How to get out of deep debt

The average American has over $101,000 in debt. This includes all types of consumer debt, such as credit cards, mortgages, student loans, personal loans, auto loans, and more. 

That is a lot of money to owe and carry interest on. And, let’s be honest, no one wants to be saddled with debt. 

There’s a reason they call it “drowning in debt.” It can feel like your debt is crushing you and you can’t breathe. Okay, that was dark and heavy, but also true. 

Time for the positive spin—and the good news is, there is a positive spin here. Debt doesn’t have to be forever. Anyone can get out of debt and set themselves up financially again if they take the right steps. 

Below, we’ve outlined some of the necessary steps to become debt-free. It’s almost like we knew you came here looking for ways to get out of debt.

10 steps to get out of debt

Following these 10 steps can help you get to a better place financially. Bonus: you’ll probably be in a better place mentally too, as financial stress can wear us all down over time. 

So, get ready to bid farewell to money stress and say hello to becoming a financially secure adult. 

1. It’s time to do more than the minimum around here 

Time for a harsh reality. If you only make the minimum payment on your credit cards, you can probably expect to be in debt for many years. 

We get it; it can be easy to fall into this trap. The minimum payment is easy and manageable, and you always tell yourself that you'll pay more next month. But the next month comes around, you've spent all your money somehow, and you find yourself making the minimum payment again. 

It’s no secret that most credit card interest rates are high—ranging anywhere from 16%-24%. When you pay just the minimum payment, you're accruing a lot of interest on your purchases. 

It can sometimes feel like you're just taking money out of your wallet and handing it to the credit card companies for no good reason. You'll end up paying more interest and holding onto a balance for longer by just making the minimum payment. 

So, let's put a stop to this today. It doesn't matter if you have only an extra $25 or $50. Do everything you can to pay more than the minimum payment.

2. Stop running from your problems

Okay, next, it's time to face the music. 

You can't get rid of debt if you don't have a plan. If you're in deep, it can feel scary to look at all the debt you've accrued. There's almost a comfort in not knowing. But it's time to rip off that bandage and add up all your outstanding bills.

Go through all your accounts and list out how much you owe for each. This includes your mortgage, car loan, credit line, credit cards, and even money you may owe friends and family. 

Once you have that total, you'll finally know what you're up against.

3. Budget is your new favorite word

For many people, the idea of budgeting can feel like a chore. You know you have to do it, but you really don't want to. 

Luckily, budgeting doesn't have to be very hard. In fact, apps like YNAB and Mint have automated the entire process for you. You just download the app, sync your accounts, set up some goals, and the app will keep you in check. 

Remember that you shouldn't just set up the budget and forget about it. It's important to check in and make sure you're on track to spend less than you earn. 

Your budget can also tell you a lot about your spending habits and highlight some expenses you might want to cut. For example, once you see that you spend hundreds on Uber Eats every month, it can motivate you to delete the app and start cooking at home more. (Come on, that Friday night slightly soggy, lukewarm $17 order of fries isn't worth it, and you know it.)

Getting out of debt will most likely take some sacrifices. Find areas of your budget that seem to be costing you a lot and consider if you can make some adaptations. For example, it might be time for a change if your car payment, insurance, and gas are costing you a quarter of your take-home pay. Consider selling your car and becoming a one-car household or even taking transit. 

4. Choose your debt payment strategy

At this point, you know how much you owe, and you have a budgeting plan to adjust to living within your means. Now, it's time to decide how you'll tackle paying off your debts. 

There are two popular debt payoff methods to choose from: the debt snowball and the debt avalanche. 

The debt avalanche method has you list all your debts from highest interest to lowest. You make the minimum payments on all your debts, and any leftover money goes to the debt with the highest interest. The idea here is the highest interest account is costing you the most, so this is the most cost-effective way to get rid of debt. 

The debt snowball method is quite different and takes a more psychological approach. With this method, you list out your debts from smallest to largest. You make the minimum payments on all accounts and allocate all extra money to the smallest debt. 

With the debt snowball method, you get wins more often. You pay off your smallest debt quickly, feel a rush of motivation from accomplishing that, and move on to the next one. 

In comparison, the debt avalanche method may save you money, but it can feel less rewarding. For example, if your highest interest account is your $30,000 car loan, it might take a few years to pay that off. For some, that can be too discouraging to go so long without getting rid of an account. 

So, would you rather be motivated by a quick win, or is saving the most money more important to you?

5. Give that debt a makeover

Before you start taking on that massive pile of debt, take a minute to consider if you could do some maneuvering. Let us explain. 

There are some actions you can take that change your debt structure or interest rate, such as:

• Refinancing: If you have a mortgage, consider if refinancing is right for you. Refinancing can help you secure a lower interest rate or lengthen your loan timeline. If your interest rate is lowered, you can potentially save thousands on your loan. Alternatively, if you refinance to a longer-term loan, you can reduce your monthly payment, which can help you focus on paying off other debts. 

• Balance transfers: If you need fast credit card debt relief, consider a balance transfer. A balance transfer card allows you to transfer a balance from one card to another. These cards often come with a promotional period where you're charged a low interest rate or even offered a 0.00% interest rate. However, balance transfer cards usually charge a one-time fee for the transfer. 

• Loan consolidation: If you have outstanding debts with several creditors, loan consolidation might be a good idea. This process involves taking out a large loan from a lender to pay off all your existing loans. Usually, people consolidate their loans to secure a lower interest rate than the average rate across all their other loans. 

• Debt negotiation: It often surprises people to learn that they can negotiate with their lenders. Try contacting your lender and asking if you can get a lowered interest rate or a longer loan period. Additionally, if you have a little bit of savings, sometimes you can negotiate with a lender to pay less than you owe if you make one sizable lump sum payment. 

Review all these options and consider if any are right for your situation. You don't just have to take your debt as is. Create the best situation you can for yourself. 

6. Time to hustle

We've covered what you'll have to learn to spend less, but the other side of the coin is earning more. 

Find a side hustle you can spend a few hours working on in the evenings or on weekends, and make yourself a promise that everything you earn from this side hustle can go directly to your debt. The reward? Once you're debt-free, you can drop the side hustle! Or you can keep at it and split that money between your savings and a "treat yourself" account. 

7. Therapy might not be free but at least you can find free credit counseling

If you're feeling overwhelmed by it all, consider taking advantage of free credit counseling. A credit counselor helps individuals who are in significant debt by looking over their situation and outlining all the possible solutions. 

There are some credit counselors who charge a fee, but it's generally recommended you find a non-profit option. First, you probably shouldn't be spending more to get out of debt. Second, for-profit counselors won't always have your best interest in mind, especially if they benefit from you taking a specific solution (such as earning a commission from you choosing loan consolidation). 

A credit counselor can be a big help if you're feeling a bit lost and want guidance. 

8. Your credit won’t fix itself, so it's time to roll up your sleeves

Do you find yourself wondering, "How to get out of debt with bad credit?" There's a common misconception that bad credit means you're trapped, and that you can't get out of debt, you can't fix your credit, and you'll never be in a financially better situation. 

That couldn't be further from the truth. You can get rid of debt, and you can fix your credit. 

Start working on fixing your credit now. It'll help you teach excellent financial habits that will prevent you from getting into debt again. As you improve your credit score, you'll find you have more leverage with lenders to negotiate down interest rates, which can help you get rid of your debt even faster. 

9. Don’t forget to give yourself a pat on the back

Often becoming debt-free is a long journey that takes several years. Make sure you stay motivated by celebrating your wins as you go. Treat yourself to small rewards when you pay off your first $100 of debt, your first $1,000, your first account, and on and on. These small celebrations can help you keep your head in the game. 

10. Stick with it to help avoid making the same mistakes again

We'll keep this last one short and sweet. Learn from your mistakes, and don't get into debt again. Once you're debt free, don't make mistakes like forgetting about your budgeting app or letting expenses climb up again. Remind yourself how hard it was to be in debt and all the work it took to get out. 

Ready, set, go: time to pay those accounts off

It'll take some work, but being debt-free is worth it. You feel lighter and happier all around. Think we're exaggerating? Imagine buying a Starbucks latte or a last-minute flight without worrying about if your card will go through, if you can afford this, or without feeling guilty about spending the money. Wouldn't that be freeing?

Now that you know the ways to get out of debt, it's time for action. Don't wait any longer and start working on these steps today. 

A better financial future is just around the corner for you.