This post may contain affiliate links. Please read my disclosure for more information.
Getting out of debt is hard enough…
…but when you’re broke as hell, it seems like you’re fighting a losing battle.
When you are trying to figure out how to get out of debt, all you hear is “put every penny you have to spare on your debt” …
But how can you do that when you don’t have any to spare?
Are you just supposed to surrender to being in debt forever?
Hang on… before you give in to defeat, there are some things you can do to start making progress to get out of debt.
Yes, even if you have no money to spare.
But before we dive in, let me explain what makes getting out of debt so darn difficult…
Why Getting Out of Debt is So Hard
The single biggest factor that makes it so difficult to get out of debt is because of the interest you are charged on your debt.
This is most noticeable when you have credit card debt, but all debt comes with a price…
Most credit card companies charge you anywhere from 15% to 25% APR on the amount you owe.
Combine the high-interest charges with the (typically) low minimum payments and it’s a recipe that credit card companies rely on to make money.
Just take a peek at your latest credit card statement…
I can pretty much guarantee you that you were charged over 50% more in interest than what the minimum payment required was.
And if you are only paying the minimum payment on your debt, then over half of that goes on interest alone and just a tiny amount actually goes on reducing that debt.
So now the question becomes, what can you do about it?
How to Get Out of Debt Fast When You’re Broke As Hell
There are hundreds of tips on how to get out of debt…
But, the reasoning behind all of them come down to doing just two things.
Paying more on your debts to reduce the amount of interest you are paying
Lower your interest rates to allow more money to go on your actual debt every month
I’ve got a few tricks up my sleeve to find a little extra to add to your debt payments…
Yes, even if you don’t have any to spare right now, I’ll share those in a bit…
…but you’ll get more bang for your buck by focusing on lowering the amount of interest you are paying first.
With lower interest rates, your payments will make a bigger impact on your debts.
More money will go towards the debt and less on monthly interest charges.
Of course, your minimum payment might also be reduced but you need to keep putting the same amount, or more on your debt monthly to reap the benefits.
Lower the Interest Rates on Debt
There are three ways to start paying less on interest…
- Ask your current debtor for a better rate
- Transfer your balance to a card with a lower interest
- Consolidate your debts into a lower interest loan
Let’s break these down to find the best option for your situation.
Grab my free Debt Crusher guide for more information on how to lower your interest rates to pay debt off faster.
Negotiating better interest rates
Negotiating better interest rates is one way to reduce your interest rates.
It’s not as scary to do as it sounds, and it can save you a bunch of money.
Simply call your creditors and let them know that you think the interest you are paying on your credit card is higher than you’d like it to be.
Let them know that you’ve found better rates but would rather continue doing business with them.
Many times, this simple phone call will do the trick.
If a company refuses, the first thing you should do is speak to a manager or supervisor to see if they can help you since they have more authority to do these things.
If they still refuse, you can try again once you improve your credit score.
Consolidate your debts
If at all possible, see if you can consolidate your debts into a personal loan.
This will help you reduce the amount of interest you are paying as well as make it easier to manage your debt payments because you’ll only have one payment a month.
If you are going to take this route, just make sure that you shop around for the lowest possible interest rate loan you can get.
Many of my readers have had great success in lowering their interest and consolidating debt with PAYOFF a company solely focused on helping people get out of debt.
Transferring the balances on your current credit cards to another card with a lower interest rate is another option.
Many credit card companies offer zero-percent financing on balance transfers for typically one year.
Not paying any interest on at least some of your debt could give you a nice boost to help pay it down quicker.
If you do choose this option, make sure you do your due diligence and know what the terms are and be sure to abide by them…
What if I can’t get the interest rates on my debts lowered?
If you can’t get the interest rates lowered on all your debts, it’s more than likely because of a low credit score.
Work on improving your score for a few months then try again.
You can find out which areas of your credit score that need your attention the most by using a free service such as Credit Sesame which shows you how you grade on all 5 factors that make up your credit score and it gives you recommendations on what you need to do to improve your scores.
Here is an article that’ll walk you through what you should focus on to improve your score quickly.
Debt Prevention: How To Prevent Getting In More Debt
Once you’ve reduced your interest rates, you need to make sure you don’t let all that go to waste.
You need to turn your focus to making sure you don’t take on any more debts…
There are a few main things that you need to put into place to prevent adding more to your debt.
Change your money mindset
One of the first things you need to work on is changing your money mindset if you want to get out of debt.
After all, our behavior towards money is one of the main reasons most people get into debt in the first place.
You have to change your mindset from being a spender into a saver.
Let me ask you, how often do you tell yourself “it’s only 20 bucks, it’s not going to make a difference…”
Or “Oh well, our cable went up again but there is nothing I can do about that.”?
If you’ve ever thought of money in this way, then you need to change how you perceive the value of money.
Because guess what? There are plenty of ways you can reduce your cable bill to save money, you just have to take the initiative.
Besides, saying “It’s only 20 bucks” once a week adds up to $1040 a year.
That would certainly help pay off debt, don’t you think?
To change your money mindset, you need to think in terms of what money is preventing you from achieving.
No, money isn’t everything, but right now, it is stopping you from living your best life.
Until you are debt-free, you should treat it as if it is everything to you…because it is.
It’s preventing you from being happy…
Protecting your assets
This is one area that doesn’t get much attention in may “How To Get Out Of Debt” articles but it’s super important that you protect the assets that you have.
What do I mean by assets? Things like your home, cars, and anything else of value that you possess that’s worth money.
If you lost any of these things it would cost a lot of money to replace and would cause you to get into more debt or worse.
So protecting these things by having sufficient insurance to replace or repair them is a must to prevent a financial tragedy.
Of course, the cost varies quite a bit from company to company, Liberty Mutual is our insurance provider because they offered the lowest rates for our situation, but it’s best to do your research to make sure you are getting the best quote possible.
In addition, you should look to protect anything that has a big price tag that would cause more debt should you need to replace them. Things like your heating system and major appliances.
Warranty programs are designed to help repair or replace these things with no, or little cost to you and are lifesavers when in debt.
I use Choice Home Warranty because they will protect all your major assets in one company so you don’t have to keep track of a ton of paperwork.
Control your spending to prevent more debt
Once you have changed your money mindset, controlling your spending should become a whole lot easier.
Maybe you spend more money than you should because you get bored, or you put yourself in situations that you really should stay away from.
There may be many reasons why you overspend and aren’t living below your means.
Identify what triggers you to spend money when you know you really can’t afford to.
Where is your money going?
Do you go shopping when you are bored?
Find a hobby or activity that you can do to replace shopping…
Or better yet, take on a side hustle which will help you stop spending and allow you to earn money to pay down debt at the same time.
Maybe you and your friends always hit up the mall or clubs on the weekends for fun.
Find other ways to get together with friends that doesn’t require spending money…
Does money burn a hole in your pocket and you just know that you can’t control spending it if you have it with you?
If so then leave your cash and cards at home and bring only enough to cover planned purchases.
There are many reasons that you may overspend, you must get down to the root of the problem and find a way to deal with it.
You can find more tips on how to do this in How To Control Impulse Spending.
Build an Emergency Fund
Having an emergency fund is a must, even more so when you are trying to get out of debt.
I’m sure you know as well as I do that unexpected expenses happen all the time.
If you are not prepared for them they will cause you to get into more debt than you are in now.
I’m sure if you thought about it, you could remember plenty of times that you used a credit card as your backup when something unexpected came up.
Aim to grow your emergency fund to at least $1000 before tacking your debts.
Open a dedicated account for your emergency fund
Step one is to set up a savings account at a bank other than the one you do your normal everyday business with.
I suggest an online bank for two main reasons.
One, you cannot instantly transfer money into your checking account with a simple click of the mouse on your online banking site…
…or hit up the ATM anytime you are short on cash and need a few bucks.
This is for emergencies only and grabbing a few bucks to make a Starbucks run does not qualify as an emergency.
Don’t worry about not being to access your money instantly.
Typically, you can get your money transferred to your regular bank within 1 – 2 business days if you need it.
This will prevent you from dipping into your emergency fund when you want to spend money on a whim.
Yet you will still be able to get it in time to pay for that “real” reason you may need it.
Earning interest on your money
The second reason is that online banks pay you way better interest rates than a traditional brick and mortar bank.
In fact, when I compared the interest rate of an online bank to my local bank, I discovered that they paid over 18 times more interest…
It just makes so much more sense to grow your money faster.
Cit Bank is the best option and my recommendation for your emergency savings.
- Typically pays the highest interest rate than most online and brick and mortar banks.
- Have no opening or maintenance fees.
- Compound interest daily to maximize your earning potential.
- Only requires a $100 minimum deposit to open an account.
Learn to Live on a Budget
Now that you have cut back on spending, and have an emergency fund, you need to create a budget.
Many people don’t like the idea of a budget, but it is essential to stay on track while paying off debt.
It can be difficult to stick to at first but believe me, it will get easier.
Before you know it, it’ll become second nature.
Your budget will become your best friend in helping to keep you on track with your spending while you are working to get out of debt.
How to budget for success
The keys to creating a budget you can live with are to make sure you include everything.
Your budget needs to be realistic or it just won’t work…
It may not look great on paper at this point, but if you don’t include every expense that you know is going to come your way…
… or if you make it so restrictive that it’s just not realistic, you are setting yourself up for failure…
You should also need to give yourself a bit of wiggle room in your budget.
It can be tempting to try to squeeze every single penny out of your budget when you are determined to get out of debt.
Although this may seem like the right way to get out of debt faster, this is a mistake that may cause you to fail or maybe even give up.
Learn how to budget the right way… Join the 5 Day Build a Better Budget Bootcamp email course >>> CLICK HERE TO SIGN UP
Tracking Your Budget
Once you have a budget in place, it’s super important that you stay on top of it.
It won’t do you any good to review your budget once the month is over because what’s done is done, you can’t go back and change anything.
Instead, you need to stay on top of it with at least weekly checks to make sure you are on track. This does take time and effort but it’s necessary when getting out of debt.
This spreadsheet is how I track my budget because it saves me so much time every month since it auto-populates from the spending tracker so I always know if I’m on track with my budget.
Create a Debt Payoff Plan
Now that you’ve got the proper foundation put into place, it’s time to come up with a debt repayment plan…
Two of the most common ways to pay down debt are the “Debt Avalanche” method and the “Debt Snowball” method.
Note: If you consolidate your debts into one low-interest loan, you won’t need to use either method since everything will be lumped into one payment with one fixed interest rate.
Debt Stacking or Debt Avalanche is a method that’s designed to help get your debt paid off by focusing debt with the highest interest rate first.
This makes a lot of sense because interest is the main reason why getting out of debt is so difficult.
The quicker you pay off those debts, the less you will pay in interest…
You would focus on the highest interest rate debt and put as much money as you can on it first.
Once that is paid, you stack the amount to the minimum payment you are making on the next highest interest debt and so on until your debt-free.
The Debt Snowball method is where you attack the debt with the lowest balance first.
It a very popular method that Dave Ramsey of the Total Money Makeover recommends using.
You’d list your debt in order of lowest to highest balances and focus on the smallest debt first.
Once that first debt is paid, you snowball the amount you were paying into the minimum payment on the next lowest balance debt and so on.
Both these methods are good strategies but personally, I prefer the Debt Snowball method.
Although the Debt Stacking method will save you some money on interest, in the long run, you’ll see results faster with the Debt Snowball method.
Just seeing the results of having one debt paid off is so encouraging and gives you the confidence that you can actually get out of debt…
Ultimately, it’s your choice which debt repayment plan you use, there is no right or wrong method…
You just need to pick one and stick with it no matter what and you will soon start to see the light at the end of the tunnel.
Set realistic goals
Anyone serious about figuring out how to pay off debt wants to get it done and over with as soon as possible.
That’s the goal, right?
The thing is that you must set realistic and achievable goals.
It’s not realistic to set a goal to get out of $50,000 of debt in one year when you are earning $30,000 a year.
It’s best to stick with realistic goals that you know you can achieve to prevent getting overwhelmed and ultimately giving up.
Setting smaller, more manageable goals is a good way to go about it.
So instead of committing to pay off $10,000 of debt this year; set a goal to pay off $833 of your debt every month or $192 a week.
You can use this nifty little debt repayment calculator to find out if your goal is realistic.
Every week or month you reach your goal is one step closer to getting out of debt.
It is more encouraging to do it this way because you are achieving your goals with smaller wins.
Track Your Debt Payoff Progress
Tracking your progress while getting out of debt is one of the most important things you can do to stay on top of your debt payoff plan.
It’s what’s going to help you know if what you are doing is working and keep you motivated to push yourself a little further to speed up the progress.
If you need an easy way to not only track your debt payoff plan but everything else you need to stay on top off while getting out of debt, this Debt Payoff Toolkit has everything you need.
Finding More Money to Pay Off Debt Faster
At this point, you’ve done the hard work…
You’ve taken the steps to prevent more debt…
You laid the foundation to manage your money…
You’ve come up with a plan to get out of debt…
Now, it’s time to focus on finding more money to tackle your debts
There are many things you can do to find more money in your budget to pay down debts, even if you don’t have much to spare.
In time, you’ll notice your minimum payment requirements will become lower, but the key is to keep putting the same amount, or more money on debt to get it paid off quicker.
Here are a few things you can do to find more money to add to your debts…
Any time you come across any found or unexpected cash, make sure to throw it at your debt.
By found money, I mean cash gifts, work bonuses, income tax returns and any other cash that you might acquire.
I know that it’s nice to be able to treat yourself with this found money, but in the end, it’ll help you get out of debt much sooner.
Once your debt is paid, you can treat yourself. For now, getting out of debt is the reward you should be focusing on.
Change your tax withholdings
Another way to get more money to pay down debt is to change your tax bracket so less money is taken out.
Of course, you’ll end up with less of a return when you file your taxes, but it’ll make a bigger impact on your debt the sooner it goes on your balances
This will help too continually reduce the amount of interest you are charged monthly instead of once a year at tax time.
Sell what you can
Make some quick cash to pay down debt by selling stuff that you don’t need or want.
Go through every room of your home, closets, attic, garage, basement and gather up anything that you don’t need, use, or want.
Once you have everything you want to get rid of, you’ll need to consider where you are going to sell your stuff.
Of course one of the easiest and fastest ways is to have a garage or yard sale.
If that’s not an option for you, there are plenty of other places to sell your stuff. Below is a shortlist of places.
- e Bay, Craigslist, & a local flea market (any and everything)
- Facebook MarketPlace (great for large items and furniture)
- Amazon (especially textbooks)
- ThredUp, My Kids Threads, and Swap (clothing)
- Your local consignment shops (clothes, housewares, toys, small furniture)
- Gazelle (electronics such as cell phones, tablets, laptops)
- Etsy (crafts, antiques, and much more)
- Cardcash (unused gift cards)
- Sell your gold (gold jewelry)
Bonus: If you can sell something that you financed with credit cards or other means that you are still paying on, you can get rid of one debt pretty quickly!
Find cheaper alternatives
Even if you reduce your spending to the bare bones, there most likely are still some things that you can do to save money to put on your debt.
One of my favorite ways to find more money in my budget is to look for cheaper alternatives.
Why? Because you still can get what you want and/or need while saving money at the same time.
Whether you find cheaper alternatives on grocery items, small everyday expenses or bigger ticket items like cable or switching to cheaper cell phone plans, it all matters when you are trying to get out of debt and it really does add up over time.
Reduce monthly expenses
Take a good hard look at your budget and everything you currently spend money on every month.
Even if you don’t spend much on non-essentials, you may be able to reduce the amount you pay for some necessities.
Take your insurance premiums for instance. You can shop around for companies that offer better rates. You can bundle your homeowner and auto to get a discount.
Another thing you can do is review your policy to see if you actually need such a low deductible or the coverage you are paying for.
How about the cable that you aren’t willing to give up. Did you know that in many instances, you could simply call them and ask for a better rate?
Just let them know that you think you are paying too much and you are shopping around and ask if there is anything they can do.
Many times they will give you the promotional rate that they offer new customers and you’ll be locked in that rate, typically for a year.
You can even get a fire stick device that doesn’t require monthly payments and stream free shows and movies if you have an Amazon Prime account.
These are just a few examples but it’s worth looking at every expense to see if there are ways to cut the cost.
Earn more money
Lastly, you can find ways to earn more money to help pay your debt off faster.
You don’t necessarily need to get a second job, even earning an extra $50 a week would make a big difference.
That’ll be an extra $200 to put on your debt balances…
Can you put in a few hours of overtime a week?
Do you have a skill or hobby that has the potential to earn money?
Think outside the box and see if there is anything that you can do to bring in extra cash.
While we were digging our way out of over $70K of debt, I would flip items from flea markets, thrift stores, and liquidation stores and sell those items for profit on sites on Amazon which really helped.
If selling online is something you’d like to try, below are the two free resources that helped me get started.
Free flea market flipping workshop created by Rob & Melissa Stephenson who earns over $100K a year flipping flea market finds.
Free Amazon FBA starter course created by Jessica Larrew, who along with her husband has been earning a full time living selling on Amazon.
Final thoughts on getting out of debt
Getting out of debt is not easy, I’m not going to lie. And it’s even harder when you are broke as hell…
But as you can see, there are still plenty of things you can do to start moving the ball forward in the right direction.
And as long as you keep moving and doing what you can, you will start seeing progress.
You can read “How Being Debt-Free Will Change Your Life” for some motivation to get out of debt.
I hope you found this post helpful and motivating so you can tackle your debt and start living the life you deserve…