What to Do When You’re Drowning in Debt?

We Listed 7 Helpful Tips Below

What to Do When You’re Drowning in Debt?

1. Get on a budget. Doing a budget is one of the most important steps you can take when you’re drowning in debt. A budget is the very thing that will show you where your money is going and why you feel like you’re drowning. But you don’t have feel that way any longer—and a budget will help!

2. Cut back on the “extras.” Now that every dollar has been accounted for, it’s time to see where you can cut back.

Take an inventory of any automatic payments that routinely come out of your bank account. Maybe you have a $7 subscription to the clean beard club. We’re not knocking beards—especially clean beards—but these kinds of expenses add up quickly. Plus, that free gift they offered you when you signed up is probably long gone, leaving you with a subscription you keep forgetting to cancel every single month—and more beard oil than you know what to do with.

Don’t get us wrong, we love a good mail day just like the next person. But whether you’re drowning in student loan debt or drowning in credit card debt (or just plain debt), you’ve got to make some pretty big changes. You guessed it: We’re talking about cutting back on these nonessential items and getting your “want-itis” under control.

3. Pause all investing. Really? Yep. Saving for your future when you’re living paycheck to paycheck (or worse) isn’t the best idea. At least not yet. If you’re still trying to pay off credit cards, an upside-down car loan, or a huge pile of student loan debt, it’s time to press pause on your future investments . . . temporarily. This temporary pause frees up extra cash you can use to pay down your debt.

Don’t worry, you’ll come back to this once you’re debt-free.

4. Don’t take on any new debt. None. We know it’s hard (and maybe not what you’ve been used to), but trust us—taking on debt robs you and your family of a secure financial future. Your choices right now can and will impact future generations of your family tree. So don’t take on even another penny of debt.

Get out your favorite scissors and do some plastic surgery (or as Dave calls it, a plasectomy). The best part? No medical experience required. Yup—we’re talking about cutting up those credit cards.

You may feel your heart start to race and your hands begin to sweat. But let us remind you: Having a credit card for emergencies seems like a good idea until your next “emergency” looks like your next afternoon coffee run. When you cut up those cards, you’re choosing to put an end to the merciless cycle of debt for good.

5. Increase your income. Now that you’re on a budget and you’ve decided to stop taking on any new debt altogether, it’s time to figure out how you can increase your income. Take a second job or pursue a side hustle that will give you the extra income you need (as quickly as possible) to throw at your debt. Whether that’s working at your local coffee shop, mowing lawns, or driving for a ride-hailing service like Uber or Lyft, you’ve got to bring in more cash.

We get it. No one wants to work around the clock. But in order to see that mountain of debt turn into a valley, you’ve got to start doing something different. Remember: This isn’t forever. You won’t be skipping out on time with family and friends for the long haul. But in order to get on the right track, you’ve got to start making sacrifices now.

6. Start working the debt snowball. Now that you’ve got some extra money coming in each month, it’s time to start paying off your debt with something we call the debt snowball method:

List your debts from smallest to largest—no matter the interest rate. Attack the smallest debt with everything you have. Did you sell the couch? Great—throw your earnings on this debt. Keep putting anything extra you make toward this debt until it’s gone. Once that debt has been paid, take the minimum payment (plus that money from your second job) and throw it at the next largest debt while paying minimum payments on the rest. Keep this snowball rolling until you’re debt-free! Want more debt snowball tips? Sign up for this free, three-day email series that will send helpful tips and encouragement straight to your inbox.

7. Stop the comparison trap. Comparison is one of the worst things you could do while you’re getting out of debt, and social media is one of the biggest culprits. If you’re scrolling through your news feed and see your friend (whom you haven’t talked to in years) on a European vacation with her mom, that doesn’t give you permission to plan a fancy vacation too. Nope. Europe will still be there when you’re completely debt-free.

When you’re in debt and going after your debt with gazelle intensity,* it’s hard not to compare your financial situation with other people’s situations. But here’s the truth: You don’t actually know their financial situation. We don’t know if your friend put her fancy vacation on a credit card. But we do know that once you’re out of debt, you’ll be able to plan these trips of your own. Listen: The Joneses are broke. If you’re falling into the comparison trap, it might be time to take a much-needed break from social media.

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"Dave Ramsey"