The level of consumer debt in the U.S. is staggering, which means that most of us are carrying some kind of debt load. Whether it’s a car, a mortgage, or credit cards, our debt has a tendency to build slowly until it’s entirely out of control.
Now, you’re faced with the massive task of digging yourself back out of that debt before the interest payments alone swallow you whole—but how do you do it?
A lot of people end up floundering in their debt because they don’t know how to go about getting themselves out of it in a constructive and healthy way. What a lot of people initially do is put themselves in Debt Prison.
What is Debt Prison?
Debt Prison is what happens when you go into debt and then put yourself in a position of absolute misery trying to get out of it. You cut everything you can from your budget, including all the things you enjoy, like going out with your friends, buying books, or even watching Netflix. You go into paroxysms of guilt if you buy even one thing that’s not in your budget—no matter how small. And then you continue to do this until you’re out of debt or you lose your mind from boredom.
Welcome to Debt Prison. Sounds Fun, right?
This is actually a pretty standard suggestion most people will give you for getting out of debt. Cut everything you can and redirect all money to your debt until it’s gone. The issue with this method is that it neglects the simple fact that you still need to live and enjoy your life.
Now, that doesn’t mean buying the bar a round of drinks and buying yourself designer purses, but it does mean having some leniency in your budget. While it may seem counter intuitive to not put every cent you have towards your debt, it’s all about balance.
So how you do get out of debt fast while still enjoying your life? Well, you put a plan in place.
Ways to Get out of Debt
Since we’ve already crossed the “put every penny you have towards your debt and sit in the dark, alone, until it’s paid off” angle to bed, here are a few tactics we actually recommend:
Live in Debt Prison, But only Seasonally
I know, I know! We just said don’t do it, but hear us out. The problem with putting all your money towards your debt with no room for fun is the issue that you’re doing it without any kind of relief in sight—until you pay off your debt. We hate to break it to you, but that could that awhile. So, if you’re going to go into debt prison, you need to make a plan and set a timeline.
What that means is that your debt prison will be a short-term, seasonal event. Let’s say January through April, you decide to go hard on your debt. This is when you really are going to feel the pinch. For four months, you will scrimp and save and redirect everything to your debt and try to drive down your debt as much as you can.
This means that you will have to make a game plan, set a number, and stick to it. Let’s say your goal is to pay off your car in this period. Figure out how much you’re already paying towards your car every month, multiply that by four, and then remove it from the total owing. From there, figure out how much is left owing and how much you have to put towards it per month to hit your goal.
Now, figure out how you’re going to make that happen. If you don’t have a budget already made up, you’re obviously going to need one so that you can see exactly how much money you’re working with. When you have that sorted, you can start to see exactly how much cash you can shift towards your bill repayment.
If you’ve got your budget all done up and you’re noticing that you don’t have anything really to spare, that’s when you have to go to plan B.
Make More Money
We know, we know, easier said than done, but there are ways to bring in extra cash that doesn’t include ending up in a life of crime or begging your boss on your knees.
Look around your house at the things you don’t use or want anymore. You would be amazed at the market there is out there, especially now with selling through online platforms. Everything from clothes to furniture, to services, can be sold. While it might seem like a lot of hassle to sell a pair of shoes online for $20, it’s $20 more than you have now—and you’ll free up closet space!
Online freelancing is another popular way to make extra money. If you have any skills like editing, graphic design, audio editing, or transcription, then you can probably find someone online that will pay you for those skills. These kinds of gigs are perfect when you’re older and still have to work a full-time job. Freelancing allows you to work from home in the evenings or on weekends, without worrying about interrupting your full-time job. That being said, you should run it by your boss if you’re going to pick up a second job in anything that could relate to your own job. Most places might be working with a non-compete clause that would mean you have to limit what clients you take on, so you don’t directly compete with the company you’re currently working for.
As that money comes in, funnel it right towards your debt repayment, so you don’t ever have a chance to spend it on frivolous stuff.
Consolidate your Debt
Interest is making plenty of people rich, but you’re not one of them. This is why debt consolidation can bring a lot of relief to someone in a lot of debt. Debt consolidation is a kind of debt refinancing that takes out a new, larger loan (usually through a debt consolidator) to pay off a bunch of smaller loans.
Think of it like fighting fire with fire. Instead of getting hit with multiple, high-interest rates from different credit cards and other debts, everything gets dumped into one bucket, and you pay off just that one loan and are hit with one interest rate.
In the end, it usually ends up being a lot more manageable financially for people in debt.
Another thing you can look into is called a credit card hardship program. This is basically when you go right into the belly of the beast (your credit card issuer), and you ask them for help.
Credit card hardship programs are offered directly to people with massive credit card debts and typically provide a reduction in your interest rates or a drop in your minimum payments. They can be short-term or until you’ve paid the card back in full. However, they aren’t well-publicized (and why would they be?). You can get more information from National Debt Relief on how these programs work and whether they could benefit you.
Stick with it
We promise, there’s going to come a day when you’re out of debt. But when that day comes, consider some of the steps you’ve taken to get out of debt to help stay out of debt. Let’s say you were redirecting an extra $250 a month towards your debt repayment. If you can manage it, start directing that money into a savings account. Set up a transfer that comes right out of your pay the second it hits your bank account, so you won’t even have a chance to spend the money.
By doing this, you could save $3000 a year. This amount can act as your safety net, keeping you financially secure when unexpected bills hit.
Have a life
Finally, it’s essential that you keep a firm hold on your debt once you’re out of it. Getting out of debt is a huge step, and one you should be insanely proud of. Even if you’re just starting to take steps to get your debt under control, you should congratulate yourself.
Once you’re out of debt (or on your way to being out of debt), learn more about frugality and how to better preserve your resources, so you don’t end up strapped for cash again and getting a side hustle to dig yourself out.
Also, don’t forget to enjoy your life, just be more aware of where your money is going. You don’t have to stop eating out period, but you may need to cut back or maybe just go out once a month. This is what we like to call “luxurious frugality.” This is when you choose something that genuinely makes your life more enjoyable, and you make that a part of your budget as well. Saving and being mindful of your money doesn’t have to be a painful experience, but it does need to be a mindful one!