So, you've dug a financial hole: a guide to getting out of debt

So many of us know the feeling: that knot of anxiety when you think about your debt. I've been there myself, carrying nearly $30,000 in credit card debt about five years ago. I've also seen it firsthand with others, from my own mother's bankruptcy to friends struggling under the weight of balances that exceed their annual income. It's heartbreaking, and it's a situation far too many women find themselves in. While I wish I could wave a magic wand and erase everyone's debt, the reality is that we have to find our own way out. And that's what this is about: practical steps, even when you're juggling family responsibilities and just trying to make ends meet, because getting out of debt requires both strategy and compassion. Because climbing out of debt is possible, and there are things you can do to make the journey a little easier—getting out of debt starts with simple, realistic steps.

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The First Step in Getting Out of Debt: Communicate with Creditors

If you're struggling to make payments, contact your creditors and explain your situation. They may be willing to work with you on a payment plan or offer temporary forbearance. In some cases, you may be able to negotiate a debt settlement, where you pay a lump sum that is less than the total amount you owe. However, this can have a negative impact on your credit score, so be sure to weigh the pros and cons.

Cutting Costs Strategically: A Key Part of Getting Out of Debt

This can be a tough one, especially since many of us end up in debt due to necessary purchases, not frivolous spending. However, even small reductions can add up. Identify areas where you can realistically cut back. This might involve cutting back on entertainment, dining out, subscriptions, and even downsizing your housing or transportation if absolutely necessary. Contact your service providers (phone, internet, insurance) and try to negotiate lower rates. Every little bit helps! Plan your meals to avoid impulse purchases and reduce food waste.   

Boosting Income: Practical Paths to Getting Out of Debt

Explore opportunities to earn extra income through part-time work, freelancing, or selling items you no longer need.  I've had success selling on Amazon Seller, Poshmark, and Mercari. Consider leveraging your skills or hobbies to generate income.   Negotiate a Raise: If possible, discuss a raise with your employer. Even a small increase can make a difference over time.

Debt Management Strategies That Support Getting Out of Debt

* Debt Snowball or Avalanche: Read more about these here.

* Balance Transfer: If you have good credit, consider transferring high-interest credit card debt to a card with a 0% introductory APR. This can give you time to pay down the balance without accruing interest. Be mindful of balance transfer fees, though, as they can eat into your savings.

* Debt Consolidation: Explore consolidating your debts into a single loan with a lower interest rate. However, be cautious of fees and ensure the new loan terms are favorable. It's also important to acknowledge that if you're already struggling with a lot of debt, your credit score may be low, which could make it difficult to qualify for a consolidation loan. Banks might be hesitant to lend to someone in this situation.

* Debt Management Plan (DMP): Consider working with a non-profit credit counseling agency to create a DMP. They can negotiate lower interest rates with your creditors and help you create a manageable repayment plan. This can be a good option if you feel overwhelmed by managing multiple debts, especially if your credit score is hindering other options.

Avoiding Scams

Be wary of credit repair scams, often disguised as quick-fix solutions. While improving your credit is achievable, it requires time and effort. Avoid companies that demand upfront payment before rendering services. Legitimate credit counseling agencies typically offer free initial consultations. Never agree to any action that involves misrepresenting information, such as falsifying tax documents. If a deal sounds too good to be true, it almost certainly is. Protect yourself by thoroughly researching any credit repair service before engaging with them, and remember that there are no shortcuts to responsible credit management.

How Smart Tools and Apps Can Support Getting Out of Debt

I mentioned that I was a big fan of the app Tally. It was incredibly helpful in managing my credit card debt, keeping me clear of late fees and minimizing interest. Tally worked by first doing a soft credit check, then linking to your existing credit cards. Their algorithm would then strategically pay down your credit cards provided that you paid Really on time. One especially useful feature was that they would even advance money to cover minimum payments. All of this lowered my credit utilization and ensured I never had a late payment. The best part, Tally didn't show up on credit reports. This was because they weren't giving you a new loan; they were using their own line of credit to pay down your existing debt. Their focus was on lowering your credit utilization, which in turn helped improve your credit score indirectly. Tally's innovative approach to debt management was really useful, and I definitely wish they were still around or that a similar app has taken it's place.

Mindset and Motivation: Staying the Course When Getting Out of Debt

Getting out of debt takes time, discipline, and a willingness to make tough choices. Remember, you're not alone in this struggle. By implementing these strategies, staying focused on your goals, and celebrating small victories along the way, you can take control of your finances and build a brighter future. Don't let debt define you. You have the power to change your financial story. So, take that first step, whether it's contacting a creditor, cutting back on expenses, or exploring new income streams. Your journey to financial freedom starts now.