24 Things Americans Can Do Right Now To Get Out of Debt Faster
Americans held $17.1 trillion in debt in 2023, a 4.4% increase from 2022. While over 11 trillion of that amount is in the form of a mortgage, which is largely viewed as a good kind of debt, the average credit card debt Americans hold increased by 17.4%.
Experts at Experian believe credit card balances have risen because of inflation increasing the cost of goods. The good news? If inflation continues to ease, many Americans should be able to put more money toward paying down their debt.
If you’re among the millions of Americans in debt, we gathered data and advice on strategies you can start implementing today to help you become debt-free.
1: Create a Budget
One of the first steps when deciding to tackle debt is to create a budget. Doing so will give you a detailed picture of exactly how much money you need for living expenses and how much you owe in minimum monthly debt payments.
The key to creating a budget is to focus on your needs, not your wants. Online lending marketplace LendingTree covers some common ways to approach budgeting. They range from zero-based budgeting, where every leftover dollar goes towards debt repayment, to the 50/30/20 plan, where you can spend up to 30% of your income on wants.
Ultimately, every person will vary in their budgeting style according to how much debt they have, the amount of income they bring in, and what they believe they’re capable of sticking to.
2: Increase Income
Here’s another reason why budgeting is so vital as a first step to paying off debt: It’ll let you know if your expenses are higher than your income. If that’s the case, the decision is easy since you must find a way to increase your income to avoid going further into debt.
Even if you make enough income to cover your expenses and have some money left over to put towards your debt, getting a side job is helpful. The more extra money you can put towards your debt each month, the less interest you’ll pay, and the faster you’ll be able to become debt-free.
3: Figure Out a Debt Payment Method
Finance experts preach two primary strategies for paying off debt: The snowball and avalanche methods.
With the snowball method, you start by paying off your smallest debt first, regardless of the interest rate, while making minimum monthly payments on your other debts. Once you’ve paid off your first debt, you’ll put all the money you were using to pay off your smallest debt towards paying your second-smallest debt.
In contrast, the avalanche method focuses on paying off your loans according to their interest rates, starting with the highest interest rate.
Both payment methods have their advantages. The avalanche method helps debtors pay less money in interest and finish paying their loans earlier. Meanwhile, the snowball method can feel more rewarding since you reduce the number of loans you have faster, which may help you better stick with your debt repayment plan.
4: Make Biweekly Payments
Many people associate biweekly payments with helping to reduce the length of time and interest paid toward mortgages. But as Summit Credit Union points out, this strategy works for many types of debts.
Biweekly debt payments are exactly how they sound: You’ll make half of your monthly payment every two weeks. This strategy helps people pay off their debt faster because it more quickly reduces the total amount of principal accruing interest. You’ll also make 26 payments each year rather than 24, which has a massive impact on large, long-term loans.
5: Debt Consolidation
Debt consolidation can be a huge relief for Americans who juggle many types of debt from many different lenders. By choosing the debt consolidation route, you’ll have a single loan to pay off with one, often lower, interest rate.
While debt consolidation can be a beneficial tool for paying off debt, Forbes cautions that it isn’t a good fit for everyone. Debt consolidation is a Band-Aid, not a fix for overspending or impulsive shopping.
So, do your due diligence and be honest with yourself. Do you have the willpower to resist taking out more loans and spending unnecessary money after consolidating your debt?
6: Pay Above Minimum Payments
Putting more money towards your debt than your minimum payment is debt repayment 101. However, it’s all too enticing for some people to do so when they know they only have to pay, say, $25 each month without any legal ramifications.
Since numbers speak volumes, here’s why that’s a financially harmful mentality. Using a Bankrate example, let’s assume you have $5,000 in credit card debt with an 18% interest rate and a $100 minimum monthly payment. It will take you 7.8 years and cost you $4,311 in interest to pay off your debt at that rate.
In contrast, if you put $300 towards your minimum monthly payment, it’ll only take you 1.6 years to pay off your credit card, with a mere $797 going towards interest.
7: Get Rid of Credit Cards
Most people in debt don’t have enough cash lying around to pay off their debt overnight. However, assuming you ran your budget and make enough income to cover your basic expenses and monthly debt payments, getting rid of your credit cards overnight — or during the daytime, for that matter — is wise in many cases.
It’s a common belief that people can’t close credit cards with balances. That’s simply not true. You’re legally able to close your credit card at any time. However, you’re still responsible for keeping up with payments until you fully pay off your debt.
Cutting up your credit cards is an especially wise choice if you’re an impulsive spender. Without plastic lying around in your wallet, it’ll be harder for you to buy unnecessary items.
8: Refinance Your Mortgage
If you have a mortgage, refinancing might be a smart option. Refinancing a home can help you save money on interest, particularly if you have a good credit score and still have many years left on your mortgage. You can then use the extra money you save to put towards higher-interest debt or your refinanced mortgage to help you become debt-free faster.
That said, refinancing a mortgage can have some downsides. Namely, it costs money to pay for the closing costs, and there may be the temptation to refinance to a longer loan repayment period, undoing your efforts to pay off your debt faster.
9: Sell Extra Belongings
The key to getting out of debt faster might already be within your home. Although it can be hard to part with belongings, doing so in the name of a debt-free future can save you stress in the long run.
Alternatively, you can try flipping other people’s belongings. The Flea Market Flipper shared a story of a grandmother named Angila, who paid off $26,000 in debt by flipping items on eBay.
10: Settle Debts
If you’re overwhelmed by the amount of debt you owe, debt settlement could be your ticket out. Debt settlement happens when a consumer negotiates with their creditor to reduce the amount of money they owe, offering to pay an agreed upon lump sum upfront.
Debt settlements can be a lifesaver to people who are on the verge of filing for bankruptcy. You also won’t have to deal with getting calls from collections for the debt you settle.
Nevertheless, debt settlement can come with high fees if you go through a debt settlement provider, and it can negatively impact your credit score. Then again, if you’re trying to get out of debt, maintaining a high credit score may not be a priority.
11: Cut Out Costly Fun
Being in debt isn’t fun, and nor is eliminating expensive fun because of it. But here’s the reality: The longer you delay putting extra money towards paying off your debt, the longer you put off guilt-free fun.
According to the 50/30/20 principle, you can spend 30% of your after-tax income on wants (50% goes towards needs and 20% towards savings). So, while some people can swing a 50/30/20 budget while paying off their debt, you’ll hands-down get out of debt faster if you temporarily reduce or eliminate wants in the name of putting the extra money towards your debt.
12: Use Tax Refunds Wisely
A tax refund can feel like free spending money to some. But those wanting to get out of debt are better off viewing it as extra cash to put towards their debt payments.
According to CNBC, the average tax refund as of mid-February 2024 is $1,741. Of the taxpayers receiving refunds, approximately 19% plan to pay down debt whereas about 20% plan on spending it on fun, non-essential expenses.
If you’re trying to get out of debt, it’s wise to join the 19% of people who put their tax refund towards their debt balance.
13: Ask for a Raise
One of the golden rules of becoming debt-free is contributing as much extra income as possible towards the amount you owe. And what better way to get more money than by asking for a raise?
The phrase “If you don’t try, you’ll never know” holds true when asking for a raise. Of the fewer than half of employees who ask for raises, less than half receive them.
So, while the numbers aren’t exactly on your side, the potential benefit of receiving extra money in your paycheck that can go toward your debt is likely worth it.
14: Change Jobs
Did you ask for a raise and your boss declined? If so, perhaps looking for a new job deserves a spot on your to-do list.
A myriad of factors go into determining whether changing jobs is a financially wise thing to do. But if you decide to take the leap, remember this: Never quit your job while in debt until you have another job lined up. Despite your craving for a sabbatical, a person wanting to get out of debt should ideally spend no more than a Saturday and Sunday off between jobs.
In addition to potentially looking for a new job, you might want to investigate a career change in a field that would lead you to higher pay. There’s a greater time commitment involved with this, and you might need to invest money in education to make it happen, so weigh your options carefully.
15: Work With an Accountant
Sometimes the kind of make-or-break money that could be standing between you and a debt-free life is beyond the scope of a non-accountant’s knowledge.
Case in point? If you’re a married person with federal student loans on an income-driven repayment plan, you might gain more money that you can put towards higher-interest loans by changing your tax status. The reason is that filing jointly with your partner considers both incomes, whereas filing separately is based on the individual borrower.
16: Pretend Bankruptcy Doesn’t Exist
Bankruptcy has its purpose, but there’s a reason most Americans don’t turn to it the moment they get into a financial bind. Depending on the type of bankruptcy you file, you’d have to give up luxury items at best and your home and some of your clothing at worst.
While bankruptcy protects a filer’s future wages and can provide emotional relief, having bankruptcy as a crutch to turn to can be a disservice to some people trying to get out of debt. The thought of bankruptcy may make it easier for some to justify falling — and, more troubling, staying — off the bandwagon.
So, if you’re in extreme debt, it’s best to consult with a financial advisor to see if bankruptcy would be a wise choice in your case. If it doesn’t appear so, you’re probably better off forgetting it’s an option.
17: Consider Selling Your Car
Before you get too upset, hear us out: Being a car owner undoubtedly makes sense for someone in debt if it’s your only option for getting to work.
However, if you have access to public transportation, you might be better off selling your car and using the money to help pay off your debt. While many factors go into deciding whether selling a car while in debt is the smart thing to do, giving it any thought at all is a step ahead of what many Americans do.
18: Debt Repayment Apps
Did you know you can use an app to help you pay off your debt faster? Changed is one of the many options. It rounds up your purchases to the nearest dollar, putting that change towards your debt.
You can even ask your family and friends to join you on your debt goals, with their rounded-up change going towards your debt. Changed also has a summary page showing the projected savings on the debt you’ve linked to their account and how soon you’ll pay off your debt with and without them.
19: Utilize Consignment Stores
If thrift stores like Goodwill aren’t already your go-to option when you need clothes and household items, it’s time to change that until you’re out of debt.
While in the ideal world, you should only go to thrift stores when you truly need something, a thrift store outing can be a more economical way to treat yourself to a shopping spree than non-consignment shops. Or, an even more debt-friendly way for a shopping lover to get their fill of buying items is to resell the items they purchase at thrift stores for a markup on eBay and the like.
20: Meal Plan
Not only can meal planning help save you time during the week and keep you on track with any health goals you have, but when done with a budget in mind, it can be an excellent way to decrease the amount of money you spend on food each month.
Resume Builder ran a survey of 800 corporate workers in September 2023 about their lunch expenses. It revealed that 71% of participants buy lunch three or more days per week, with half spending $20+ on each meal.
Meal prepping easily costs significantly less than eating out for lunch. So, if you’re in the habit of doing so, start meal planning today and put the extra money you save towards paying off your debt.
21: Potentially Pause Investments
It’s wise to consult a financial advisor on this one, so this is just food for thought. While investing in your retirement savings is valuable, depending on the kind of debt you have, it might not make sense to do so.
According to Fidelity, it often makes more sense to temporarily forgo saving for retirement in the name of paying down debt if your debt’s interest rate is 6% or greater. That said, there are nuances to when they do and don’t recommend this number, including whether you have an employer match and how much time you have before retiring.
The bottom line? Pausing retirement investments to pay off debt has the potential to save you money in the long run, but it’s not always the best move. So, seek out a certified financial planner to determine the best-fit plan for your situation.
22: Envelope System
Sometimes going back to old-fashioned budgeting methods is key to helping Americans get their debt paid off. Then again, “cash stuffing,” which is the same concept as the envelope system, has been a trend on TikTok.
The envelope system involves divvying up cash for your monthly expenses into different envelopes. Each envelope has a label for its purpose, such as “rent” and “food.”
The point of the envelope system is to help people avoid spending beyond their budget. It can also be a wake-up call to see how fast cash can flow out of your pocket; swiping a credit card often doesn’t have the same effect.
23: Get Group Support
For many Americans, setting up a budget and sticking with it at the beginning of a debt pay-off journey is the relatively easy part. The hard part is sticking to it for months or years until their debt is paid off.
For this reason, letting people know about your debt-free goals and seeking support along the way is vital to increase your chances of staying on track. Apps like Changed can help keep you accountable since your friends and family will be donating their excess change for you.
Another excellent option is Debtors Anonymous. Through Debtors Anonymous, you can connect with people in similar situations via face-to-face meetings, phone calls, online group meetings, and more.
24: Speak With a Professional
While the items on this list are an excellent way to kick-start becoming debt-free, connecting with a certified credit counselor is wise. Many credit counseling organizations are non-profit, and certified individuals provide advice about debt management.
The benefit of connecting with a certified credit counselor is that they can help develop a plan tailored to your situation, helping you spot ways to get out of debt faster that you may not have been able to see on your own.
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