Getting out of debt may seem daunting, especially if you have accumulated substantial credit card, auto loan, or student loan debts over the years. However, with some strategic planning and discipline, it is possible to become debt-free within a year. Here are 7 practical tips to help you get out of debt fast:
1. Make a Detailed List of All Your Debts
The first step is to make a list of all your debts, including the outstanding balance, minimum monthly payment, and interest rate for each one. This gives you a bird’s eye view of your total debt burden so you know exactly what you are dealing with. List your debts from smallest balance to largest balance for the debt snowball method.
2. Cut Your Expenses to Free Up More Cash
To pay off debt quickly, you need to free up as much cash as possible each month Analyze your monthly spending and look for areas where you can trim fat For instance, you can save money by cooking at home instead of eating out, renegotiating your cable and internet bills, or canceling unused subscriptions. Even small savings of $5 to $20 per month add up.
3. Increase Your Income With a Side Hustle
Consider taking on a side gig or freelance work to supplement your regular income. The extra money generated can be thrown directly at your debt. Depending on your skills you can work as a rideshare driver tutor students, walk dogs, or do handyman jobs on weekends. Every little bit counts.
4. Sell Unused Items for Quick Cash
Get rid of the electronics, appliances, furniture, clothes, and other things that are just sitting around in your home gathering dust. You can get quick cash by selling things online or at a garage sale, which you can use to pay off your debt. Extra tip: To get the most money, sell things on consignment.
5. Change Habits That Enable Debt
If you want to get out of debt, you have to address the root habits that cause you to overspend. For instance, you may need to cut up credit cards that tempt you to buy stuff you don’t need. Or you may need to unsubscribe from promotional emails from your favorite shops. Changing spending habits is key.
6. Adopt the Debt Snowball Method
The debt snowball method is the most effective way to become debt free fast. You pay minimums on all debts except the one with the smallest balance. Attack that small debt with a vengeance until you knock it out. Then roll the amount you were paying on that debt into the next smallest debt. Repeat until all debts are gone.
7. Seek Help from a Non-Profit Credit Counselor
If you are struggling with debt, meet with a non-profit credit counseling agency. They can help analyze your budget, identify savings opportunities, and set up a debt management plan. This free assistance can help you structure your debt payoff.
The key is sticking to your debt freedom plan through sheer determination, sacrifice, and most of all – hope. With diligence and commitment, you can realistically get out of debt within 12 months or less. The prize of becoming debt-free is well worth the short-term effort and lifestyle changes required.
Changing how we viewed our debt was a crucial first step to becoming debt free
It would have been easy to let the feelings of shame and embarrassment continue to control how we felt about our debt. We couldâve given in to those feelings as weâd been doing and as a lot of people do, but instead we decided to do something different.
Bear with me, as I know this is going to sound weird, but we started to think of becoming debt free like playing the original Donkey Kong video game:
- We were Mario, with a difficult path ahead of us
- The barrels, oil, and fire were our current debt hurdles (credit cards, loans, etc)
- Donkey Kong was consumerism trying to keep us in debt
- Saving the princess was financial freedom!
This Donkey Kong metaphor may sound completely bizarre to you, but it really helped us shift how we thought about our debt. It went from a dark cloud that loomed over our heads, to a silly game we could try to beat. With each ladder we climbed and every barrel we jumped over, weâd be getting that much closer to rescuing the princess (AKA gaining financial freedom).
Whether you want to buy into our Donkey Kong metaphor or not, maybe thereâs a way you can reframe how you think about your debt? The most important thing at this point is to draw your line in the sand and to tell yourself: I WILL GET OUT OF MY DEBT!
TIP: A great thing to help draw your line in the sand is to have someone hide your credit cards so you canât have access to them. Or just cut them up. Start using a debit card or cash only.
Itâs Time To Look At Every Dollar You Spend (And Find Hidden Money)
Have you ever logged into your online banking or your credit card company, only to realize itâs kind of a pain in the ass to figure out how much money youâre actually spending? Sure, you can see your expenses in a vertical list with a total balance (usually always decreasing, ugh!), but banks and credit card companies donât try to help you see where you can save money or cut costs.
Itâs time for you to take control of all your expenses, and get a firm grip on every dollar you spend and make.
Thereâs a simple exercise that my wife and I did that opened up our eyes to our spending: We exported the last three months of activity on our bank accounts and credit cards, put them in ONE spreadsheet, and did our best to organize them by spending category (separated by month).
How To Be Debt Free in ONE Year or LESS
FAQ
How do I get a debt-free life?
Pursuing a debt-free life can be a long process, depending on where you are starting. Paying off a few debts early on can really get you excited to keep going. Action Item: Choose whichever method sounds best for you, then organize your debts in that order. After, you’re ready to start making payments.
How can I get free from debt?
Set up automatic transfers from your bank account to your credit card to make payments on time. If you want to get out of debt, try these tools and methods. When you have a lot of debts or credit cards to pay off at once, use a calendar or set up automatic reminders to keep track of when payments are due.
Can you get free from debt in a year?
Depending on how much you owe and how much you can pay, you could be free from that debt morass in a year or less. While this won’t work for everyone because everyone’s circumstances are different, some people may be able to get debt-free through careful planning. You’re not alone if you find yourself mired in debt.
How do I get Out of debt?
Getting out of debt can save you money, boost your credit score, set you up for success and release financial stress. Here is a list of the steps to pay off debt. USA TODAY Blueprint may earn a commission from this advertiser. 1. Avoid accruing more debt The first step toward getting out of debt is to avoid getting into more debt.
How can I pay off debt faster?
Cutting your APR can help you pay off debt faster. However, be sure to read the fine print. Be aware of any balance transfer fees, and make sure you pay off your balance before the end of the introductory rate period. 5. Consider a Debt Consolidation Loan.
What does it mean to be debt free?
Commit to the process and the journey of remaining free of debt and enjoy the freedom that it brings. Being debt free doesn’t mean living like a miser.
How to become debt free in 1 year?
Here are the steps you can take to shed debt in a year, no matter what type of debt you choose to tackle. Assess and Prioritize Your Debt. Create a Budget. Choose a Debt Repayment Plan. Cut Down on Spending. Increase Your Income. Consider Alternative Options for Paying Off Debt.
How much bad debt can you write off in a year?
If you have a bad debt, you can deduct up to $3,000 from your short-term and long-term capital gains and other income in the year it stops being worth anything. Any remaining balance can be carried over to subsequent years.
How to pay off $5000 in debt in 1 year?
Is $6000 credit card debt a lot?
The average American household has over $6,000 in credit card debt, which can be a challenging amount to manage. If you’re just making minimum payments, expect to stay in credit card debt for many years – about 25 years on $6,000, by our calculations.