10 Tips to Help You Get Out of Debt

There’s a four-letter word that can wreak havoc on your finances—debt. While loans and credit cards are useful financial tools, their interest expenses can rack up if you don’t pay them back on time. If you’re in this position, you know how stressful it can be. Losing your job unexpectedly can mean defaulting on your debt payments and damaging your credit score. Having a lot of debt may also prevent you from reaching your future financial goals, whether you want to build up an emergency fund, save for a vacation, or buy a home. If you’re wondering how to get out of debt, you’re in the right place. With determination and the right strategies—as well as these ten effective tips—you’ll be well on your way to being debt-free.

Chapter 1

Confront Your Debt

The famous talk show host Dr. Phil often says, “You can’t fix what you don’t acknowledge.” While Dr. Phil isn’t exactly who you should turn to for financial advice—the wisdom here rings true.

Face your debt and find out exactly how much you owe.

It’s tempting to turn a blind eye toward your debt, especially when it feels overwhelming. But this strategy won’t serve you well. Instead, you should face your debt and find out exactly how much you owe.

If you have several credit accounts, you can calculate your total debt balance by:

Requesting a free copy of your credit report on AnnualCreditReport.com

Writing down all of the active credit accounts on your credit report

Finding out the current balance on each of these accounts, either by calling the creditor or logging into your online account

Adding all these balances up

Once you’ve calculated your total debt balance, you’ll know how much money you need to repay to become debt-free.

Calculate Your Debt-to-Income Ratio

Another important metric you should familiarize yourself with is debt-to-income ratio (DTI). This ratio compares how much money you owe to the amount of money you earn.

To calculate your DTI, simply divide your monthly debt payments by your gross monthly income. After that, multiply the resulting number by 100% to transform it into a percentage.

The higher your DTI is, the longer it may take to pay off your debt. If you know this ahead of time, you can manage your timeline expectations. If your DTI is extremely high (over 50%), you may also want to consider credit counseling, a debt settlement program, or filing for bankruptcy (more on these strategies later on).

Chapter 2

Organize Your Debts

Juggling multiple debt accounts can become chaotic if you don’t have an organizational system in place. Luckily, there are many tools you can use to streamline your bill-paying process and create a debt management plan.

For example, you can create a customized digital spreadsheet on Excel or GoogleSheets. When you create this spreadsheet, make sure to include the following columns:

Name of creditor

Current balance

Annual percentage rate (APR)

Payment due date

Minimum payment amount

Amount paid

New balance

Debt Reduction Calculator

Creditor Information Table

Credit card #1$4,400.0013.00%50.002
Auto loan #1$3,200.009.81%30.001
Auto loan #2$5,000.0012.00%55.003
Student loan #1$21,200.004.75%262.125
Student loan #2$9,500.006.80%143.854

As you make your debt payments throughout the month, indicate so on the spreadsheet. This will help you ensure that you make all of your debt payments each month on time.

Chapter 3

Create a Budget

Budgeting may sound like a drag, but it’s actually the stepping stone between you and financial freedom. After all, a budget is simply a plan for how you decide to spend your money each month. If you follow your budget, you’ll be much less likely to come out short when it’s time to pay the bills.

Here’s how you can make a realistic budget:

Write down your monthly income after taxes

Make sure to include all of your income, including any odd jobs, alimony, child support, interest, or rental income. If your income varies month-to-month, simply use an average.

Calculate your monthly expenses

Next, list out all of your monthly expenses. Separate them into “essential” and “non-essential” categories. After that, add them both up to arrive at the total amount.

Subtract your expenses from your income

Finally, it’s time to face the moment of truth. If you’re in debt, chances are you spend more than you earn each month. If so, you’ll need to cut some costs going forward. The costs you decide to cut are up to you. Just make sure you create enough room in your budget for your debt payments. As you spend throughout the month, track your expenses with a bill tracking app to ensure you stay on budget.

When you recognize the value of your budget, you’ll have a much easier time sticking to it. As long as you stick to the plan, you can rest easy knowing that you’ll be on the road to debt reduction in due time.

Chapter 4

Align Your Spending With Your Values

Living in alignment with your values is important in all areas of your life, finances included.

For example, let’s say your greatest values are family and health. While leasing a fancy car, shopping every weekend, and going out for indulgent dinners gives you some joy, you may have to work overtime to afford these luxury items. In turn, you may have fewer opportunities to bond as a family and the stress of working so hard may take a toll on your health. As you can see, these spending habits aren’t actually aligned with your values.

Once you discover that your spending is out of alignment with your values, it becomes a lot easier to say no to unnecessary purchases and help your financial situation.

Need to pay down your most immediate debt?

Chapter 5

Identify What Got You Into Debt

It’s also important to reflect on what got you into debt in the first place. As you examine your past financial habits, ask yourself if you:

Have a poor bill-paying system

Forget to track certain expenses throughout the month

Shop to boost your mood after a hard day of work

Eat out more often for convenience sake

Live in a home that’s beyond your means

Once you pinpoint what got you into debt, you can prevent yourself from making the same mistakes going forward.

Chapter 6

Pay More Than The Minimum Amount

If you want to stay in good standing with your creditors and avoid late fees, you must make your minimum debt payments each month. But you might want to do more than that.

To pay off your debt as quickly as possible, put as much extra income toward your debt payments each month as you can afford.

Making larger payments can speed up the debt repayment process significantly.

While you may have to live a little more frugally to accomplish this goal, it will be well worth it—you’ll get out of debt faster and pay less interest overall.

Chapter 7

Find Ways to Earn More Money Each Month

While spending less and sticking to your budget can help you get out of debt, increasing your income can also make a big difference. These days, there are many flexible side hustle ideas that can bring in extra cash.
Here are a few possibilities:

Become a rideshare driver for Uber or Lyft

Become a tutor

Babysit or dogsit

Become a freelance writer, video editor, or graphic designer

Sell your stuff online

In addition to these side hustles, you can ask your boss for a raise, look for a higher-paying position, or work overtime to enhance your earnings. With more money flowing in, you’ll be able to make larger debt payments each month with ease.

Chapter 8

Try The Debt Snowball Method

Many financial experts recommend using the snowball method to repay your debt. With this method, you approach your debt like you’re building a snowball—you start slow and gradually build momentum over time.

  1. List out all of your debts and their current balances
  2. Organize them in order of balance size, starting with the smallest balance
  3. Make the minimum payment on each debt each month
  4. Use any extra money to make a larger payment on the smallest debt on your list
  5. Keep doing this until the first debt is paid off entirely
  6. Repeat this process with the second smallest debt, and so on, until you’re debt-free

The magic of the snowball method has to do with the psychology behind it. Sticking to a debt repayment plan is a lot easier when you’re motivated and optimistic about the process. With the snowball method, you get to enjoy quick wins at the start of your debt repayment journey.

Due to this rewarding sense of accomplishment, you’ll be more likely to continue with the process, even when the larger debt balances take longer to pay off.

Chapter 9

Utilize Debt Management Tools

When it comes to paying off debt, working smart is just as important as working hard. In addition to making larger debt payments, you can also find ways to reduce your interest rate or lower your remaining debt balance through negotiation.

Here are a few valuable strategies you might want to explore:

Balance transfers

A balance transfer is a type of credit card transaction where you transfer debt from one credit card to another. Usually, balance transfer credit cards come with a 0% APR introductory period. During this time (usually 6 to 24 months), you can pay off your debt interest-free. If you can pay off all of your debt within this time frame, you can save a ton of money on interest.

It’s important to note that your credit card’s APR will return to its standard rate once the introductory period is over. You may also have to pay a balance transfer fee of 3% to 5% of your total transfer amount. Thus, you should do the math to find out if a balance transfer is worthwhile.


If you’re unhappy with your current interest rates or minimum payment amounts, you can refinance your loan to adjust the terms. Refinancing is the process of paying off an existing loan with a new loan.

Your new loan will come with a brand new set of terms. Ideally, you’ll want to find a new loan that offers a lower interest rate, fewer fees, or a better monthly payment amount (depending on your reason for refinancing).

Just keep in mind that refinancing isn’t always the right decision. If you can’t qualify for better terms, you’re better off sticking with your existing loan. This may be the case if interest rates have increased or if your credit score has gone down since you took out the original loan.

Credit counseling

If you need help getting a handle on your debt, a non-profit credit counseling agency can help. Credit counselors can give you guidance on how to best repay your debt. They also offer educational workshops and budgeting assistance.

In some instances, your credit counselor may even negotiate with your creditors to reduce your interest rates or monthly payment amounts. If they do, you’ll start paying your credit counselor directly and they’ll pay your creditors each month on your behalf.

Debt settlement

If you’re drowning in debt, a debt settlement program can help you reduce your overall debt balance. Once you enroll in this type of program, a third-party company will negotiate with your lenders to reduce your remaining balance.

However, it’s important to know that debt settlement programs can harm your credit score, since they indicate that you couldn’t repay your debts in full. Some programs also come with costly fees. Your creditors may refuse to negotiate, making this option a risky choice. For these reasons, debt settlement programs should only be used as a last resort.

Cash advance apps

Have you ever had a bill due, but you couldn’t pay it on time because your paycheck hadn’t come in yet? In these situations, you can borrow money against your upcoming paycheck with a cash advance. This money will enable you to pay your debts on time. After that, you can repay the cash advance once you get paid yourself.

While you usually don’t have to pay interest on the money you borrow, you may have to pay a fee. Thus, cash advances should only be used when necessary.

Chapter 10

Track Your Progress

As with all new undertakings, your motivation may peak at the beginning of your debt repayment journey and wane as time goes on. As you lose that initial jolt of motivation, you may stray from your budget or give up on your debt-free goals altogether.

To prevent this from happening, schedule a time to review your finances and debt balances on a regular basis. You can check in once a day, once a week, or bi-weekly—the frequency is totally up to you.

By monitoring your progress consistently, you’ll be more likely to stick to your plan and make any necessary adjustments along the way.

Possible Finance—Getting Out of Debt is Possible

As you can see, a debt-free life can be yours if you take the right steps. Once you’ve paid off your debt, you’ll be able to save, invest, and enjoy greater financial freedom.

Now that you know it’s possible, why not start your journey today? With Possible Finance’s payday loan alternative, you can borrow up to $500 to start paying down your most immediate debt.

Get cash in minutes. Build your credit score. And see that a better financial future is possible—with Possible Finance.

Consumer Financial Protection Bureau. What is a debt-to-income ratio? Why is the 43% debt-to-income ratio important?

Consumer Financial Protection Bureau. Credit cards key terms.

Credit Card Insider. How Credit Card Balance Transfers Work.

Consumer Financial Protection Bureau. What is credit counseling?

Consumer Financial Protection Bureau. What are debt settlement/debt relief services and should I use them?

Chang Fu

Chang is an avid writer, among other things. He grew up loving reading and writing, creating his own poems and even a book he's now hidden in an old closet, unpublished. His financial experience at a large bank along with his passion for technology to help underserved communities inspired him to write for Possible.

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