Updated on 04.26.16

How to Get Out of Debt Without Credit Counseling

Here are eight steps to dig your way out of debt - all on your own.

The presents have been opened and stashed away. Holiday visitors have come and gone, leaving behind memories, new traditions, and plenty to look forward to in the new year. New Year’s Day has been celebrated. Champagne bottles emptied. Resolutions made.

And now you’re ready to tackle your debts – holiday-induced and otherwise – once and for all. But, where do you start?

For a lot of people, the first step out of debt is tallying it all up. Figuring out how much you owe is crucial because, without a firm number or a “total,” it’s almost impossible to create actionable goals.

Sadly, this is where the process ends for many people. After figuring out how much they owe and to whom, they feel absolutely overwhelmed – like a deer in headlights, but with an empty wallet.

Should You Consider Credit Counseling?

If you add up your debts and find yourself in that position, you might consider turning to a third party like a credit counseling agency for help. According to the Federal Trade Commission, that isn’t the world’s worst idea, but there are some caveats.

“Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops,” writes the FTC on their website. Further, most reputable credit counselors are registered non-profits.

But that doesn’t mean all non-profits are honest, notes the FTC: “Be aware that ‘non-profit’ status doesn’t guarantee that services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, which they may hide, or urge their clients to make ‘voluntary’ contributions that can cause more debt.”

If you do opt to use a credit counseling agency, the FTC urges you to check out all firms thoroughly with the state’s Attorney General and your local consumer protection agency. Further, the United States Trustee Program lists firms that are approved to provide pre-bankruptcy counseling on their website.

Getting Out of Debt Without Third-Party Help

But, what if you don’t want a third party involved? What if you want to take the bull by the horns and solve your problem the same way you created it – on your own?

That’s perfectly reasonable, and may even be a better solution if you’re truly ready to take control. The power to get out of debt is in your hands, but only if you quit putting it off and start today.

So, put your New Year’s party hat away, put your thinking cap on instead, and buckle down. You got this. Here are eight steps that can help you get started:

1. Create a Budget

Here at The Simple Dollar, we are absolutely obsessed with budgeting. We especially love zero-sum budgeting, which forces you to “spend” — or rather, account for — every last dollar you take in each month.

The Federal Trade Commission agrees that getting on a monthly budget is your first best step to cope with debt. “The first step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend,” the FTC says.

We couldn’t agree more. If you want to get out of debt, the first thing you need to know is where your money is going. On that front, creating a budget and tracking your spending is almost the only thing that will help.

2. Contact Your Creditors

While a credit counseling agency will contact your creditors and try to negotiate on your behalf, you can do it on your own. The main goal of this strategy is to get them to work with you on a payment plan, or perhaps even lower your interest rate to make your payments easier to stomach.

“Contact your creditors immediately if you’re having trouble making ends meet. Tell them why it’s difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level,” writes the FTC.

But don’t wait until your accounts have been turned over to a debt collector, warns the FTC. “At that point, your creditors have given up on you.”

Ideally, you’ll want to call your creditors – and even your credit card issuers – to negotiate more manageable terms before you get into real financial trouble.

3. Consider a Balance Transfer

If you’re struggling with credit card debt specifically, a high interest rate may be impeding your progress. One strategy to consider is transferring your highest-interest balances to a card with a low, promotional interest rate. Balance transfer cards can help you save on interest for an introductory period of 12 months or more, which will help you pay down your debts faster, even if you continue making the same payment each month.

The Chase Slate® is our favorite balance transfer card because it offers 0% intro APR on balance transfers for a full 15 months – plus no balance transfer fees for transfers made in the first 60 days. That last point is particularly appealing, since most cards charge in the neighborhood of a 3% fee on balance transfers.

The key to making this or any other balance transfer offer work, however, is to use that introductory period to absolutely kill your debts. Since you’ll be paying a lot less interest (maybe even 0%) with a balance transfer card, you should theoretically be able to throw a lot more money toward your balances – and pay them off once and for all.

how to get out of debt? stop digging a deeper hole

If you truly want to get out of debt, you first have to stop digging yourself deeper into it. Photo: Drew Stephens

4. Cut Your Expenses

If you’re in debt and struggling to find a way out, you need to find a way to free up some additional cash. Since you can’t always earn more money, the easiest way to do this is to slash your spending. In other words, give up some stuff – at least temporarily.

This will hurt a little, but rest assured it’s supposed to. If you truly want to get out of debt, it will require some sacrifice on your part.

Figure out what you can live without – whether it’s dining out at restaurants, your cable television package, or your smartphone and data plan, then figure out a way to cancel those services and replace them with something a lot less expensive.

The money you free up can then be used to pay off debt faster – or simply catch up on bills and create some financial breathing room.

5. Try the Debt Snowball

Once you’ve tried some combination of suggestions 1-4, you’ll want to actually tackle your debts, right? One strategy to do just that is the debt snowball method, an idea made popular by Dave Ramsey many years ago.

With the debt snowball, you’ll make a list of all your debts – starting with the smallest balance at the top. Now, while making minimum payments on all the balances, allocate as much extra money as you can in your monthly budget to paying off that smallest debt.

Once you pay off the smallest debt completely — an emotional victory to keep you motivated — take whatever money you had been paying toward that bill and apply it to the second smallest balance (in addition to the minimum payment).

Rinse and repeat month after month until your smallest debts are gone and you’re just left with the big ones. The key is, as your smaller debts are blasted away, you should have more money to pay down your largest debts at a faster rate.

6. Try the Debt Avalanche Instead

If you don’t need the motivational push that small victories can provide along the way and would rather focus on the debts with the highest interest rate (and therefore pay less in interest over the long run), you’ll want to try the debt avalanche method instead.

With this strategy, you’ll want to list your debts in order once again – but your balances with the highest interest rates will go on top.

Once again, make all your minimum payments, but focus your extra efforts on the balance with the highest interest rate first. While the psychological advantage of killing small debts won’t be the same as if you had done the debt snowball, you’ll have the advantage of saving money on interest instead — which can actually help you become debt-free faster, as long as you stick to your plan.

Both methods are solid; it really is up to you to decide which will work best for your individual situation.

7. Pick Up a Side Hustle

While cutting expenses and budgeting are essential steps to getting out of debt, earning more money can speed up the process. However, you don’t have to run out and get a soul-sucking part-time job if you don’t want to. Instead, you could consider picking up a “side hustle” – or even starting a small business on the side.

Trent highlighted 50 side businesses you could start on your own, and that’s an excellent place to start. However, your best side hustle will depend on your individual talents, resources, and skill set. Here are a few other posts that might give you some ideas:

8. Stop Digging

This last step might seem obvious, but it’s often overlooked: If you truly want to get out from under your debt – with or without credit counseling – you need to stop digging deeper into it!

For most people, this step involves figuring out where their money leaks are and plugging them up – quickly! If you’re continually running up credit card balances you can’t pay off, for example, cut up the cards! If you’re constantly spending more than you earn, figure out a way to bring that to a halt.

If you want to get out of debt, you first need to stop racking up more of it. If you can’t do that, none of the other steps in this post will work, and not even a credit counseling agency will be able to help you.

Final Thoughts

While a credit counseling agency can hold your hand throughout your journey to debt freedom, you can take all the same steps on your own if you want. Either way, you’ll need a dose of self-discipline, some humility about your situation, and a sincere desire to improve your financial situation.

The first step – and the one that might be the hardest – is to just get started. It may not be easy, but hardly anything worth doing is.

Have you ever considered using credit counseling to get out of debt? Did you go through with it? Why or why not?

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