Editor's note - You can trust the integrity of our balanced, independent financial advice. We may, however, receive compensation from the issuers of some products mentioned in this article. Opinions are the author's alone. This content has not been provided by, reviewed, approved or endorsed by any advertiser, unless otherwise noted below.

23 Powerful Tips and Tools to Get Out of Debt

Here is one of the most frequently asked questions in all of personal finance: “How do I get out of debt?” At one level, eliminating debt is simply about following a few steps:

  1. Stop going into more debt
  2. Spend less than you make
  3. Pay off debt with the difference

If you follow these steps, eventually you’ll be debt free. The problem is that following these steps isn’t always so easy. And to make matters worse, there is a lot of “help” out there that’s not very helpful. From debt consolidation companies to books like Kevin Trudeau’s “Debt Cures” that I wouldn’t recommend to my worst enemy, there are a lot of promises being made that getting out of debt is easy. It’s not.

In fact, tackling your debt may be one of the hardest things you’ll ever do. You have to control your emotions, which can play a big part in how we make financial decisions. You have to educate yourself about everything from home loans to credit cards to credit scores. And you have to discipline yourself in the way you manage and spend money. The fact is that controlling your spending and paying off your debt is not an easy thing to do. But the good news is that you can do it. If you want to be debt-free bad enough, you can make it happen.

And to help you reach your goal of being debt-free, I’ve assembled a list of 23 tips and tools. If you know of others, please leave a comment at the bottom of this post.

Get to Know Your Debt

The first step in tackling any problem is to fully understand it. When it comes to debt, you should know everything about the terms and conditions of the money you owe. Here are some tips and tools to help you understand your debt.

  1. Put Your Debt On Paper: The very first step is make a list of the debts you have. The list should include the following information: The name, address and phone number of the creditor; the outstanding balance; the interest rate; the minimum payment; and any other information you feel is important. Even in the age of computers, I like to write out my debt on paper, at least at first.
  2. Take Advantage of Personal Finance Software: By now many people already have and use personal finance software like Quicken. If so, you can use the tools within the software to record all of the debt you owe and to develop a plan to pay off that debt.
  3. Use Free Online Tools: There are many budget tools available online for free. These tools can track your debt and are easy to use. And it’s hard to beat free!
  4. Use Free Excel Templates: Microsoft offers free Excel templates that can help you track your debt and a budget. Actually, Microsoft offers free templates for just about everything, including resumes. You can check out the free budget templates here.
  5. Involve Others: It’s important that your spouse or significant other is involved in the process. If you don’t see eye-to-eye on finances, it can make getting out of debt even more difficult than it already is. It’s not uncommon for one spouse to take the lead in handling finances, and that’s fine. But you both should be on board, particularly as you develop a plan to tackle the debt.

Create a Plan to Pay Off Your Debt

After you’ve written down all your debts, it’s now time to determine how you will go about paying off these bills. A solid plan should not be complicated. It’s simply your approach to tackling your debt. There is no one single approach; you need to do what works best for you and your family. There are, however, some important considerations and tools that can help you develop an effective debt repayment plan:

  1. Debt Repayment Calculator: As a starting point, it’s helpful (and sometimes painful) to see how long it will take you to pay off your debt if you make just the minimum payments. And there is a free debt repayment calculator that is very easy to use. While the plan will involve making extra payments, the starting point is to understand what you are up against making just the minimum payments on your debt, and this calculator will help you do just that.
  2. Prepare a Budget: For many, the word “budget” is the dreaded “B” word. But the fact is that you need a budget to control your spending and better manage your money. Remember that it’s the money you don’t spend each month that will go toward paying down your debt. Here are a few budget related articles that can get you started:
  3. Be Aggressive About Paying Off Debt: Dave Ramsey talks about tackling debt with “gazelle” intensity. It’s about being aggressive in paying off your debt. As you work through your budget, recognize that every dollar counts, and that the more you throw at your debt, the less interest you’ll pay and the faster you’ll get out of debt.
  4. Be Realistic About Paying Off Debt: While we all want to get out of debt fast, we do have to be careful not to get too aggressive. Paying off debt is a lot like going on a diet. You can commit to never eating foods that are bad for you, but is that realistic? The thought of never eating ice cream is just too much to bear. The same is true with debt. Yes, sacrifices will have to be made to meet your financial goals, but you need balance in life, including your financial life.
  5. Order Your Debt: With your budget in place and an understanding of how much extra money you can put towards debt, it’s now time to map out a specific plan. The question is this–which debt will you put your extra money toward first? The first thing is not to get too hung up on this question. Depending on your situation, one approach may be better than another, but if you consistently pay down your debt without incurring more debt, you’ll make great progress regardless of which debt you pay first. That said, here are the top three approaches to deciding how to tackle your debt:
    • Highest Interest Rate First: With this approach, you put all the extra cash you have on the debt that has the highest interest rate. This approach will result in the lowest interest charges and the fastest debt repayment possible.
    • Smallest Balance First: This is the Dave Ramsey approach. He suggests targeting the debt with the smallest balance first. While that debt may not have the highest interest rate, the theory is to get one debt paid off as fast as possible. The rationale is twofold. First, paying off a debt gives you a feeling of accomplishment, which may be just the motivation you need to keep on track. Second, by paying of a debt completely, you free up the cash that was needed to make monthly payments to that bill. While you are likely to put that cash to the next debt, in an emergency, you could use it for other purposes. In other words, by paying the smallest debt first, you free up cashflow.
    • Non-Revolving Debt First: While many talk about the two approaches above, few look at the type of debt when deciding which one to pay first. Recall that revolving debt, like credit cards, allows you to borrow again after you’ve paid down the debt. Non-revolving debt, like a car or school loan, does not permit you to borrow again as you pay down the debt. With a car loan, once the debt is paid, the loan is gone. With a credit card, once the debt is paid, the card is still there to use again if you so chose. For this reason, I’ll often focus on non-revolving debt first. Why? Because I can’t go out and charge up the debt again once it’s paid. This is purely a psychological issue, but an important one, particularly if you fear you may lack some discipline once some of your debt is paid off.
  6. Don’t Forget Your Emergency Fund: An emergency fund is a really important part of a debt elimination program. While you may be tempted to put 100% of your extra cash toward debt, keeping at least some of it aside for emergencies will help break the reliance many have on credit. When the car needs new tires, it’s better to turn to the emergency fund than it is the credit card. I’ll also add that while you can use a high yield savings account for your emergency fund, a short term, high yield CD may be the better bet. While most CDs do charge a penalty if funds are withdrawn before the end of the term, that penalty can help keep you from accessing the funds for anything other than a true emergency. In addition, there are short-term CDs available with 3 or even 1-month terms.

Improve Your Credit Score

When many people think of credit reports and credit scores, they see them as important if you want to apply for a loan. And of course they are important when you apply for a loan. But your credit report and score are also absolutely critical to getting rid of debt. With a good credit score, you qualify for lower interest rates that can help bring down your total interest charges. With bad credit, you’re stuck paying double digit rates. So let’s look at some tips and tools that can help you:

Apply Now

Self is a unique company that offers to help you build your credit score.  Instead of applying for a credit card which has high fees or a high interest rate, Self has created a way for you to increase your credit score through a self funded loan. After you’ve applied for your loan and selected a payment option, you’ll be on the path to building your credit. Once you’ve completed your payments, the entire principal is returned to you minus the interest rate.

  1. Understand the Importance of Your Credit Score: As noted above, your credit score is an important tool in getting out of debt as quickly as possible. To underscore this, check out these stats from myFICO.com for individuals with a FICO score of 660 (fair credit) versus 760 (excellent credit):
    • Mortgage: The average interest on a home loan today is about 4.766% for excellent credit, but 5.379% for fair credit.
    • Car Loan: With a credit score of 760, you can expect a car loan interest rate of about 6.3%. With a score of 660, the rate increases to about 9.8%.
    • Home Equity: Excellent credit can expect a rate of around 8% or lower, while fair credit borrowers will pay as much as 11% or higher.

    In short, your credit score matters.

  2. Get your Free Credit Report: The starting point is to get your free credit report and check it for errors.
  3. Get your Free Credit Score: Next you should get your free FICO score. You can’t get this from annualcreditreport.com, but there are several sources that offer your real FICO score in exchange for signing up for a free trial of a credit watch program. You can always cancel before the end of the free trial if you don’t want to keep the service.
  4. Pay Your Bills on Time: There are a number of factors that go into a credit score, but one of the most important is paying your bills on time. Do whatever is necessary not to forget a payment, and make sure you make the payment far enough in advance of the due date so that there is no chance it will be late.
  5. Don’t Close Accounts: As a general rule, don’t close credit card and other revolving accounts. One of the factors in determining credit score is the amount of debt you have in comparison to the amount of available credit. The greater the available credit, the better. You can always cut up some of your cards if you don’t want to risk using them, but don’t cancel them. Here are some other tips to improving your credit score.

Get the Lowest Interest Rates Possible on Your Debt

While you are working to improve your credit, it’s important to be on the lookout for ways to reduce the interest rate on your debt. Whether the debt is a home loan, car loan, credit card or some other debt, getting the lowest possible interest rate will help speed up the time it takes to eliminate your debt. Here are some tips and tools to help you lower your rates:

  1. Refinance Your Mortgage: The general rule is that you should refinance if you can lower your interest rate by 1%. While that’s a good starting point, it is important to also consider how long you plan to stay in the home and whether you need to convert from an adjustable rate mortgage to a safer fixed rate loan. Interest rates are still at historic lows, and it is easy to compare mortgage rates online.
  2. Negotiate Lower Interest on Home Equity Lines of Credit: If you have a home equity line of credit, compare your interest rate with current market rates. If you think you can do better, step one is to call the mortgage company and request a lower rate. We did this successfully with our home equity line of credit. While there are no guarantees, it can’t hurt to try.
  3. Lower the Interest on Credit Cards: Because interest rates on credit cards have risen so much in the last year, getting a lower rate on credit card debt can save a lot on interest payments. If you have a good credit score, you can qualify for a 0% balance transfer credit card. Currently the longest 0% offer comes from Citi, which offers 0% for 21 months on the Citi® Diamond Preferred® Card and 18 months on the Citi Simplicity® Card – No Late Fees Ever.
  4. Be Careful with Debt Consolidation: While it is important to take advantage of the lowest interest rates possible, the one area where you want to be really careful is with debt consolidation companies. While they may promise you low rates and a single payment, the number of consumer complaints about such companies is exploding. As an alternative, you can refinance and consolidate your debts online. Here are several good options for low rate personal loans.

Find the Best Personal Loan for You

Spend Less and Make More

As I said at the start of this article, one important aspect of getting out of debt is spending less and making more. While these topics are the subject of entire books, here are a few resources to get you started:

  1. Painless Money Saving Tips: There are countless ways to save money without sacrificing your standard of living. From canceling cable to greening your home, you’ll find plenty of ideas on how to knock hundreds of dollars (or more) off your monthly budget.
  2. A Must-Read Book: If I had to pick one personal finance book to read, it would be Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence. This book puts money in perspective and was for me a real source of motivation to get out of debt.
  3. Earn Extra Income: Any extra income goes a long way to getting out of debt. I’ve learned this firsthand from the money I’ve made blogging, all of which either goes to charity or paying off debt. If an extra few hundred dollars a month can help you get of debt faster. Check out Multiple Income Streams: 10 Ways to Earn Extra Income for some ideas and links on how to build a second income.
  4. Bonus: If you want to refinance high interest debt, consider SoFi. They offer some of the lowest rates available and the online application process is very easy.

If you have other tips or tools to help folks erase their debt, please share them in the comments below.

Author Bio

Total Articles: 1074
Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Article comments

Debt-Pro Debt Councellors says:

Good Advice Friend! This tips really helps one a lot to get out of debt easily. It was a great read.

Jim Powell says:

Great post! A lot of great practical advice. Paying down debt can be life changing and I like the simple points summarized in the start of the post. Continuing to work on those 3 things will get you out of debt and keep you out of debt. Thanks for posting!

Great tips to follow that is achievable only if people will have the determination to beat up debt problems.

Sam Wilkins says:

Great tip about creating a plan to pay off your debt. That way you can follow a specific plan and know what to do after completing each step. My husband and I need to get out of debt, so I will be sure to come up with a plan to follow through with.

Mike says:

I disagree with putting your emergency fund in a CD. Emergency fund is not an investment fund, and a CD is a horrible investment, and needs to be available when needed. As I posted in a reply, murphy’s law by definition means that what may go wrong will go wrong and if you have your money in an account you cannot get to without penalty then it defeats the purpose of an emergency fund. I agree it needs to be in a place where you won’t be so easily tempted to dip into it but you cannot have it in a place you cannot get to it now. What happens when you put it in a CD and on the way home you blow a tire, or something happens to the car? You have a relatively small window to avoid penalty withdrawing from a CD and most will auto roll over to the next month, quarter, etc. Getting 1.3% interest in a CD compared to a .15% in a savings account is nothing compared to the money you lose if you need it. The better bet would be a money market account.

Frank Holder says:

I am a fan of the 50/20/30 rule. It is important we allocate our money spent on our top priorities. In addition is is never too educate the youth on how to spend and save money wisely.

how do i become debt free says:

You might also consider tossing out any current credit cards that you have.
How to become debt free the new American dream starts with not going an
further in debt. Sell that car that you are paying $500 dollars a month on.

Mon Monica says:

I really wanna out from my debts which alraedy overlimit of my life with 2 kids. Daddy strock need money. Sibling cant get fund, their not working. My salary rm1500.00 an having side income rm300.00 an everymonth payment need to bedone round rm1450.00. How you think that can be free birds. Kindly help me out from debts.

Mike Della says:

There are no debt rules other than planning. When you plan accordingly you avoid a lot of overspending. The same goes for paying bills. If you plan for it, you can pay for it and this means you don’t have to finance purchases that should never be financed in the first place such as electronics. Pay cash for anything that’s not a car or home!

shay says:

I currently work about 70% and my husband full time. We are in a season of raising our son, who is four. We are also older parents, early forties. We have begun to see how the life in Northern Virginia is at break neck speed and has a XL consumer mantality. We are downsizing, simplifying and this blog is so inspiring to tackle our goal. I desparately want to come home full time for my son and start my own home staging business. Thank you for sharing your insight and tips. I’m going to purchase the book Your money or your life on my kindle, so we can get a game plan. Thank you again.

Nancy says:

Wow! That’s a lot of info! There was one thing you said that rings true, stop going into more debt!

The debt I had had gotten to the point where I couldn’t stand to sit and pay all those credit cards bills every week. My husband and I made good money and the debt we had was not a burden, but ‘what if.’ What if we were laid off or one of us got sick. I can tell you, I was sick of all the debt we had.

I paid off all 8 credit cards and 2 loans in three years – debt avalanche. It still amazes me when I read how so many folks are so deep in debt that they can’t afford groceries. They forego groceries in favor of applying for a new credit card so they can shop till they drop and running up more debt.

Love your post, Rob. Very comprehensive.

Wow, that’s a very comprehensive guide to getting out of debt! I especially like that you include the various approaches to paying it down such as paying off the smallest balance first.

I also like that you included things that many times get ignored by PF bloggers such as making more money, renegotiating debt, and refinancing the house.

I’m not so hip on worrying about the credit score though. If your goal is to get out of debt, you really don’t need one. Trying to maintain a good score is just a tool that will eventually get you back into debt, right where they want you.

I just recently started a blog series that may be of interest on getting out of debt that details each step you need to take to get you all the way to financial freedom.

“How Do You Get Out of Debt? (Part 1)”

I have always been a bigger fan of increasing your income as opposed to slashing debt. However, I do think most people have a disposition to not wanting to work more and would rather shrink expenses. For those people, I think articles like these and even Dave Ramsey’s book are perfect.

Monica says:

Great post about paying of debt. I am trying to start that road myself but first I have to get caught up on the bills I am behind on. Its hard to pay off credit cards when you just don’t have that much extra money coming in. I have tried to find ways to make extra money doing on line surveys, I have tried the blog thing, Now I am trying to sell stuff on ebay, so far none of them have helped. A second job would mean I would never be home with my family and I don’t think that’s fair for them, I already work full time. I have a plan it’s just sticking to it I get frustrated when I don’t see results fast and give up to easy. Wish me luck.

Lively Jason says:

Under current difficult economic times, it pays to work extra hard and put in more effort into improving our income. Certainly, this is one of the quicker ways to get out of debt – especially when you have tried tightening your belt and found that there is not much you can do as your monthly household expenses be further reduced.

Lori says:

Great articles! It’s great to have specific, meaningful steps to follow and things to do. Thanks for writing this!

Usiere says:

Being in debt is not a place to be. You have to work out what works best for you. Financial education is crucial, so as to better evaluate your options and not be hook winked or misled. Brokers usually look out for themselves. When you are financially savvy, you can make informed decisions

Viv says:

I don’t see how you can pay off the smallest debts first when ALL the creditors are demanding payments RIGHT NOW. I feel overwhelmed and depressed. I’ll probably be in debt for the rest of my life, and will die owing people money.

Also “stop going into more debt” sounds easy, until you get slammed with thousands of dollars in medical bills because you don’t have insurance. Things like this are never planned for, they just happen.

Rob Berger says:

Viv, when you are paying the lowest balance first, you must still continue to make the minimum payment on all your other debt. The point is to take any extra money you have and put it on the smallest balance.

And as for health issues, you’re absolutely right. Sometimes things are just outside of our control. That’s where planning can help, but nothing is fool-proof. Best of luck.

juliet says:

thank you for your good tips it helps me alot…, i am sooo down before it helps me alot ,advice ,strategy, anything,good luck and GOD bless you more power….

Forex Analyst says:

Absolutely the most important point is spend less than you make. No matter what else you might be doing to try to get out of debt, if you fail at spending less than you make you fail at getting out of debt.

Mike says:

Even though I do not agree with Mr. Ramsey on everything, I do agree with the principal of paying off the lowest balance first. Add a good sound and manageable budget with this and any consumer in debt will be feeling good about themselves again rather soon. A big issue with a lot of people is the feeling of despair when they are over there heads in debt. When people are working their budget, setting goals and then accomplishing them in a rather short period of time, it will create a great momentum swing for them. The more results they get, the more vigor they will attack the next one with.

Billy says:

I like # 7, preparing a budget. Many consumers dont monitor their income vs. expense when it comes to paying off debt. If consumers do this, they can target their income and expenses and in turn, get out of debt imo..

Earn and Invest Money says:

Thank you for this tips because I have a problem when it comes to debt. What I am doing right now is using checking account to pay my debt by depositing my salary on that account.

Real Financial Help says:

I got into trouble with debt at a young age and it took many years to overcome it. Since then I refuse to use an credit cards or loans. This forces myself to either work for the money or do without. Works much better.

Louisa says:

I am at the point in debt that I cannot even open a checking account! My car got repossesed due to not being able to get my car out of repo yard, expired tags and then it just started rolling. I am terrible pay bills..or should I say terrified? I am low income as well and single mom of teen twins! What should I do first? Website suggestions? Anything?????

Credit Card Help says:

The best way to eliminate debt, is to not have it. When in need of credit card help tho, consolidation is best imo.

No Debts, No Regrets says:

I agree with Stella. This is a very comprehensive article- all the key points are there.

Due to illness and then unemployment, I accummulated a large amount of debt. I have been able to pay off about 30% of it so far. One of the ways I did this was to create what I call the Debt Buster spreadsheet. I have posted it on my blog where anybody can download it for free. I will also help anybody who needs it on how to use it. Just post a question and I’ll answer it as soon as possible.

Good Luck!

Emi says:

I use coupons at the grocery store and retail stores when available. I see how much I have saved from my shopping trip and put that into the savings account. It builds up fast if you stick to the plan.

lisa says:

a quick and free credit score is at http://www.creditkarma.com no cost or singing for a freeebie and then having to cancel, no sales or anything

Cathy says:

Great advice!!! I found the book: “Life or Debt 2010 by Stacy Johnson, Stacy W. Johnson (2009, Paperback): A New Path to Financial Freedom” a tremendous help. (Stacy also has a website: http://www.moneytalksnews.com.) It’s a wealth of information on $$-related stuff. His book (above) gives step-by-step instructions on how to get out of debt. I’m also one that has had to “squeeze Lincoln till he cries”

I’ve found tremendous coupon sites on the internet. One good place for books (and other things) is http://www.half.com – everything is 1/2 off OR MORE. I just went on the site for the above book, and it was $2.29!!

Use all the coupons you can; make your own laundry detergent – I have and it’s a FRACTION of the cost of store-bought, and it cleans just as good, if not better (and doesn’t leave all the soap residue the regular stuff does).

Tipnut.com is a great site to try. You really CAN find the extra $$ (even if you don’t smoke/drink/shoes – like one person stated).

Lower your cable bill by calling & asking them to put you on the lowest speed. I did, and you’ll never even notice the difference, but you’ve saved $$. Unplug all the things you’re not using that “trickles” the electricity. Use store brands – sometimes they’re even better than the brand names.

Definately buy store brands for things like aspirin, joint med, etc. Compare labels & you’ll see they are the SAME EXACT INGREDIENTS! All you’re paying for is the name! BY LAW the manufacturer’s of these items have to have the same ingredients as the store brands.

Check http://www.gasbuddy.com for the lowest gas prices in your area. Ask for cash back from the grocery store, which costs you nothing, as opposed to an ATM. For more ideas, google America’s Cheapest Family. There are a ton of ways to save $$ – make it a game, and see just how many you can find! Hope this helps…

Ali says:

A lot of people tried that and faield. If you do not make any payments, you’d probably get a 1099 form for the cash advances and charges. If you try to file bankruptcy, you could also be charge for credit card fraud. There is also an old saying in the collection business, If you’re gonna be a thief, make sure you can retire from it .

Wow – this is so detailed and to the point, practical actionable steps. Debt management. I’ve bookmarked this – and need to read it again.

You’re right – emotions play a big part in getting people into debt and is the single most important factor, which if controlled can help anyone, by over 50%, to avoid getting into debt.

Tyler says:

This article is pretty informational. As for the last comment, im not so much about that Dave Ramsey guy. But anyhow, useful information for sure!

I have been on the Dave Ramsey plan for about 2 years and will be 100% debt free (inc. house) by August 2012! The baby steps work, but you must follow them. Not complicated, but it is difficult.

Dollars Not Debt

Jeffrey says:

I would love to snap my fingers and be out of debt. But I do agree with the many tips you have here. Under the idea of spending less, well I have found a number of ways. Everything from using samples and coupons to comparison shopping. That is where savecreatively.com comes in to help. They have a great coupon and sample database. Thanks again for your tips, especially the making a plan for your debt tip.

Sue says:

I do quite agree with Chuck, a good way to kill debt is stop spending on the things that kill you to save money and get out of debt. Although what if you don’t have any habits like, smoking and boozing or shoes.

Getting out of debt is very hard as those who get into debt are the most part those who are not conscious of their financial situation, so you have to teach such ability to that person before they can get out of debt. Some are unwilling to learn, some get drawn in by these TV commercials who say they can sort your debt out by consolidating it. Point is that you need to understand the business world before you can grasp debt, no service will get you out of debt, as services are for profit not charity. One has to do it themselves. hence the above tips that are a very good start!

As well as involving others, having an accountability mechanism in place really helps. Publish your progress on social media, blog, Facebook etc. and keep everyone posted. Nothing like a bit of accountability to help keep progress moving with eliminating your debt.

Jason says:

Spend less make more…..certainly a must for most people in this economy. Great advice.

Solving Debt Problems says:

Wow great resources for getting out of debt! Thanks for the info

Jamal says:

Figuring out debt (thanks to software and online tools) are easy nowadays but as most important aspect seems to be getting others involved, most importantly your spouse or significant other need to be in same page.

Rod Ferrier says:

Debt can be so overwhelming! I have worked with many people over my financial career and have never seen people so in need of assistance. Your suggestion # 2 is a good one.While I agree that people need to know how much they have coming in and going out, I also notice how discouraged people are after failing to follow a budget due to this thing called life happening. Knowing the tools in your toolbox and using them properly is key to eliminating debt fast.

Bill says:

This is a very helpful article about eliminating debts. It is true that extra income can really in order to get out of debt. I’ve learned this too from the money I’ve made from writing articles online.

Michelle says:

Any ideas for someone who has lost their job and unemployment is way less than half of regular income. I have done very well paying all debts plus utilities for over 2 months, but my reserves are getting extremely low. I did cash in a small 401K from my last employer because I had to pay for some emergency home improvement loans that were coming due and to lower monthly payments. Three debts will be gone and I will have enough left to make 5 car payments. Looking hard and fast for work, but am getting discouraged. Any other ideas?

Allie says:

Hi Michelle,

Sorry to hear about the job loss. Congratulations on looking hard and fast for work. Keep it up.

Now that you are on a time limited, low income, it’s time to stop looking at debt reduction and start looking at your capital resources. Do not cancel any credit cards (as pointed out above), or try to “kill” any more loans — for your situation, a bird/dollar in the hand is much more valuable than trying to reach future goals. Pay only the minimum payments until you can secure a steady source of capital to pay food, shelter, etc.

Of course, reduce your spending to only the absolute essentials and see whether or not you can make it, and if so, for how long of a time period. Don’t guess…make a list of your essential expenses and fixed bills. Question every planned expenditure. Then figure out the date at which your resources will expire.

Only when you know those figures will be able to clearly see if more drastic steps are necessary — e.g., selling a house and renting an apartment, selling the car and downgrading to a used car to get rid of monthly payments, and liquidating retirement savings.

I know it sounds painful, but trust me – I’ve done it and you will feel more powerful for having assembled this knowledge. Plus, it gives you something to say back to those well-meaning friends and relatives who ask only one, unbelievably irritating question, “What are you going to DO now?” Preparing to make sacrifices and talking about them in a logical, unemotional way will make you seem like a superhero, and when you are looking for work in a down economy, self-positioning like that is an important part of networking. People tend to brand the unemployed as “losers” and that is a difficult cycle/stygma to beat.

Good luck. Remember that all of us are “between jobs” at some point in our lives, and that it is very likely that your termination was not a comment on your personal or professional performance.

We recently had to move all of our employees to part-time for 6 months, and my husband took a 70% pay cut. We made it through that rough patch, but people didn’t realize that we were experiencing the same worries as they were.

Good luck.


DR says:

Michelle, I echo everything that Allie said. Pay only those bills that are an absolute necessity, and spend every available moment looking for work. I don’t know what your skill set is, but while looking for work, you might want to consider freelancing. There are numerous online job and freelance forums with available work. If you let me know what your background is, I’ll do my best to point you in the right direction.

LeeAnne says:

I’d love some links to online jobs and freelance forums. I’m always looking for them but never find anything legit. I am completely maxed out and working on debt repayment but desperately need an income source I can squeeze into my spare hours at home. Any suggestions would be hugely appreciated!

Lively Jason says:

Sad to know that you’re in sure dire situation. Under your circumstance, the best approach would be to tap into your circle of friends and relatives – either for small personal loans or market some products for a profit.

steve says:

hey I really like your article my favorite step was involving others I have been talking to family members and helping them with getting out of debt. My brother is very an independent person and is trying to do most of it himself. through this process we found a firm that is working with him very well.

Lively Jason says:

In today’s environment, trying to progress financially alone is tough. The keyword for succeed is – network.

The motto should be: Work with people and help others succeed.

I have yet to read “Your money your life,” but after being on the PF blogosphere about a month now it seems to be nearly as popular as Dave Ramsey. I’ll have to check it out.

Styles Stewart says:

Att: Chuck Adkins

In addition to all you have learned please learn to use the shift key or caps lock key, thank you.

Hank says:

What great tips! I especially like the very first one. I was actually in denial about how much debt I had until I put it down on paper. That was what really got the ball started for me to pay off my debt.

Judy says:

The suggestion regarding paying non-revolving debt off first is one I’ve never seen before reading this article. What a great idea! I never thought of it that way before. Thanks for the suggestions. Much appreciated!

Kate says:

I have interspersed non-revolving debt payoff with revolving debt payoff because, in an emergency, I may still need to charge something. So far so good, but you never know. You think you can pay it off, and everything seems fine, then all of a sudden, something happens where you need some of that credit back. If you’re just paying off non-revolving debt, there’s no chance to get it back. Yes, I know you should stop charging completely, maybe save a $1,000 emergency fund, but if your transmission costs $2,000 and you have to pay right now, you’ll wish you had room left on a card.



Beau says:

I have two suggestions. I am currently getting out a debt I acquired a year ago. I had to put my tuition on a credit card bill and I knew the charge was coming. So beforehand, (1st recommendation) I called my credit card company and asked to have the rate reduced knowing that a large balance would be inevitable. I had always been responsible paying it off every month so they reduced my rate considerably and they also raised the credit limit. I am now paying it down as fast as I can. Mentally I just don’t like having the liability. My second recommendation is to do your own consolidation. Sometimes balance transfers can make sense. If one card has a 15% rate while the other has an 8% rate, try to put as much on the 8% card. There can be charges for balance transfers, but depending on the situation the lower interest will offset any transfer fees. Caveat: the borrower must also consider the effects of using a higher amount of credit available on one card. This lowers credit score until the debt-to-credit limit is reduced.

Also transfering non-tax deductible debt (like credit cards and store cards) to tax-deductible debt (like HELOCs, or student loans) will make the interest rate cheaper. If a person is in the 25% tax bracket, a 10% HELOC may be reduced to 7.5%. The problem is that the effects aren’t noticeable and also the borrower must be also paying off the debt at the same time to make it worthwhile.

DR says:

Beau, thanks for the tips. I’ve found that calling creditors to ask for lower rates is a great idea. It only takes a few minutes, and while many will say no, some say yes. We reduced the rate on our home equity line of credit with a simple phone call.

schernoff says:

To Save Money Hound: By “white goods”, I assume you mean washers, refrigerators, etc. If I can buy something with a 15-20 year useful life and take a year to pay it off on someone else’s dime (see the “same as cash” offers at Home Depot and Sears), that doesn’t seem like “bad debt” to me. I get to keep my money in the bank and let it earn some interest, while making payments so it’s all paid off at the end of the term. Yes, the resale value of that appliance is next to nothing, but then, if I’m replacing an appliance, it’s because it’s dead and repairing it would cost more than buying a new one.

Mike says:

There are all kinds of problems with that idea. For one thing when you pay on time you have little to no negotiating leverage. Go to an appliance store and wave $100 bills in the face of the salesman and see the deals he’ll offer to get that money. If he doesn’t, you walk to the next appliance store. Someone will make a deal. Use their “same as cash” deal and the chances of that are virtually nil. So much for same as cash.

Murphy’s law dictates that whatever may happen will. What happens to this plan if other more pressing expensives come up forcing you to delay paying it off on time? Or worst, lose your job?

Any debt is bad debt. It hangs over your head like a cloud. It makes you a slave to the debtor and ties up money you may otherwise have for other things.

Amy says:

It is important to keep guard of our credit reports. Many times there are errors on them. Credit cards can be used for good, sometimes. But you need to know what to watch out for. The credit card catches.

Divide your debt into bad debt and good debt.
Decide why are you going into debt, determine what you are going to get out of it in the end and how much your purchasing decision will cost you.
Good debt is anything that will give you an investment and provide a return.
Bad debt is purchasing stuff on loan that will lose value eg consumable items, white goods etc.

Cheryl Maguire says:

Great article with lots of tips. I think an important first step would be to figure out why or how you got into debt in the first place and what is your relationship with money?

Figuring out debt (thanks to software and online tools) are easy nowadays but as most important aspect seems to be getting others involved, most importantly your spouse or significant other need to be in same page.

Craig says:

I like how you include involve others, I look at it more as get advice, and reading your blog is one great way. Getting good advice from others specifically those who have been through it before is very valuable and can help you plan your attack to get out of debt.

Indeed, it’s very important to avoid debts today due to unstable financial situation all over the world, though, it’s sometimes rather difficult to manage this. You mentioned some really helpful tips as for me and I think if everyone will follow them it can even improve the current economy system. It’s very unpleasant to possess debts and I hate being in debt, therefore, it’s always interesting for me to learn the different points of view belonging to various authors. Thanks!

@Craig: It always help to discuss your financial plans, including paying your financial debts, with people you trust and can help you with their experience. For me this is a preferred way to learn new things.