How 4 Average Americans Finally Got Out of Debt for Good
Getting out of debt can be a daunting task. Student loans, credit cards, and unexpected expenses can significantly derail your plans. Having a large debt load can impact your finances by lowering your credit score or prevent you from making an important purchase, such as a home. The bigger your debt, the more difficult it can be to move forward with your financial goals. You may even find yourself dipping into your emergency savings fund or relying heavily on credit cards to bridge financial gaps.
Once debt becomes a problem, it can become almost impossible to dig yourself out of it. Out-of-control debt can make you feel hopeless, and cause you to start feeling bad about yourself. Some consumers become so disheartened by their financial state that they sink into a deep depression.
Unfortunately, debt plagues most American households. The most common type of debt is from credit card purchases. The average household with credit card debt has balances totaling roughly $16,061, according to a Nerd Wallet study. Furthermore, households with any kind of debt owe about $132,000 overall (that’s including mortgage debt).
If you’re drowning in debt, you might start to feel like you’ll never pull yourself out. However, it is possible to overcome these circumstances. The Cheat Sheet spoke with four individuals who managed to conquer debt, despite making a middle class or entry-level salary. Read on to learn more about how these financial warriors finally got out of debt.
How I paid off my debt: Selling old items
My husband and I paid our debt off last year. I’m a stay-at-home-mom and writer. My husband owns a furniture repair business. We had $86,000 in car payments that accumulated after my husband’s business was dramatically affected by the recession of 2008. He could no longer sustain his operation costs and had to downsize. (Thankfully, the business is now thriving.) My husband had prior judgments and car payments as well as a few credit cards.
We paid off the debt by selling things on Craigslist and eBay. Creating and staying on a budget, having two yard sales, and squirreling away every extra dollar on the debt. I also ramped up my online earnings by writing an ebook that became an Amazon bestseller.
It took us five years to pay off the debt. We would have been able to pay it off more quickly, but we added three children to our family (for a total of seven kids) during that time!
Get angry. Use that energy to fuel you. Don’t be discouraged, because you’ll still have the debt if you do nothing. However, in the future you will be pleased that you took action and paid it off. A few years down the road you’ll be out of debt and probably earning more money too (this certainly happened to us).
Carrie Willard, author and frugality expert
Next: Paying off $30,000 in 12 months.
How I paid off my debt: Budgeting
I paid off $30,000 in student loans in 12 months making $48,000 a year as an entry level management trainee. In order to pay off my debt, the first thing I did was set financial goals. Then I created a budget. After that, I reminded myself of my financial goals daily. I put together a guide that goes more in depth here.
The advice I would give to others is to set goals, have a budget, and do it! If you want something bad enough you will find a way. If not, you will find an excuse.
Philip Risher, founder of Young Adult Survival Guide
Next: Credit cards may even help you, but you still have to be careful.
How I paid off my debt: Cutting costs
I graduated from Barnard College in 2013 and paid off all my student loans ($19,000) within 13 months of starting repayment. While I was repaying my student loan debt I worked in startup marketing, as well as a retail boutique on the weekends (making anywhere from $10 in retail to $22 per hour in marketing during repayment).
Cut costs wherever possible (for example, I lived with my parents during repayment). I would also tell others in my situation to find ways to create multiple streams of income. In addition, pay off highest interest debt first so that you can minimize interest payments. Finally, use 0% interest credit cards strategically to cover expenses, but only if you can pay it all off before the interest kicks in.
Angelica Valentine, marketing manager at Staffjoy
How I paid off my debt: Starting a business
I’m a work-from-home mom. I had $100,000 in debt, which was comprised of a home equity loan, credit cards, car loans, and other small debts. I racked up this large debt by rehabbing a rental house, buying two new cars, putting small things on credit cards, and buying a new television — everyday things that added up over time.
I paid off the debt by using additional income from a home-based business to tackle one debt at a time. I then paid more than the minimum one debt at a time until it was gone. Then I moved to the next debt. This took me about one year.
Know exactly how much debt you have and then find a way to bring in additional income. Instead of trying to cut back on other things to save and then pay off debt, begin asking yourself, “How can I bring more income into our home specifically to pay down debt?” Paying off debt is not exactly exciting and motivating. One must be focused and have a reason why it needs to be paid off. What is your reward at the end of paying it off? If you don’t have a reason or a reward, it’s very difficult to stay motivated and focused.
Holly Evans, founder of Vitality Coaching Solutions, LLC
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