July 29, 2024

How to Get Out of Debt: 11 Ways to Be Debt-Free Faster

A debt repayment plan on a stationery pad

We all have experienced debt one way or another. Being in debt does not always mean financial trouble. It only becomes a problem when it gets out of control. That is why it’s important to know how to manage debt the right way.

In this article, we've outlined some smart strategies and suggested effective ways to manage debt, so it doesn’t negatively affect your life.
Let’s explore this in more detail.

11 Ways To Manage Debt

Whether you have credit card debt, student loan debt, or a mortgage, it can be difficult to know where to start, especially if they’re all piling up like crazy.
Here are some useful tips to help you learn how to manage debt effectively.

1. Calculate Your Debt

The first step to managing debt is to figure out how much you owe and your monthly payments. You can do this by getting all your statements together and seeing how much money goes toward paying back principal versus interest each month.

The next step is to look for any additional charges that may be tacked onto the bill, such as late fees or annual fees, that you can try and eliminate by negotiating with your creditors.

Once you've confirmed the amount of debt you have, you can start working towards repaying it.

2. Make a Budget and Stick To It

If you have debt, chances are you're either living beyond your means or not earning enough money to comfortably pay all your bills. The first step to getting out of debt is budgeting—you need to know how much money is coming in every month and how you spend that money.

If there's not enough money left over after paying bills, something has to change—either your spending habits or your income level.

3. Identify Spending Leaks

Once you have a budget, identify where you're spending extra money and make adjustments accordingly. Look at each category and see if any unnecessary expenses can be cut out or reduced so that you can save more money for debt payments.

For example, if you spend $300 per month on take-out food, look for ways to reduce that amount by packing leftovers for lunch or cooking more often at home.

4. Avoid Using Credit Cards

Credit card debt is one of the most common types of debt, and it can be very difficult to get out of. If you're struggling with debt, avoid using credit cards until the balance is paid off—try switching over to debit cards and cash only!

5. Increase Your Income

If you can earn more money, do so by picking up extra shifts at work, doing freelance work, or taking on side jobs. This may not seem like an immediate fix for your debt problem, but it will help you increase your monthly income—which means more cash available to pay off debt faster.

6. Prioritize High-Interest Debt

It's tempting to consider paying off your low-interest debts first, but that's not always the best move. Paying off the highest interest rate debt first will save you the most money in interest payments and decrease your total debt amount faster.

7. Make More Than the Minimum Payment

If you have a large debt, try making more than the minimum payment required each month. This will help you get out of debt faster and save on interest payments in the long run.

8. Consolidate Debt

If you have multiple lines of credit or loans with different terms, consider consolidating them into one new loan with a lower interest rate.

For example, if you have several credit cards with high-interest rates, you could take out a personal loan with a lower interest rate and use it to pay off your credit card debt. This way, you'll be left with a single monthly payment, due date, and lower interest rate.

Always ensure that the new loan has an affordable payment plan, or else it might not be beneficial for your budget.

9. Leverage Automated Tools

Automated tools and apps can help you track your spending and identify areas where you can cut back on unnecessary expenses.

They also let you know when bills are due and how much money is available in each account so that you don't accidentally overdraw or miss a payment due date.

10. Use Balance Transfers Wisely

If you have several credit cards with high balances, consider transferring them all to one card with a 0% introductory APR. This gives you time to pay off the balance without any further interest charges, which can save hundreds or even thousands of dollars over the course of the promotion period.

Just make sure you have enough cash on hand to pay off your debt balance within that promo period (typically six to 21 months)—so you don't risk adding to your debt.

11. Consider a Debt Management Plan

If your debt situation has gotten completely out of control and you need professional help to manage debt, consider enrolling in an affordable debt management plan (DMP). You can sign up through your creditor or a third-party organization such as a nonprofit credit counseling agency.

Such programs help you devise a plan to repay your debt within a reasonable period (typically three to five years).

When you sign up for a DMP, your counselor will negotiate with your creditors on your behalf for lower interest rates and lower monthly payments and can even get them to waive their fees. You then make one monthly payment to the agency which will distribute the funds among all of your creditors.

Credit counseling agencies typically charge a small fee for this service, but they're worth it if it means getting relief from your creditors. Just make sure to do your due diligence to avoid ending up paying more, or worse, getting scammed.

How Can You Avoid Debt?

Once you've dug yourself out of debt, it's important to make sure you don't fall back in, in the future.

The first thing to do is identify the root cause of your debt. Maybe you were going through financial hardship, or maybe you just got caught up in the consumer culture, and never thought about how much money you were spending on unnecessary things. Whatever the reason, once you identify it, it will be easier to avoid making similar mistakes moving forward.

The second step? Make sure to set financial goals and develop a savings culture. That can mean anything from setting up a savings account for certain projects—to making sure you're using cash instead of credit cards whenever possible. It can also mean finding ways to save more money on your current bills by comparing rates and fees with other companies or services.

Lastly, build up an emergency fund so that if something unexpected happens—like losing your job or needing medical care—you won't have to go into debt again right away.

And if you have a hard time developing the discipline to save, using an app to help you save money can go a long way.

Earnin: The Convenient Way To Manage Your Finances

If your debt is getting the best of you, it's time to get smart about your finances. Learning how to manage debt the right way is the first step toward a better financial future.

At Earnin, we know that life can be stressful and finances can be hard to manage—so we've built tools into our app to help you take control of your money.

Our Earned Wage Access tool Cash Out lets you withdraw up to $750 of your earned money before payday. That way, if an emergency or something else comes up, you'll have the cash on hand when you need it most!

With our Financial Calendar feature, you can also stay on top of bills and other expenses, so you don't have to scramble at the last minute. Plus, you can build a habit of saving money by using our Tip Yourself tool—which lets you reward yourself for hitting targets and milestones!

Download the Earnin app today and start managing your finances better.