Four Smart Ways to Get Out of Debt


Tips for debt relief

Jeff Rose, a certified financial planner, offers some constructive options for paying off debt.

Most of us find ourselves in financial trouble at some point in our lives. We look up one day and find that we are in debt.

According to a recent study by Experian, the average American has a total debt of $ 97,427. For many, getting into debt is easy, but when it does get out the challenges and frustrations become unbearable.

A few weeks ago we talked about some of the mistakes people make when trying to get out of debt. Today we’re going to talk about some of the best strategies that can help you get out of debt for good.

Before we dive into these techniques, it is important to remember the two things that we can all control about our finances: how much we spend and how much we make.

PREVIOUS: Your Debt Plan For 2021: The Four Biggest Mistakes People Make When Trying To Pay Off Debt

If you carefully record all of our expenses, you can reduce debt and create wealth. This means that a budget is a must if you really want to get out of your debt trap. One of the budgeting techniques I recommend is the 50-30-20 budget, which allocates 50% to your needs, 30% to your desires, and 20% to savings and debt payments.

The other missing piece of the wealth creation puzzle is how much you make. There is an obvious way to increase your earned income, but the pandemic hasn’t been very helpful. Instead of seeing salary increases, we’ve seen more people laid off or on leave. Many are just grateful to have some income.

One of the best ways to increase your income outside of your job is by adding a side business. There are many different types of sideline activities that you can do in your spare time. I previously shared how delivery apps like DoorDash, Grubhub, and Uber Eats exploded during the pandemic. Deploying for these services or something like Instacart is an easy way to add extra cash to your bank account. On my blog, I am listing 12 of the most popular sideline things of the year for you to try.

After we have a primer, let’s dive into these debt settlement techniques.

1) debt snowball method

This is actually one of my favorite ways to pay off debts, although many math teachers may disagree. How the debt snowball method works, you must first list all of your smallest to largest debts, regardless of the interest rate you are paying on that debt.

Once you determine the smallest debt you owe, focus all of your extra money on paying that debt first while making the minimum payments for the rest to avoid late payments or penalties. Once you’ve paid off the smallest debt, move on to the next smallest debt and cross each off the list.

You may be wondering why you should pay off a smaller debt at, say, the lowest interest rate, instead of tackling a larger one at, say, 20%? The reasoning is simple: dynamism. By paying off the smaller debts first, and most likely sooner, you will gain confidence and more excitement as you deal with the rest of your debt.

The debt snowball method works because it’s about behavior change, not numbers or basic math. It gives you hope, and for many it is worth more than its weight in gold.

Common Mistakes When Paying Off Debt

Jeff Rose, a certified financial advisor, explains some of the mistakes people often make when paying off their debts.

2) debt avalanche technique

The debt avalanche technique is very similar to the debt snowball method. You need to first identify all of your debts and list them in the correct order, including their interest rates. The main difference with this method is that instead of focusing on the smaller debt, you are focusing on the larger debt.

The rationale is simple: focusing on the larger debts should save you more money as you will be paying off the debt with the highest interest rate compared to the smaller balance.

If you are self motivated and don’t let how long it may take you to pay off that larger debt, the debt avalanche approach works.

3) Transfer to 0% credit card

This may sound counter-intuitive as it is about paying off debt. Why this can be a smart approach for you depends on how much credit card debt you have and what your interest rate, or APR, is.

If you have a high interest rate, say between 15% and 25%, and then transfer your balance from your high yield credit card to one that pays 0% for example 12 months, it can save you hundreds, if not thousands, of dollars. Please note that a bank transfer fee may apply.

Typically you will see 3% of your total amount. Also, be sure to find out if there is an annual fee for the new credit card, especially if your current credit card doesn’t. You need to do the calculations to see if this strategy makes sense for your situation.

4) Consolidate or Refinance Your Debt

When you have different types of debt and it turns into a bear trying to manage them all, debt consolidation is a good strategy for paying off debt. One of the most common ways people do this is to take out a personal loan, settle all of their debts, and then make payment on the new loan.

Today, there are several personal loan providers that offer no fees, including no origination fees, no prepayment fees, and no late payment fees. You can usually check your interest rate online and then check your payment to see if this method works.

Refinancing your debt can also be very useful. This is very popular in the student loan area. College Avenue, an online student loan lender, suggests borrowers can save thousands on their student loans if they spend some time researching how to refinance their student loans.

Overall, every step to improve and get out of debt is a smart financial move. The key is to pick a method, any method, and just get started.

Jeff Rose is a combat veteran, certified financial planner, and founder of

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