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Jul 19, 2018

Try These Tips to Get Out of Debt Now

By Jeremy Quittner

It takes work digging yourself out of a financial hole. Here are 7 ways to do it.

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Getting into debt is easy. Trying to get out of debt is the hard part.

Total household debt in the U.S. is more than $13 trillion, a record according to a recent report from the Federal Reserve. That comes out to about $137,000 per household. While the majority of that debt is for mortgages, households have also racked up a staggering $17,000 in credit card debt, on average, and $37,000 in student loan debt.

Even if you don’t have credit card or student loan debt, it’s possible you have other types of debt, such as auto loans, or medical bills.

So, how can you dig yourself out of the hole and get out of debt? Here are some common strategies:

Create a budget

Creating a budget should be your number one step for helping you get a handle on all of your financial questions. A budget will give you insight into how much money you have coming in each month, and how much you’re spending. By knowing these two things, you can make adjustments to pay off more of your debt.

“The other great thing about having a budget, is you get to tell your money what to do instead of wondering where it went,” says Christian Stewart, a financial coach, and owner of Do Better Financial.

The debt avalanche technique

The debt avalanche means organizing all of your debts, from highest interest rate to lowest. While you continue making payments on all of your loans, the goal is to target the debts with the highest interest rates first, by throwing more money at these loans than the others.

“You’re always eliminating the accounts with higher interest rates, which add up over time,” says Jacob Lunduski, an analyst for Credit Card Insider.

The debt snowball technique

The snowball technique is almost the reverse of the avalanche method. Organize your debts by dollar amount, from smallest to largest. Focus on paying off the smallest debts first, and then move on to the bigger loans.

The theory behind this approach is that you’ll gain confidence if you pay off the smaller loans completely. That will then let you tackle the bigger loans, having a sense of fulfillment and psychological momentum about paying off the other loans first.


Consider refinancing your student loans. Federal student loans carry an average interest rate of about 4.5% for undergraduates and 6.3% for graduates, according to recent reports. While federal loans give you plenty of flexibility, including the ability to make deferrals on payments and options for needs-based repayment, some private lenders can offer you lower repayment terms, that could potentially save you hundreds of dollars each year.

Get a side gig

We get it, you work really hard at your current job. And you may not have time for a second one. But if you can, think about jobs you can do in your spare time, such as driving for Uber or Lyft, or even earning some extra income from that unused spare room, via Airbnb. You might even find you have a passion for dog walking on the weekends. All of these things can help you get out of debt faster.

“You can earn extra money in your spare time when it’s convenient for you,” says Kat Tretina, a personal finance expert at Student Loan Hero, an education website on student debt, who adds you can use the extra cash to make additional payments on your student loans.

Lump sum payouts and raises

You may qualify for a tax rebate in April, or find yourself receiving an inheritance from a wealthy uncle or even a work bonus. Take this cash and put it toward your loans, Slater says. Similarly, if you get a raise, use the extra money to pay down your debt, while sticking to your current budget.

Switch to debit cards

If impulse spending is your enemy, and it helped get you into the many thousands of dollars of debt you have now, consider cutting up your credit cards. Some studies have shown that people spend up to 100 times more on credit than with cash.

Switch to debit cards or cash. Debit cards usually deduct cash directly from your checking account. And by spending cash, you’re likely to be more connected to what you’re spending.

These are just a few ideas to get out of debt, but there are many others. Budgeting and saving money are always good ideas.

Not going into debt is another.

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Jeremy Quittner is the editorial director for Stash.


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