Getting out of debt can feel like an impossible task. But it’s not. With the right information, guidance, and support, you can get out of debt faster than you think. The trick is knowing where to start. You might be surprised to learn that debt isn’t always bad—in fact, it can be helpful when used correctly. You just need to make sure that your debts are manageable and affordable so they don’t keep piling up on top of each other like a house of cards ready to collapse at any moment (which happens more often than you’d think). In this guide we’ll walk through what getting into debt looks like and how you can use these tips to get back on track with your finances!
When you’re in debt, it can feel like you’re never going to get out.
When you’re in debt, it can feel like you’re never going to get out. You might have the same thought I did: “I’ll never be able to pay off all this debt. I will always have debt.” The stress of living like this is intense, and as a result, so is the sense of being trapped—a feeling that’s only exacerbated by financial challenges such as low or unstable income and unemployment.
If your debt is causing stress and negatively affecting your life in other ways (for example, by limiting what you can do), then something has to change. Here are some ways to help:
- Get back on track with budgeting
- Start saving for the future
Your debt-to-income ratio will tell you how much of your income goes toward paying off your debts.
Your debt-to-income ratio is a way to measure your financial health. It’s the percentage of your income that goes toward paying off all of your debts. The debt-to-income ratio is calculated by dividing a list of outstanding debts by total household income. For example, if you have $20,000 in credit card debt—and annual household income is $50,000—your debt-to-income ratio would be 40 percent (20 / 50).
The higher the number on this scale, the more at risk you are for experiencing financial trouble down the road. If your ratio is too high (e.g., above 40 percent), it may mean that you can’t afford to take on any new loans or repay existing ones without getting deeper into trouble with debt collectors and creditors who want their money back immediately!
Understand the way that debt works and how it fits into your life.
The first step toward getting yourself out of debt is to understand how debt works in your life. Debt isn’t a bad thing, and it doesn’t always have to be bad for you. It can actually be a great tool for optimizing your finances and helping you achieve the things that are important to you. For example, if buying a house is something you want in the next few years, taking on some mortgage debt could be an excellent way to get there faster—assuming that the value of what’s being purchased outweighs the cost of borrowing money at interest rates higher than those available through other investments.
However, there are times when taking on too much debt isn’t wise at all; this usually happens when people don’t understand or respect their own limitations with regard to paying off loans over time (e.g., credit card balances). If this sounds like something that describes your own situation right now then please keep reading!
Know what happens if you don’t pay your bills on time.
You may think that if you skip a payment or two, it won’t matter. But if you don’t pay your bills on time, there are consequences. You could lose your credit score and find it hard to get loans in the future. Your creditor can also sue you for payment and send the case to collections if they decide not to pursue legal action themselves. These actions can make it difficult for you to get approved for new credit cards or loans in the future because they’ll lower your credit score even further.
There are many options for paying off debt and saving money, but not all of them work for everyone.
There are many options for paying off debt and saving money, but not all of them work for everyone. You can pay off debt in a variety of ways, including:
- paying off your credit card with another credit card
- using a cash back rewards credit card to save money on everyday purchases like groceries
- taking out a personal loan or line of credit to pay down your debt faster (but this can be risky if you’re carrying too much debt)
If you need help deciding how you want to pay your debts, consider getting advice from an expert at CCDR.
If you’re struggling with debt, try these tips.
If you’re in trouble with your debt load, try these tips:
- Pay off the debt with the lowest balance first and roll that payment toward the next largest the following month.
- Make a budget and stick to it. If you don’t know where your money is going, you might be surprised by how much of it is going toward unnecessary spending—like those daily coffee runs or weekly happy hour outings that seem harmless but really add up over time.
With enough knowledge and support, getting out of debt can be less scary than it seems at first.
If you’re feeling overwhelmed by the idea of getting out of debt, don’t worry. With enough knowledge and support, getting out of debt can be less scary than it seems at first.
- You can do it yourself: If you have a basic understanding of how to manage money and create a budget, then self-management might be an option for your situation.
- You can get help from a professional at CCDR: A professional can help set up an action plan and provide guidance along the way as well as assist with difficult decisions or unexpected challenges along the way. While this type of assistance is often more expensive than self-help options, having someone else involved who understands what needs to happen may feel more reassuring during times when things seem overwhelming (and they will!).