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10 Ways to Get Out of Debt

According to credit.com 80% of Americans are in debt with 44% of them having mortgage debt. Being in debt can cause one to feel overwhelmed with a sense of hopelessness; this does not have to be overwhelming. In fact, individuals with smart debt don’t even see it that way as they are building equity in appreciating assets. It is for this very reason we have comprised a list of 10 ways to get out of debt.

First lets distinguish good debt from bad debt. Good debt would be considered educated borrowing in order to receive a good return on investment. This would include loans on rental properties and/or business loans utilized to expand business operations. Good debt is debt used to purchase appreciating assets.  Bad debt otherwise known as consumer debt is used to buy depreciating assets. These are assets such as cars, vacations, clothes, etc. Since these consumer goods are rarely backed by large assets, they tend to carry much higher interest rates. The following we have determined to be 10 ways to get out of debt:

10 Ways to Get Out of Debt – List

1. To kickstart out 10 ways to get out of debt one must stop the unnecessary spending. The first step to getting out of debt is controlling your spending. If you cannot control this, then you will never get out of debt no matter how much money you make. Just ask Mike Tyson who blew through a $300 million dollar fortune and had to file for bankruptcy in 2003. A real good tool to help you track your spending is the mint app which links to your bank account and allows you to create a budget. Once the budget is created the app tracks all the spending on your debit and credit cards for you.
2. Get rid of the credit cards. If you are not disciplined enough to have a credit card, own up to it and get rid of it. DO NOT CLOSE THE CREDIT CARD. Closing a credit card will reduce your credit age and will ultimately hurt your credit score. Just about everyone will need some sort of credit sometime in their life so save it for a true emergency.
3. Pay yourself first. This goes for much more than just getting out of debt. Always pay yourself 10% of your earnings prior to paying anyone else. In the case of someone being in debt, look at your interest rates on your debt and decide if this is greater than or less than your alternative investment options. For instance, if you have a mortgage which is 4.5% but you can buy a safe bond which yields a 7% return on investment you would be losing money by paying anymore than your monthly payment on the mortgage. In contrast, if you have a mortgage of 8% but are only making 1% in a money market account at your local bank, you would likely be better suited to put any additional money you were about to put into that money market account towards paying off your mortgage as that is a guaranteed 8% return on investment.
4. Pay off the highest interest debt first. Seems simple but some people tend to pay the debt that is the most convenient rather than the debt with the highest interest rate.
5. Ask for a lower interest rate. Look at all the credit card offers you get on a monthly basis; now think of what that tells you about the competition in the credit card industry. Many individuals would be shocked by what a simple phone call to your credit card company will do by calling them and requesting a lower rate. If at first they deny you, then tell them that both of your local banks have offered to settle your credit card debt with them for you for a much lower rate.
6. Transfer your debt to a new card. There are many different credit cards which allow you to transfer your debt to the new card for free and with zero percent interest for an extended period of time. Be cognizant of the fees which you will incur. BE WARY OF THE 0% INTEREST OFFERS AS IN THE FINE PRINT MANY OF THEM ACCRUE INTEREST IF YOU DO NOT PAY THE ENTIRE BALANCE OFF WITHIN THE INITIAL GRACE PERIOD. For instance, say you transfer $10,000 worth of debt to a new card which is accompanied by 0% for the first year. In the fine print it states that if the debt is not fully paid off by the end of the first year it will have accrued interest at the going rate of 10%. So if you pay off the debt prior to day 365 you will pay just $10,000; but if the debt remains open as of day 366 then you will immediately owe $1,000 in interest and still owe the $10,000.
7. Always pay more than the minimum payments. This works both to help boost your credit score (it is recorded when you pay more than the minimum payment) and anything extra will be taken off straight from the principal balance. Without going into grave detail when a loan starts, most of your payments will go straight to interest. After some time the amount allocated towards interest and principal will begin to even out. Then towards the end of the loan period payments will be largely allocated to principal. So a excellent way to get rid of debt and future interest payments is to pay extra because any extra payments will go straight to principal which means paying no interest on that extra amount in the future.
8. Find inexpensive hobbies which you love to do. First when you find an inexpensive hobby you will genuinely be happy with what you are doing. Secondly, this will distract you from potentially spending additional money which you would have done if you were not busy with your hobby.
9. Get a side gig. Do something you like to do. If you are always at the bar become a weekend bartender. If you love animals start a dog walking business. If you love children, babysit for a couple hours on a Friday or Saturday night. If you love baseball become a peanut boy or girl and watch all the free baseball you want. If you love writing, get on Fiverr and become a freelance writer. If you love music start a band or become a DJ. 
10. Our last but probably most important of the 10 ways to get out of debt would be to set realistic goals. If you are serious about something, you should always write down what your exact goal is and what it is going to take to get there. What you write down shouldn’t just be “My goal is to get out of debt”. The type of goal I am referencing to would sound more like this. “My goal is to save 10% of my earnings to pay off my credit card debt within 8 months and my car note within 24 months”. Then that person would write how they plan on accomplishing these goals. The key here is to not be overly aggressive. We all would like to pay off our mortgage in three months but this is not very realistic for most of us. Make sure your goals are attainable with little effort just serious discipline.

10 Ways to Get Out of Debt – Conclusion

The key to make this work is a positive attitude and discipline. If you want out of debt you will get out of debt. We hope our “10 ways to get out of debt” helps. Please leave any questions or comments below. 

For additional ways to make easy money and gain your financial freedom while staying out of debt visit the Weekly Investments’ blog.