How Can You Get Out of Debt by Yourself?

Aug 19, 2020Debt

It is possible to get out of debt without help from others! You can get out of $85,000 debt in a short number of years if you play it smart and act accordingly. It’s not the simplest thing to do but by following these guidelines you can start!

We’re not talking about 5 or 10 years from now either. We’re talking about right now.

You CAN and WILL get out of debt

I was able to pay off over 85K in student loans, credit card debt, and an auto loan over the course of a few short years. Here are the things that I did and none of them are earth shattering. They are all things you can start doing today.

I, like most people, had bad spending habits when I was younger. On top of my student loan I paid for many things using a credit card throughout my college years and post-graduation. I was living way beyond my means and that meant accruing a sizeable amount of debt. I went on trips with friends, bought every new iPhone when it came out, and went out to eat all the time. It was a lot of fun, but it was a lot of stupidity in terms of my financial well-being. As I approach 30 it was really starting to weigh on my mind.

What if I want to start a family? What if I fall ill and can’t work? What if? What if? Getting into the cycle of “what if” because of debt is incredibly stressful. Debt is a constant blight always there in the back of your mind. I wasn’t sleeping well, I was sometimes depressed because of it, and it took up a lot of my day to day thoughts. Needless to say, it was a bit overwhelming.

But I decided to start facing this challenge had on.

My goals were simple:

  • Get entirely out of debt
  • Become financially stable.
  • Plan for my financial future.
  • Take a deep breath and reduce my stress.

And that is exactly what happened.

I can now say that I am completely debt free, excluding my mortgage which is of course technically a loan. The way I got debt free isn’t rocket science either, there is no rabbit in the hat, it was straightforward.

Here are the basic steps:

  • Determine my debt and calculate debt ratio.
  • Change my bad behaviors permanently which created the debt in the first place.
  • Earn enough income to pay off the debt over time.

That is, it in a nutshell. When I was able to do all three of these things it was just a short matter of time until my debt would be eliminated. Let’s look at each piece more carefully.

Determine Your Debt Amount

Let’s face it, not thinking about your debt isn’t going to make it go away and with interest rates what they can be on credit cards it can continue to grow even if you’re not spending any  more money. So, the first thing to do is to determine your entire debt amount and how it is broken down.  Add together everything: student loan, credit card debt, auto loan, and any other miscellaneous debt you have.

Total it and that is the amount of debt you have.

Income to Debt Ratio

When you know your total debt amount you want to compare it to the amount of money you make every year. DTI (debt to income ratio) can be determined in a number of ways. But it’s pretty easy to use a simple formula to create a ratio.

  • Let’s say you earn $40,000 a year and your debt is $20,000. Your DTI or debt ratio is 0.5
  • Let’s say you earn $50,000 and your debt is $200,000. Your DIT or debt ratio is 4.0

Now you have a ratio as a starting point and give you an idea of how much debt you have and what will be required to eliminate it.

If your debt ratio is really high like the 2nd example above, do not despair. You can get out of it, but it will take some careful planning and serious commitment. It’s much easier to get into debt than to get out of it but it’s something you can and will do!

Change Bad Spending Behaviors Which Created Your Debt in the First Place

There are lots of reasons people get into debt but a very common one for younger people is spending money they don’t have. So, take the correct steps and stop that behavior. Start cooking at home instead of ordering out every meal. Make your coffee at home instead of buying it at Starbucks. Stop buying clothes you don’t really need. And so on. But it goes beyond spending habits also.

  • Stop spending money you don’t have on things you don’t need. Your iPhone X is just fine, do you really need the iPhone 11 pro? The answer is NO.
  • If you have $40K debt for undergrad, don’t take out $90 for a PHD.
  • If you lost your job and built debt because of the fallout, get hired and eliminate your debt and prepare for something like that in the future just in case.

This is sometimes harder than people want to admit. Chang your lifestyle and habits isn’t something that is easily done overnight. But it is one of the most important factors to eliminating debt. How can you get out of debt if you keep building more and more of it? You can’t.

Breaking habits can be tough. But just like an alcoholic who starts going to AA meetings to get some help with their alcohol addiction, there are no group therapy meetings for overspending. It’s something you have to be diligent about. Start small. Like cooking at home every night, a week instead of Friday. Little steps like this make a huge difference over time. Think about it, ordering out can be $15-30 a night. Cooking at home for similar food can be $5-10 a night. That really adds up over time.

Start and keep at it.

Earn Enough Income to pay off Your Debt Over Time.

You have to have enough money to live your day to day life and also to pay down your debts. That means making enough to do both things. You can’t decide between groceries and a credit card payment every month, that is something is not sustainable.

The coin needs to be flipped. Instead of spending what you don’t have you need to be making more than you spend. So, it has to be completely flipped on its head. The faster, longer, and to greater level you can earn MORE than you spend, the faster you’ll be out of debt on your own for good.

Cutting Spending May Not Be Enough, Earning More Will Be

For people with a lot of debt, changing from eating out to cooking at home isn’t going to be enough of a change to get out from under a $100,000 student loan. Living at home with your parents may not be something you’d like to do again so that means you have to earn more. There are a number of ways to do it.

Get a part time or 2nd job. You can bar tend or work at a coffee shop or tutor on the side. Sometimes there are better job opportunities in different cities, and you may consider a move. Through adding a 2nd job, changing your career, and cutting spending you can add a good amount to your yearly income.
Playing the lottery isn’t really a game plan. So be practical. The biggest options will be changing your job for better pay or taking on a second job. If you’re debt isn’t incredibly high maybe changing your spending habits will do the trick. The point is take every step possible.

Some earning tips:

  • Sell things on eBay – old collectibles, video games, or other items can be sold on eBay. It’s a great way to clean up your apartment but also make a side income. Even a few thousand can make a big difference.
  • Work more – get a 2nd job or try to work overtime if you can. Adding another job isn’t going to be easy but it can be a good short-term solution to boosting your income.  You could start teaching English online to young students through places like Baby-sitting, dog walking, Uber and Lyft driving, are all ways to supplement your income.
  • Work better – work hard enough to get a promotion. If you can’t get a promotion look for a new better paying job. You may consider starting a small business on the side as well.

Use the Tools Available to You to Eliminate Debt

Debt Consolidation Loan

If your credit score is still intact, consolidating your debt with a debt consolidation loan could be a smart option. This variety of personal loan can be a great tool to pay off all of your credit card debt and then use the loan on a lower interest rate.

Pay the loan each month and over time you’ll be out of your current debt. Because you can get a fixed term loan over a few years there is no way to make minimum payments. You pay a fixed amount and know that if the loan term is 3 years everything will be paid off at the end of the 3 years.

That is great because it lowers your interest rates reducing what you will owe over time and provides a clear monthly goal and finish line at a set period of time. This can be a great option.

Consider Balance Transfers

Certain credit cards offer a no fee balance transfer option. This is a way you can immediately get out from a high APR interest rate credit card. You can simply move your debt from the high interest rate card over to the low interest rate card. This can save a decent amount of money over time.

This option doesn’t completely solve your debt problem, however. There can be balance transfer fees or if you still can’t make more than minimum payments, you’ll still have plenty of debt. Your credit also has to be high to get approved for a card with a lower interest rate and that means higher spending limits. So, if you haven’t truly addressed your spending habits this could be bad option that puts you into even greater debt.

Debt Management and Credit Counseling Services

There are services out there who will work with you to get your debt and finances in order. But be aware. Some of them are literally scams that will make your situation worse and despite the federal governments crack down on these predatory practices they are still out there.

  • Don’t go with an organization which has large up-front fees.
  • Be wary of big promises.

The (Nation Foundation for Credit Counseling) is a reputable non-profit credit counseling organization that works with Americans of all walks of life to get their credit debt under control. They will direct you to a local counsellor who will work with you directly. There may be a fee on a monthly basis or based on time, but it is usually very fair. is another option. Accredited Debt Relief partners with reputable debt relief companies, non-profits, and organizations who will negotiate on your behalf with your credit card companies. They will look to reduce interest rates, payment amounts, fees you owe, and more. You pay them directly on a monthly basis and they in turn pay your creditors under the new arrangement.

Get the Ball Rolling!

There is nothing more important that getting started on tackling your debt head on. No one can do it for you and winning Powerball is just pipe dream (plus if you play every week it can become costly over time).

Getting out of debt takes time and that means getting started. The longer you wait the worse it will become, just like any other problem. Things don’t get better on their own in this sort of a circumstance, so it’s up do you to take action.

In a nutshell here is what we’ve gone over:

  • Stop spending what you don’t have
  • Destroy your credit cards
  • Sell what you don’t use
  • Look for a better paying job or really go for that promotion
  • Downsize your apartment
  • Work part time
  • Use a debt consolidation loan
  • Transfer high credit card interest balances
  • Find out about credit counseling

You can do it. You just have to take the first step.

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