you can put towards your debt. Some might be total no-brainers while others won’t even apply. But if you’re serious about getting out of debt, this exercise will be the best thing you do to paying of your American debt.