I Want to Get out of Debt. How Do I Get Started?

Fun fact: Americans LOVE putting charges on their credit card. 

Not-so-fun fact: The average American family has nearly $16,000 in credit card balances. That’s a heck of a lot of money that could best be spent elsewhere (like paying down debt) or, frankly, saved.

If you’re one of these statistics, you may feel your blood pressure rise every time you receive a statement in the mail. Debt can be stressful, overwhelming, and ruinous to relationships – not to mention, it inhibits you from building wealth and preparing for your future. 

So, what can you do once you’ve already fallen into the consumer debt trap? Depending on your particular circumstances, you may want to start by reaching out to a reputable debt relief company. Sometimes, the best step is to explore options like debt consolidation programs to help you clean your slate and get back on track. However, in some cases, your debt may be small enough – and your income large enough – to tackle it on your own.

At any rate, we’re sharing just a few tips on how to get the ball rolling if you are hoping to get debt free fast, so you can start to put your money where it matters most: building the life you want, and preparing for your future.

First and Foremost, Build An Emergency Fund

We know what you’re thinking: I have a mountain of debt, and you’re asking me to worry about savings?! Well, yes. Yes we are. And here’s why:

Life is full of surprises – both the good kind and the not-so-good kind, like a broken-down car, caved-in ceiling, or sudden company-wide layoff. If you live paycheck to paycheck, your only option, should an emergency arise, be taking on more debt, which will only land you deeper in financial trouble.

While many financial experts recommend saving at least three to six months of living expenses, take some time to estimate the ideal savings amount for you. Take into account certain critical expenses, such as:

• Housing
• Food
• Health care
• Insurance premiums
• Transportation costs
• Personal expenses
• Debt

When tallying your expenses, do NOT take into account items that you would slash from your budget in the event of an emergency, such as:

• Entertainment
• Dining out
• Nonessential shopping trips
• Vacations
• Savings for a vacation home, school, or other personal goals

In some cases, saving three to six months of living expenses may not be enough. For instance, if you’re retired, your income is variable, or you work in an industry with a high risk of layoffs, you may want to consider saving more. No matter the amount, though, building – and preserving – a robust emergency fund will help you remain financially secure even if misfortune befalls you.

Second, Create A Plan to Systematically Tackle Your Debts

Maybe you have one debt, or maybe you have fifteen different debts vying for your dollars. Either way, to become debt-free, you need a plan.

Start by writing out each of your debts, working from the smallest to the largest. Include everything: student loans, car payments, credit cards, mortgage, and medical bills. 

Then, decide how you want to tackle the debts. Do you want to knock out the high-interest debts first? Or, do you want to pay off the smallest debts first, then gradually work your way to the larger ones? Can you consolidate them and negotiate a better rate? Or, do you want to explore an option like debt settlement to see if you can get a portion forgiven?

For guidance on the best option for you, consider reaching out to a trusted financial advisor or a reputable debt relief company. 

Third, Commit to Change

Becoming debt free is a long game. It requires discipline and persistence. If, up to this point, you’ve become accustomed to spending whatever you want, whenever you want, it’s time for a sea change: Working to pay off debts requires saying no to frivolous purchases, saving more than you spend, and taking (often) extreme measures like picking up additional jobs to generate more income. It’s hard, but the efforts pay dividends in the long run.

If frugal living isn’t your forte, try starting with a few simple habit changes:

• “Clip” coupons – Your favorite vendors likely have apps. Check them out to see if they offer periodic discounts.
• Make what’s old new again – Rather than shelling out big bucks for a fancy new wardrobe, hit your local consignment store to see if you can find a neglected treasure instead.
• Cut the cable – When you can watch most of your favorite shows online, why pay hundreds of dollars a month on traditional cable? Put that bill toward something else – like building your emergency fund or chipping away at your debt.
• Eat at home – Takeout may be easier (and tastier!) than eating those lingering leftovers, but it adds up!
• Skip the Starbucks drive-through – That grande vanilla latte may taste sweet while you’re sitting in morning traffic, but seeing those miscellaneous $5 purchases snowball into something much bigger will be alot tougher to swallow.
• Ditch expensive hobbies – You don’t need a golf club membership to socialize and stay in shape. A pair of good running (or walking) shoe prices out around $100, and hitting the trails is completely free.

This is just a sampling of the many ways you can start to live more simply – and in doing so, save more abundantly. Think of it this way: Each time you say “no” to a frivolous purchase, you are saying “yes” to a financially secure future.

If you aren’t sure how to get started, keep it simple: Even cutting just a few unnecessary expenses each month will pay dividends in the long-term. And if you still find yourself struggling, consider reaching out to a financial planner, credit counselor, or reputable debt relief company for guidance.