DYI Guide on How to Get Out of Debt in Six Proven Ways

Free Financial Advice Guide on How to Get Out of Debt
If you are struggling with debt, the best you can do is to make a payment plan and stick with it. While this is easier said than done, it is possible with the right mindset and techniques.

Debt payment requires psychological commitment as it does financial discipline. Several studies show that emotional preparedness is the number one determinant of successful debt payment.

Understand Your Debt Situation

You cannot have a clear debt payment plan if you do not have the full picture of your debt position and the available options.

Remember that if you shop around patiently, you are likely to find solutions to almost anything including how to get out of debt with no money and bad credit. The most important thing is that you have a clear understanding of your position and you are open-minded to explore different solutions.

Cut out Spending on Things That do Not Matter

Once you are aware of your debt position, it is time to make the extra financial effort needed to clear off debt quickly. The first thing to do is to sit down and evaluate your spending habits and how they impact the quality of your life. The goal here is to identify and cut mercilessly on things that you can live comfortably without and commit more money to debt payment.

Pay more attention to spending habits that emanate from the need to gain recognition and acceptance from peers and work towards overcoming them. For instance, if you are living in an expensive suburb to keep up with the Joneses, it is time to reconsider that decision.

Keep a Journal

First, list down all your debts and factors that influence payments such as your credit score, monthly income, and budget. Explore debt management alternatives such as debt consolidation and debt management plan and shop around for deals that match your credit profile and financial position. Use a debt calculator to compare different offers.

Keep a journal to help you focus on your debt problem and keep reminding yourself of the end goal. When the going gets tough, talk to someone close or practice writing therapy to refocus your thoughts.

One way to stay motivated is to keep tabs on your debt payment progress. There are many tools out there to help you track progress. We also recommend that you keep a journal to reflect on your debt payment experience. As mentioned earlier, set debt payment targets and celebrate every time you achieve a milestone.

Use Simple Debt Repayment Strategies to Pay Off Debts

If you have multiple debts, some with high interest than others, most traditional financial advisors will tell you to clear off the expensive debt first. Logically speaking, this advice makes a lot of sense.

Debt Snowball

Tip Paying off high-interest debt first reduces the overall cost of debt.

But when it comes practically paying off the debt, the most logical idea is not always the best. Studies show that people who pay off their small loans first have a high likelihood of carrying out their debt payment plan to the end. Paying off small debts first motivates you and instills the discipline required to pay more substantial debts.

Debt Avalanche

Starting with more substantial debts, on the other hand, is likely to wear you out. Again, if you are looking for a strategy on how to get out of debt, starting with small debts will give you the time build on your savings to be able to manage more significant debts.

Tip We recommend that you break your debt payment plan into small goals and celebrate every time you achieve a milestone.

Find a Personal Accountability Coach

Do not fight the debt battle alone. Get someone close walk with you through the debt payment journey. Involve them in your debt management plan and hold yourself accountable to them on each debt management goal. If possible, the personal accountability coach should be someone who has been through the same level of debt under the same conditions and managed to pay off. You can also collaborate and hold each other accountable with a person who is going through the same level of debt as you.

According to Frugal Rules, a personal accountability coach helps you stay motivated and stay on track. They also provide an objective opinion about your debt payment plan and support and encouragement when the going gets tough. Remember that commitment to pay off debt requires behavioral changes that can be emotionally draining. A personal accountability coach should be there to provide empathy and understanding when you need it.

Visualize a Debt-Free Life

By visualizing a debt-free life, you can define your goals clearly and have a better chance of success. Think of the stress-free life you will live once you pay off all your debts. Make a list of the great things you intend to achieve once the debt burden is off your shoulders. Remind yourself of the end goal often, preferably every morning before you start your day.

Visualization is known to stimulate creative subconscious and increase creativity. Through visualization, you are likely to come up with new ideas on how to tackle your debt quickly. You are also expected to feel motivated to keep on paying the debt even when you are financially strained.

Getting out of debt requires psychological as well as financial preparedness. While the above tips will help you achieve the right mindset to tackle debt, you need to research on debt management strategies that fit your situation. For instance, you can take debt consolidation for good credit or bad credit if there are great offers out there. You can browse through our website for helpful materials on debt management.


Works Cited

1 Dave Ramsey “25 Ways to Get Out of Debt” https://www.daveramsey.com/blog/ways-to-get-out-of-debt/

2 AICPA.org “New Survey Finds Relationship Tension and Anxiety are Hidden Costs of Debt” https://www.aicpa.org/press/pressreleases/2017/relationship-tension-and-anxiety-are-hidden-costs-of-debt.html

4 Journal of Marketing Research “Paying Off Small Debts First May Get You in the Black Quicker” https://www.ama.org/publications/JournalOfMarketingResearch/Documents/brown-debt-jmr-14-0281.pdf

5 Business Insider “The 5 most common lies I see in my debt management practice are simple, but damaging” https://www.businessinsider.com/the-5-most-common-lies-i-see-in-my-debt-management-practice-are-simple-but-damaging-2015-2?IR=T

6 U.S.News “12 Mind Tricks to Psych Yourself Out of Debt” https://money.usnews.com/money/personal-finance/debt/articles/2017-12-20/12-mind-tricks-to-psych-yourself-out-of-debt

7 Nerdwallet “How to Get Out of Debt: 7 Tips That Work” https://www.nerdwallet.com/blog/finance/7-tips-for-paying-off-debt-from-people-who-did-it/