“How to Get Out of Debt: Proven Methods from Financial Planners”

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Track Your Spending

Starting a budget is crucial for paying off debt quickly. A budget outlines how you’ll allocate funds for spending, saving, and debt repayment. However, Kassi Fetters from Artica Financial Services warns that many people fail to track their spending, which can derail their efforts.

“Many families forget an important step to a successful budget—feedback,” Fetters says. To ensure your budget is effective, you need to monitor your actual spending against your planned spending.

For instance, if you plan to spend $250 dining out in a month, you need to track your actual spending to see if you stayed within your limits. “Use a spending tracker where you can categorize your spending each time you make a transaction,” Fetters suggests. She recommends researching budgeting apps to find one that suits your household.

Set Debt Priorities

There are two main strategies for prioritizing debt repayment: the debt snowball method and the debt avalanche method.

The debt snowball method involves paying off your debts in order of size, starting with the smallest balance. Make minimum payments on other debts and allocate any extra funds to the smallest debt. Once that debt is paid off, move on to the next smallest.

The debt avalanche method focuses on paying off debts with the highest interest rates first. Joseph Carpenito from Materetsky Financial Group RIA notes that both methods have their advantages. “The avalanche method may save you more money in the long run, but the debt snowball method can be really motivating and give you a sense of accomplishment as you pay off smaller debts first,” he says. Choose the method that keeps you motivated.

Balance Saving and Debt Repayment

Balancing debt repayment with saving is key to long-term financial stability. Gabriel Lalonde from MDL Financial Group advises setting aside at least three to six months’ worth of essential expenses for emergencies.

“It can help you avoid taking on more debt in case of an unexpected expense or emergency,” he says. “Plus, having some savings can help you feel more financially secure and reduce your stress levels.”

Nick Loeffelman from Citrine Capital adds that you should also check if your employer offers a 401(k) match. “If so, take advantage of this by contributing up to the matching limit,” he says. Beyond that, focus on paying off high-interest debts first for the best returns on your effort.

Live Like a College Student

Kassi Fetters shares a unique strategy from her experience: live like a college student. “When my husband and I got married over 10 years ago, we had $49,000 in debt,” she explains. They paid it off within a year by being strict with spending and downgrading their cars.

“No eating out, no travel, and a lot of free outdoor activities,” she says. Her advice: be prepared to make temporary radical changes to your budget. “Anyone can live like a college kid again for a couple of years.”

Consider Consolidation

If you have good credit, you might qualify for a debt consolidation loan. Consolidating your debt means combining multiple balances into one new loan, ideally with a lower interest rate.

Joseph Carpenito suggests considering consolidation if you’re juggling multiple balances. “It can help you simplify your finances and reduce your overall interest rates,” he says. However, he cautions that consolidation may not be the best solution for everyone.

Talk to Your Creditors

If you’re deeply in debt, consider talking to your creditors to see if they offer a hardship plan. “Communicate with your creditors and be honest about your financial situation,” Carpenito advises. Many creditors are willing to work with you to find a repayment plan.

A credit card hardship program may include deferred payments, temporary reductions in interest, and reduced fees. While not all lenders offer hardship plans, it’s worth checking with your lender or credit card issuer if you’re struggling to make payments.

The Bottom Line

Getting out of debt isn’t easy, but there are resources available to help. Consider reaching out to a nonprofit credit counselor for free or low-cost assistance with budgeting or a debt management plan. For long-term financial planning, consult a financial planner to help you manage your debt, save, and invest for a secure future.

Additionally, start monitoring your credit for free through Experian. Free credit monitoring alerts you to changes in your credit report and score, helping you stay informed about your creditworthiness and make improvements to increase your score faster.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you achieve financial stability and secure your future.

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