How to actually get out of debt | Stop being broke
Seeing an overdue credit card statement can make you sick to your stomach. Seeing a bank account dwindle to single double digits, even single digit numbers will feel like a gut punch. Having more money LEAVE your bank account than what comes IN will cause you to panic. Debt can sneak up on any of us. We conform to our salaries and what we make, and we mold our lives around that type of income. When we get promoted, so does our daily lives. However, debt can hit you like a truck if you don’t manage it correctly. Some viewers may be struggling to pay off loans, credit cards, car payments, or mortgages. On the business side, it’s true that leveraging debt can bring forth greater profits if done correctly. However, in our personal lives, the debt we have directly effects our financial living and our mental health. The truth is you NEED to properly handle debt, and its not easy. Digging yourself out of that hole takes a lot of commitment. The easiest preventive measure is to not place yourself in a position where you are extremely over leveraged in debt payments. There will be warnings signs prior to this, so dont miss them because the end result is more than just a negative impact on your finances, it’s also a negative impact on your mental health. Let’s dive in to some details.
The Debt Trap and Its Catalysts
Managing debt is more than just paying off your expenses. It’s actually understanding how you get into a position of debt. Let’s break this down and say that you get a 0% interest credit card so you can purchase a sofa. The bank approves you for $5,000 at 18 months interest and of course, you decide to get the best living room set. That’s $278 a month. Now, you have your awesome new sofa, BUT. You can’t have a brand new therapeutic, boogie, luxurious sofa and a vizio TV can you?! Of course not. Let’s talk to best buy. Best buy says, hey! I have 18 months interest free also! And i’ll give you 7,000! Oh my god. Well. Let’s get the most expensive tv they have, maybe update my fridge that i didnt need to update, OR like me, you buy an extra freezer that sits in your garage with a couple slabs of meet every once in a while. You have the money available, and mentaly, you say, okay, i dont have to pay it off, so ill max it out. $388 a month. You have a car payment that’s $500, your mortgage or rent thats roughly $1,600. light bill, water bill, and so on lets change the topic so we dont all start stressing about next months bills. The 0% interest credit card are bangers, i have about 3 of them active right now. BUT, those 2 cards added about $667 dollars of EXTRA payments we didnt have before. and guess what. those payments are for 18 months. So your next promotion at work, to offset these extra payments has to be over $10k. This is a very unique scenario, but the reality is that you can replace the credit cards with absolutely anything. A new car, a new mortgage, student loans, a business loan, HELOC payments, and so on. The trick here is the rabbit hole. Let’s circle, back, you NEED to understand how you GET THERE. So in the scenario, how did you get in a situation of more debt? Credit cards. It’s not ONE financial decision that leaves you in this situation. its literally an entire journey to get approved, find something to buy, purchasing it, and then paying it off monthly. And lets be honjest here, sometimes, you dont evne GET TO CHOOSE. you can have a medical emergency that places you in situations where you’re even more in debt. Interest rate fees can kick in after those 18 months and some installment plans are not friendly. You have outside factors that can impact you where you have no control. Medical expenses as mentioned earlier, job insecurity, home repairs, etc. The issue becomes even greater when you rely on temporary solutions like getting a loan to pay another loan, or get a credit card to make some payments. Its like running on a treadmill. sure, you feel like you’re moving, but youre not getting anywhere. It’s not a real solutions. NOW, fyi, i get it. you may have 0 options, but this is WHY its important to understand the root cause of being in these situations to prevent yourself from having to do this.
Breaking Free from the Debt Cycle
So, how do you break free from this seemingly endless cycle? The first step is to take a hard look at your financial habits and identify the catalysts that got you into debt in the first place. This could be as simple as tracking your spending for a month to see where your money is really going. Once you’ve identified the problem areas, it’s time to take action.
Create a Realistic Budget:
A budget is your financial blueprint—it shows you where your money should go, rather than wondering where it went. Start by listing your income and fixed expenses, like rent and utilities. Then, categorize your discretionary spending. The key here is to be realistic; if you love your morning coffee, budget for it, but perhaps cut back on other non-essentials. Now, dont get this twisted. Some of you are shrugging saying, oh man this guy thinks not buying coffee will change my life. Just know, everyone’s situation is different. It does not have to be coffee. It can be any spending habit that you can CUT to use that money for DEBT. THAT is the important part. By having a clear picture of your finances, you can allocate more funds toward paying off your debt. If you don’t have a budget, you’re in luck. I have a whole budget planner for $20 in my website (bridgingmindset.com. check it out!
Prioritize Your Debts:
Not all debts are created equal. High-interest debts, like credit cards, should be your top priority. Consider using the avalanche method, where you pay off debts with the highest interest rates first, or the snowball method, where you start with the smallest debt to gain momentum. Both methods are effective, but choose the one that aligns best with your psychological comfort and financial situation. My suggestion, the avalanche method will statistically be the better option because you pay LESS interest over the long run. However, the snowball method is psychological. Small wins can feel really good. So, choose the one you feel best fits your own character.
Negotiate with Creditors:
Many people don’t realize that you can often negotiate with creditors for lower interest rates or more favorable repayment terms. It might feel intimidating, but creditors are often willing to work with you—after all, they’d rather get paid something than nothing at all. Approach them with a clear plan and demonstrate your commitment to paying off your debt. There’s a few companies that also do this for you but….they charge. Try and do it yourself first. take some time to really hit the ones that are hurting you the most financially. you may be surprised with the results
Build an Emergency Fund:
One of the biggest catalysts for debt is unexpected expenses. By building an emergency fund, you create a financial buffer that prevents you from relying on credit cards or loans when life throws you a curveball. Start small—aim for $500, then gradually increase it to cover three to six months of living expenses. This fund should be easily accessible, so consider keeping it in a high-yield savings account.
Avoid New Debt:
This might sound obvious, but it’s easier said than done. To truly manage your debt, you need to stop adding to it. That means cutting up those high interest credit cards (or at least leaving them at home). and PAYING THEM WITH STATEMENT BALANCE and not MONTHLY MINUMUMS. Please please please do not get into the rabbit hole here of not paying your statement blalances. pay off your card monthly, if you can i highly suggest automatic payments. saying no to impulse purchases, and living within your means. It’s about making conscious decisions every day that align with your long-term financial goals.
get another job or a promotion
i know this option may not be what you wanted to hear in this video. BUT, honestly guys its true. I know people who were in debt and they got a side job ont heir days off. did it pay a lot. I mean no, they weren’t making bank. but ive seen it first hand that doing that gave them enough money to pay off what they owed. Working over time, doing uber, delivery services, mowing lawns, whatever it can be, fast food, anything to get an extra buck. Put your pride aside, if you need to pay off debt, then you need to sacrifice a bit to get yourself out of that situation. I suggest, a job overnight and maybe one on the second shift. Those jobs are usually less demanding because everyone is asleep and it can give you time to relax and not feel as pressured as working an 8-5 then another 5-12, but those are my opinions.
Empowering Yourself Through Financial Discipline
Managing debt is not just about the numbers—it’s about transforming your mindset and approach to money. Your HABITS here play a huge role. You have to understand the implications of purchases and debt. By implementing these strategies, you’re not just paying off debt; you’re reclaiming control over your financial future. You’re building discipline, resilience, and a keen understanding of how to navigate the complexities of personal finance. It’s a journey, one that requires patience and persistence, but every step forward is a step away from financial instability and towards a life of freedom and choice.
The key takeaway? Managing debt is about more than just making payments—it’s about creating a sustainable financial plan that prevents future debt, empowers you to handle life’s unexpected challenges, and ultimately, transforms your approach to money. So, take a deep breath, grab a pen and paper, and start mapping out your plan. The road to financial freedom begins with the first step.
