8 Strategies for Getting Out of Debt (2024)

8 Strategies for Getting Out of Debt

Getting out of debt can be hard. I know; I’ve been there. When my husband and I got married, I came to the wedding with a car loan, student loans, and a handful of nearly-maxed out credit cards. That debt that had been a nuisance as a single person suddenly felt like a huge weight now that we were “grown ups.” Since I’d quit my job to move with my husband, I had time to make paying off debt my highest priority.

Here’s how I did it.

1) Know Where You Stand

The first step is to know what debt you have. You can’t get somewhere without knowing where you are now. Get a piece of paper and write down every debt. Figure out the balance, the interest rate, and the scheduled or minimum payment each month.

This part can be a little scary or sad. Try not to get caught up in the emotions. This is where you are, it is OK, and you are going to move forward. You can do it!

2) Set SMART Goals

Image from iStock.com/fizkes

3) Prioritize Your Debt

Figure out the order in which you want to pay your debt. Two popular methods are the “snowball” method and the “avalanche” method. Or you can make a different order.

The snowball method says that you pay the debt with the smallest balance first, then pay the next largest debt. Continue until you’re done! This gives you small, fast wins that can create enthusiasm and energy for the bigger, harder debts.

The avalanche method says that you pay the debt with the highest interest rate first. The avalanche method is mathematically better, because you will pay less interest in total if you pay the debts with the highest interest first. But if your highest interest debt is large, you may get tired of making extra payments and not feeling any progress.

Most people come up with some combination of the two methods. Maybe you have one debt with a sky-high interest rate, and it absolutely needs to be paid first. Or maybe you have one or two tiny debts and you’d feel better if you had those completely paid off. There’s no right or wrong way, as long as you keep making progress.

4) Make It Visual

I like to make a chart where I can mark off the progress that I’m making. You can make a chart yourself or purchase printable charts online pretty inexpensively. Post your chart somewhere you will see it regularly, such as on the refrigerator or your bathroom mirror.

Some people like to make financial goal vision boards to focus on their goals. Or journal your journey to being debt free.

Another tactic is to put a note or picture in your wallet or wrap it around your debit or credit card. Pick a picture of your motivation for getting out of debt. Maybe that’s your baby, or the desire to buy a house, or plans to do something fun once you have no debt.

Image from iStock.com/Nattakorn Maneerat

5) Stop Adding To Your Debt

A vital step in getting out of debt is not adding to your current debt. Many people find this easier if they use cash for a period of time. If you prefer to use debit or credit, limit your options. Don’t carry a wallet full of cards. Remove your cards from any online accounts that make it easy to make quick purchases. Designate one card for current use and track that use carefully.

Closing credit cards is effective, but may temporarily lower your credit score. In most situations, that’s OK, but it could be a problem if you are getting ready for a PCS move, your score is already low, or you have other considerations.

An old-but-good tactic is to freeze your credit cards in a bowl of water. This won’t prevent you from buying online if your account numbers are saved, but it may slow down in-person purchases or purchases through new retailers.

6) Find or Make Extra Money

You can get out of debt faster by finding ways to make extra money. Maybe you or your spouse can pick up a part-time job, or you can sell things you don’t need.

During my husband’s first deployment, I worked two nearly-full-time jobs. We lived off his paycheck and my paychecks were used to pay off debt.

Another tactic is to look at your spending plan and identify areas that you could eliminate or reduce for just a few months. For example, could you stop eating out for one or two months? Or could you reduce your grocery bill by 10% for four months? Knowing that cutting back isn’t permanent can make it a lot easier to do.

Understand how much effect BAH has on your home buying budget and priorities. See our article, Understanding Your BAH.

Image from iStock.com/YakobchukOlena

7) Pay As Often As You Can

You don’t have to wait and make payments once a month. You can almost always pay towards credit cards and loans more often. Check with the debt servicer to be sure. This is particularly useful if you get paid every week or every two weeks.

8) Celebrate!

Thinking of buying a home? Learn what you should do about your financial situation before taking the plunge.