Paralyzing Debt: How To Get back on Your Feet

Having an empty bank account means hard times are here and it can feel paralyzing. Learn how to get back on your feet here.

Getting into debt can be a serious problem, and there are various types. About 61% of Americans are in credit card debt, and 23% say they go deeper into debt every month.

People typically get into debt when they’re struggling with finances, and it tends to only make things worse. For some, getting out of debt may seem like an impossibility.

Spiraling deeper into debt can be very scary. Fortunately, there are some things you may be able to do to make it easier to get back on your feet.

In this guide, we’ll go over some key tips and strategies that can help you get out of debt. Keep reading for more.

List Out Your Debt Details

If you want to get out of debt, you should start by making a financial plan. For this, you need to have a clear understanding of all debts you have. For each debt you owe, list the following:

  • Type of debt
  • Total balance
  • Interest rate
  • Lender
  • Monthly payment

People often focus on just one debt at a time, but if you want to create an effective plan, you need to take all debts into account. Student loan debts, for example, are often pushed to the side. The interest rates of these are often more manageable than most different types of debt, so you should consider it alongside any others.

Adjust Your Budget

Your money habits can be one of the most important things to change if you want to get out of debt. Take a close look at your current spending and determine areas where you can make adjustments. Even if it’s just temporary, cutting out some spending will help ensure you have a bit of extra cash each month to help with your debt payoff.

List all of your expenses and then categorize them. There should be some “must-haves” like rent, food, transport, and insurance which you need to keep.

Then there should also be some “nice to haves” like one-off travel, eating out, and streaming subscriptions. These are where you want to look when cutting back. Small adjustments can add up and make quite a noticeable difference.

Boost Your Income

One of the best ways to make it easier to get out of debt is to increase your income. The more money you have coming in, the quicker you can pay your debts off.

The most obvious way to do this is by increasing your salary. It may be worth asking for a raise at work, or you could even consider switching jobs.

If you have a lot of possessions you don’t need, you could sell some. Bear in mind this won’t generate a recurring income so is more of a short-term solution.

Side hustles can also be a great way to make a bit more money. Freelance work (particularly online) is ideal for this. If you have any skills people will pay for, you could start bringing in more cash every month.

Try the Snowball or Avalanche Method

The debt snowball method is an approach many people use to make it easier to pay off their debts. It involves paying back the minimum on all of your debts except one. You can pay more for the one with the smallest balance first.

This will be the quickest one to pay off, and you’ll then have one less debt to worry about. You then do the same with the next smallest, and continue like this. Paying off smaller debts quickly will reduce the amount of interest you’re paying each month so you should be able to get out of debt faster.

The avalanche method is similar, but instead of focusing on the smallest debt you want to pay off the one with the highest interest rate first. Interest can be a major issue, so eliminating the debts that have steeper interest rates will help reduce how much interest you have to pay overall.

Submit More Than the Minimum Payment

It’s common to stick to the minimum payments for a debt, but by doing this, you’ll only be in debt for longer. Paying it back this way will result in paying more interest overall. You can reduce your interest by paying back more each month.

If you’re able to cut back on expenses or increase your income as discussed above, you should be able to do this. You can also use unexpected cash infusions such as tax refunds or inheritance to help pay off your debt sooner. You can do this with larger monthly payments or a large one-off payment.

Attempt to Negotiate and Settle for Less

This can be worth trying if you’re in over your head and struggling to pay off your credit card debt. You may be able to negotiate with your creditors to settle for less than what you owe. This approach is typically best for delinquents with payments who are being contacted by debt collectors.

In other situations, this strategy isn’t likely to work. Creditors will only be happy taking this route if they’re confident the borrower won’t be able to repay their debt in full.

You can discuss your income and expenses with them and then determine a repayment plan that works for you. If they accept, you should get a full agreement from your creditor in writing with details of the new repayment plan.

Be cautious when taking this route. You may come across companies that offer debt settlement services, but they could be a scam. Always check for certification and accreditation when looking at debt settlement companies.

Manage Your Debt and Get Back on Your Feet

Getting out of debt is rarely easy, but with the right approach, you may be able to get back on your feet. Make sure you understand all of your debts and establish a plan to pay them back. If you can reduce your expenses or increase your earnings, this will be much easier.

Money Ladder is dedicated to helping people pay off their credit card debts. We have plenty of 5-star reviews on Trust Pilot from previous clients and can create a tailored plan that’s specifically for you. Get in touch with our team now to discuss your needs.