Dare to Be Free of the Burdens of Debt

How You Can Get out of Debt — Expert Advice

Experts talk about how to get out and stay out of debt

Cellphone in hand with message, “Plz pay me.”
Cellphone in hand with message, “Plz pay me.”
Photo by Morning Brew on Unsplash

Yet, financial experts such as Bob Haegele and Christina Roman see hope for those determined to rise from the depths and achieve better lives for themselves and their families.

Haegele, founder of The Frugal Fellow, specializes in frugal living and saving money. Roman is the consumer education and advocacy manager at Experian, a multinational consumer credit reporting company.

Together they looked at budgeting when funds are sparse, separating wants from needs, creating emergency funds and basic ways to climb out of debt.

Don’t Try to Do It All at Once

Initially, stand back and take a good look at your debt load. You can’t eliminate debt all at once. Devise a plan and stick to it.

“I attack high-interest debt first, such as personal loans and credit cards,” Haegele said. “It helps to understand where your money is going in terms of expenses. Many budgeting apps will break your spending down by category so you can see if you’re spending too much in one area.”

“I attack high-interest debt first, such as personal loans and credit cards” — Bob Haegele

Although debt can be overwhelming, Experian’s blog states that reaching financial stability is possible — it just takes a little time. A post gives five steps to consider to get on the right track with managing money.

“Everyone’s debt journey is different,” Roman said. “When I was going through mine, I realized I needed to come to terms with all my debt. I needed to see a visual of everything I owed: credit cards, car, student loans and the interest on the different types of debt.

“If you are ready to tackle debt, research different methods such as the snowball and avalanche method,” she said. “If you feel like you can’t keep up with the interest, check out the lasso method by the Debt Free Guys.”

Break Debt-Inducing Habits

Eliminating severe debt might involve lifestyle changes.

“Examine the behaviors and situations that got you into debt: impulse spending, eating out, living outside of your means,” Roman said. “Those behaviors have to go. If you went into debt for circumstances beyond your control, once you pay your debt off, consider building an emergency fund for the future.

“Examine the behaviors and situations that got you into debt: impulse spending, eating out, living outside of your means. Those behaviors have to go.” — Christina Roman

“Ultimately, you have to change those behaviors,” she said. “You have to choose a method that’s going to keep you motivated in your debt-elimination journey.”

Create a budget starting with your actual income and expenses. Then tweak where you have flexibility. Be sure to be realistic rather than aspirational. Have attainable goals.

“It may be necessary to cut most or all discretionary spending,” Haegele said. “You can ‘Marie Kondo’ your expenses by asking if they spark joy. You can also try negotiating expenses such as your utilities. If you have late fees on your credit cards, you can ask your credit card company to waive the fee this time.”

Experian states there are several approaches to making a budget. The right way to do it depends on your priorities, preferences and goals. Whether you’ve tried budgeting before or you’re completely new to the concept, their blog explains how to get started.

“When developing a budget with a tight income, make a list of your needs for basic survival: rent or mortgage, utilities, gas, food — set a realistic budget for your groceries — monthly bills and so on,” Roman said.

“Then take a look at your last two months of spending,” she said. “Can you identify spending habits that you can eliminate? Are there subscriptions you can cut out or split with a family member or friend for now?”

Be Flexible for Plan B

The results can be eye-popping.

“If you can trim your spending down to your needs, you might be surprised at what you can save,” Roman said. “However, if you cut your spending and are still struggling, you might want to consider a different living situation or find lower-cost options for your monthly bills.”

If struggling to separate needs from wants, resist letting your eyes get bigger than your wallet. Instant gratification might be how you got into debt in the first place.

“If there is an expense you’re unsure about, you can always try eliminating it for a few days or weeks,” Haegele said. “If you find that you absolutely can’t live without whatever that thing may be, you can always go back. No one is ever going to refuse your money. Remember, short-term sacrifices build a better future.”

That points to the importance of a proper mindset.

“This is where behavior examination is key,” Roman said. “Do you make purchases to lift your mood? Do you eat out when you have food at home? Do you need that purchase to survive this month? If not, it’s probably a want.

“When you walk away or close a window on an impulse purchase or a want, make a note of that,” she said. “That’s a win in your financial journey. Every win brings you one step closer to where you want to be.”

Consider Automated Solutions

Several resources or services are available to help you get out of debt.

“Some services will help you automatically lower bills or get your credit card fees waived,” Haegele said. “There are also things such as debt consolidation and refinancing. Sometimes these come with high fees, though. Be sure to read the fine print.”

To help navigate relief options available in the United States, Experian has compiled a list of financial and non-financial institutions’ websites with more information on relief measures.

“There are so many great articles and resources available online,” Roman said. “These include nonprofit credit counselors such as the National Foundation for Credit Counseling. Your bank or credit union might have someone you can talk to. Financial advisers can help you.”

The best debt repayment strategy is the one you can live with. If it seems impossible, you won’t stick with it for long.

“The best way to decide is to try different strategies and see what works for you,” Haegele said. “There is the debt snowball versus debt avalanche. There are good things about either, but some work better for some people than others.”

Experian’s blog compares these strategies so readers can decide which one is a good fit for their unique circumstances.

“Sometimes it just comes down to seeing what sticks for you,” Roman said. “It may be cost-effective to tackle debt with high interest rates, but you might find more motivation tackling your lowest debt. If you feel lost with the whole process, seek help from a professional.”

Ask First Rather than be Asked

When in danger of falling behind on bills or payments, contact creditors at the first sign of trouble. With a heads up, you might qualify for different payment options.

“Some banks will be willing to work with you if you call them to say you are having a difficult time financially — especially during crises,” Haegele said. “Ask if they have a grace period or can set up a payment plan that better suits your income.

“The worst thing you can do is look like you are hiding from or ignoring them,” he said.

When unable to make mortgage payments, Experian recommends contacting the mortgage servicer or lender.

“If you are behind on your bills, contact your lenders as soon as possible,” Roman said. “See if they have any options that may help you. Many lenders are willing to work with people during an emergency, but you have to call them.”

When struggling to make ends meet, do not struggle alone. If you could do everything on your own, you wouldn’t have gotten into deep debt. Ask agencies or lenders for help. It’s not a matter of pride but survival.

“Do you have a big car payment?” Haegele said. “For most people that is the second-biggest expense. If you can ‘downgrade’ to an older car with a lower payment, that would be a huge win.

“If you already have an older car, how much are you paying for insurance?” he said. “If your car is 10 years old, for example, you may only need liability insurance.”

According to Experian, many people turn to credit cards and loans to make ends meet during tough times. However, doing so can lead to even worse anxiety as those bills come due. The company’s blog suggests a new and improved strategy.

Ways to Boost Income

“If you are struggling to make ends meet, re-examine your cash flow,” Roman said. “Look at how much is coming in and how much is going out in your monthly spending. Are there any areas you can trim down?

“If your budget is already as slim as it can be, you may want to consider a side hustle or a second job,” she said. “I found weekend work cleaning houses, doing yard work and filing. The extra finds helped to get me to my next paycheck.”

To build an emergency fund on a tight budget, get in the habit of paying yourself first. Treat your emergency fund as your №1 expense. The difference is that you control the payment. Start small and increase as you feel comfortable.

“When building an emergency fund, make it a line item in your budget,” Roman said. “Don’t treat it as an option. Treat it as a necessity.”

During or ahead of a financial emergency, Experian recommends re-examining how you spend money, no matter whether budgeting for yourself or for a family. To squeeze the most out of budgeting for essentials, the company’s blog lists things to consider.

“There are a few different approaches you can take,” Haegele said. “There’s no such thing as saving too little. You can have a savings account automatically withdraw $5 per month from your checking, for example.

“You can also use an app that automatically rounds up your purchases — say from $4.52 to $5 — and puts the change aside,” he said. “Every bit helps.”

Saving has Priority

If you have little money, think about saving rather than investing. Invest what you can afford to lose, and at the moment you don’t have that luxury.

“The easiest way to invest is through your employer’s retirement plan,” Haegele said. “You still have to contribute your own money to the plan, but many employers will match your contributions up to a certain amount, allowing you to start investing with less.

“Many investing apps also let you buy fractional shares through electronic fund transfers,” he said.

Investing may seem like it’s only for wealthy people, but Experian states that anyone with a little extra cash can do it. The company’s blog explains how to start investing.

There are such things as side hustles to increase income, which is easier said than done during a pandemic with record unemployment. Yet, there could be a way to offer a service that others might overlook.

“Increasing your income — if possible — can be a huge win,” Haegele said. “You don’t necessarily have to get a second job, either. Is getting a raise at your current job a possibility? If so, it’s worth a shot.”

For those who cannot get a raise, his blog has many tips for increasing income.

Haegele added that larger companies often have “set in stone” salaries, but smaller companies or startups might have more leeway.

About The Author

Jim Katzaman is a manager at Largo Financial Services and worked in public affairs for the Air Force and federal government. You can connect with him on Twitter, Facebook and LinkedIn.

Disclaimer

This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.

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Jim Katzaman - Get Out of Debt

Written by

Helping Americans shave years off of debt, cut thousands of dollars in interest, increase lifestyles and save for secure #retirement. largofinancialservices.com

Financial Strategy

From financial goals to success — follow us and learn how to develop your path

Jim Katzaman - Get Out of Debt

Written by

Helping Americans shave years off of debt, cut thousands of dollars in interest, increase lifestyles and save for secure #retirement. largofinancialservices.com

Financial Strategy

From financial goals to success — follow us and learn how to develop your path

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