Get Out Of Debt: The Ultimate Guide To Getting Out Of Debt Fast, Even If You're Broke

In this article, you will learn how to get out of debt fast, even if you're not rich. Though overall, America's debt is down, one thing that's not down is the number of people that have debt. The Federal Reserve Bank of New York found that, of the total number of households in America, 16.6% had debt. And not only that, but Blacks have the highest levels of debt. The median amount of debt per Black family was $25,704 in 2017. Most struggle to pay back debt. The average person spends on average, $7,361 a year to make their payments. And with interest, that can amount to quite a hefty bill. Getting out of debt and getting ahead might seem like impossible tasks. Following these steps will help you get out of debt fast, even if you're broke.

Pay Off Credit Cards With Snowball Strategy

The first step to debt freedom is to pay off your credit cards. Paying off credit card debt means that your credit score will go up and when your credit score increases, it means you're able to get new loans for a lot less money. Since you're not going to be charged as much interest, you'll be able to pay off your debt quickly. The fastest way to pay off credit card debt is by using the snowball method. With the snowball method, you pay off the more significant debts first since they are the ones that can add up the most interest. You make the minimum payments on all your other credit cards until the most significant debt is completely paid off. The key to this strategy is to stop using credit cards for new purchases until you pay all your cards to a zero balance. What's the point of trying to get out of debt if you keep adding new debt?

Stop Spending On Designer Items and Sell Them Instead

This one is going to hurt a little. Too many broke people spend too much money trying to look good in front of others. This is called peacocking. Studies show that 40% of America's lowest-income families' consumption goes on luxuries. If you bought designer handbags and Louis Vuitton shoes in the last year, you would have racked up a sizeable debt. There are several ways to replace that designer handbag or pair of sneakers. But if you can't just up and replace your designer items, you need to stop using them. You may think that this sounds easy, but it's not. It is tough. You need to take the leap and stop using your stuff. You can do this by selling it online or in a yard sale. Don't be scared to let your stuff go if it's in good condition. You can use your proceeds to pay off your credit card debts. You look great without the designer, and you will feel better having more money in the bank and less debt.   

Budgeting and Creating a Plan

Most people shrug with indifference or respond with a bit of stank lip at the mere mention of broke people budgeting. It is true that generally, people of color have more of an income issue than a budgeting issue, but that does not mean they should forfeit budgeting. Getting out of debt is not about how much money you make. Most people can get out of debt if they decide to get serious about it. To get out of debt, you must create a plan. "Financial literacy is key," says Adrienne Spector, CFP, a private wealth adviser and president of Spector Wealth Strategies. If you don't know how much is in your checking account, you can't manage your finances. It doesn't get any more complicated than that. You must make a budget that includes a down payment for your next house. If you want to save money, you must learn to shop with a price tag and stick to a budget. You must create a budget for giving to your church or buying gifts for family and friends. You can also look at your expenses and look for areas where you can save money. The more you save, the more you will be able to pay off your debt faster and hopefully pay down the debt faster than you ever thought possible. 

Most financial trouble begins when people spend outside of their financial means. These are usually the same people who find no value in budgeting. My thoughts and prayers are to those who refuse to budget and expect to get out of debt fast.

Use Debt Consolidation

According to the nonprofit trade association the Alliance for Financial Literacy, most people who get out of debt use debt consolidation. For this reason, one of the best ways to get out of debt is to consolidate debt. Here's how it works: The borrower can apply for a loan with new, lower monthly payments and get a lump sum back in exchange for the old loan, making the monthly payments much more manageable. For example, let's say that a borrower has $5,000 in credit card debt and $2,500 in car payments, and they want to consolidate the debt. To do this, they must have at least $5,000 of combined debt to qualify. You can use a company like Tally or Payoff to do this for you.

Credit card consolidation is a great way to pay off your credit card debt by combining multiple credit card debts into one low monthly payment. Sometimes this can be very helpful, especially if you're struggling with high-interest rates on different credit cards and want to get your debts under control. However, there are a few things to consider before using debt consolidation. Make sure you don't have any significant medical bills or other big expenses in your budget that you cannot pay off. A low monthly payment could put you in a hole. If you have a lot of things like this in your budget, then debt consolidation might not be the answer for you.

Create Side Hustle Income to Pay off Debts

Like I mentioned earlier, it's possible to get out of debt even if you're broke. You need to hustle for the extra income, and you can get side hustle income from many different sources. First, you can become an independent contractor. That means you are not tied to one job, and you don't have to work for someone else. Also, you can go on eBay and sell used items, which would be another source of income. You can even create a blog to advertise your products or services. These are just a few of the ways that you can get a side hustle income to pay off your debts. You must dedicate all your side hustle income exclusively to paying off your debts. By doing it this way, you learn new fiscal discipline, and once your debts are paid off, you'll need a lot more cash on hand to build up your savings from side hustles. Too many people make more money to spend more money. Stop trying to impress others and hustle, so you have, versus hustling, so you show.

Negotiating Better Terms With Your Creditor

Yes, it is possible to get a better deal on your credit cards. If you are willing to call and complain, you can probably get some leniency. Call the card company and ask them what you can do to settle your debt or lower your interest. Be firm and honest. It's important to realize that getting to the bottom of the debt will be challenging, and you will not be able to pay off your balance overnight. However, if you can get them to negotiate with you, you will have a much better chance of reaching an agreement. You may need to write an email to the creditor outlining the steps you have taken to pay off your debt.

Conclusion

In this article, I've discussed some of the best ways to get out of debt if you're broke. However, you should know that it's not going to be easy to get out of debt if you're broke, but it's also not impossible. I filed for bankruptcy at 21, but through faith in God and hard work, I became a millionaire by 33. You can find your path out of debt, but it begins with taking the most challenging step – the first one.

Sources:  

“El Chapo” Shirts Are Flying Off the Shelves at $128 (and Reselling for More) (moneytalksnews.com)

The Worst and Best Ways to Destroy Debt (moneytalksnews.com)

Resolutions 2013: Getting Rid of Debt (moneytalksnews.com)

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