Learn how to break free from debt with a plan, positive outlook and professional advice.

If you struggle with debt, you are not alone. CNBC reports that the average American’s credit card balance is $4,293. On top of that, many folks have large student loans to pay off. If you’re tired of being in debt, here are tips that can help you become debt-free.

Learn where your money goes

The first step in getting rid of debt is to look at your spending. One month of tracking your expenses will give you a good overall picture of regular expenses. Record everything from your morning cup of joe to monthly bills. Tracking can be done with pen and paper, a spreadsheet or even an app.

You’ll also need to account for expenses that occur less often, like vacations; subscriptions; memberships; car, renters or homeowners insurance; property taxes; and HOA assessments.

Make a budget

Once you’ve identified where your money goes, you can make decisions about which expenses can be cut or eliminated altogether. Your choices will be reflected in a budget that lays out the money you have coming in and what you spend.

Be sure to include savings in your budget. Designate savings for your emergency fund, and goals like education, a new car and retirement.

Put your budget in writing and continue to track expenses. Ongoing tracking will raise your awareness about where your money goes. It will also help you stick to your budget.

If the word “budget” makes you squirm, keep in mind that you can change it. For example, if after a few months of restricted spending you find that eliminating eating out altogether feels too austere, you can shift your spending by reallocating funds. You can reduce another expense category so you can go to a restaurant once in a while.

Get a gig

One sure way to reduce debt is to get a side gig and use all the earnings to pay down debt. In today’s economy, you have lots of options. There are traditional part-time jobs with an employer; at-home opportunities like becoming a tutor or transcriptionist; and gigs like walking dogs, becoming a caregiver or being a delivery driver.

Yes, your schedule will be full with additional work. One way to stay motivated even when feeling time-crunched is to remember that you’re spending time, not money, in order to make your life better. Plus, the gig can end when your debt is paid off. Need more motivation? Check out these 17 benefits of being debt-free.

A strategy that doesn’t work

One option that seems like a quick fix for eliminating debt can actually cost you more. Personal money-management expert Dave Ramsey advises people to avoid debt consolidation plans that combine all your debts into a single payment. Debt consolidation actually extends the life of your loans, keeping you in debt longer.

Keep your outlook positive

Paying off debt can feel stressful. It can be frustrating when it doesn’t feel like debt balances have gone down. To combat discouragement, try one or more of these approaches:

• Keep your ultimate goal in mind, i.e. paying off student loans or retiring early.
• Make a game out of reducing expenses. Summon your inner Sherlock Holmes to track down unnecessary expenses as well as good deals on things you need to buy.
• Give yourself kudos for even the smallest budgeting successes. Find free, healthy ways to reward yourself without spending money. For example, go for a walk, play your favorite music and dance, or do nothing. Find more ideas for treating yourself without spending money here.

Get free, professional advice

One of your benefits as a Consumers member is free, unlimited access to our Credit Smart program and GreenPath financially counseling. These services can help you devise a plan for debt repayment and help with any financial concerns you have.

Learn more about Credit Smart and GreenPath counseling services.

 

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