There’s also the effects of the Great Recession that lasted from 2007 to 2009. It left scars concerning job, income, housing, and wealth. Many low-income Americans took the worst hit as most of them lost their jobs and their homes. Their credit scores plunged and they cannot buy a property as they don’t have access to credit anymore. More than a decade after the recession, many Americans are still in debt and haven’t recovered from the financial crisis that flooded their families.
Whichever the reason may be that one gets stuck in debt, the determination to improve his life is never far from his mind. Questions like “How to get out of debt fast on my own? Is there a surefire way of resolving my problem? What can I do to avoid this problem in the future?” will prompt him to look for the answers. And he can find them, for sure, because even if he does not earn much or already broke, there are several ways he can get out of the financial situation that he’s in. Some of them will be discussed in this article.
Steps on How to Get Out of Debt Fast Without Help From Others
The journey to financial freedom is not easy. It is littered with pain and difficulties. The temptation to spend is there at every turn. One can steer off the path. But if he has the will and determination to get out of the sinkhole of debt that keeps sucking him down, he can retrace his steps and start the journey all over again. The ride to freedom may be rocky but if someone has the will to stick to the course, they’ll reach the destination.
So, what are the steps that a person with debt can do to pay off all creditors and stay debt-free?
Here are three steps to completely remove a debt.
- Tackle debt by determining the debt ratio.
- Generate enough money to pay all outstanding debt and don’t incur new ones
- Rid yourself of the bad habits that got you into debt in the first place – for good!
Let’s discuss each step to clearly understand why they have to be done and what can they do to completely solve a consumer’s debt issue.
How to Compute the Debt Ratio
Knowing a consumer’s debt ratio will let you see clearly how much money you actually earn and how much you owe monthly. To calculate the debt-to-income ratio (DTI), here’s what one needs to do.
- First, get the sum of all monthly bills such as rent or house payment; loan payments for auto, student, etc.; minimum credit card payments; and child support or alimony payments.
- Next, use this debt ratio calculator to get the DTI by entering the annual gross income (income before taxes) and total monthly bills.
One’s DTI will off course, be way above 45% if you are charging monthly groceries and other utilities in your credit card and only pays the bank in minimum. Yet, there’s no reason to despair. Someone in debt will be able to reduce his/her debt ratio after doing some changes which will be discussed next.
Ways To Earn Extra Money To Pay Off Debt
It will be difficult for a consumer to stay off debt if you will not take out the reasons that put you in a bad financial situation in the first place. You’ll never rid of debt completely if you don’t learn to spend within your means. Harsh but true. There are several reasons people incur debt yet whatever they may be, what’s important is that you doesn’t let yourself be in a financial crisis again.
“How to get out of debt fast on my own?” one might askf. There are many solutions out there but for them to work, the debtor should change their lifestyle and should sacrifice things to get out of debt. This involves turning your back on bad financial habits.
- Stop paying debt with the money loaned from another person or lending company.
- Start setting aside money for an emergency fund in case one loses his/her job or need to pay medical bills that his/her health insurance can’t cover.
- Avoid extravagant travels and purchase. Live only the life that he can afford.
They’re easier said than done, yes, especially controlling the impulse to splurge money on a car or a vacation. When one gets used to a certain lifestyle, it’s really hard to change.
Cutting spending alone will not do the trick. An individual also has to earn more than he/she spends and still have enough money to support their basic needs. You can get a part-time job or sell some stuff to earn extra money. If you can manage to get a better job than you currently have, the higher the chance of increasing your income and pay your debt.
By researching online, you’ll find many ways to earn more money on top of your job. Regardless of the number of strategies out there, they can all be classified in just three.
- Work harder than before – One can do overtime at work or acquire a second job.
- Be smart with work – Work to get promoted and if it’s not possible, look for a new job with better pay and
- Start selling stuff – If there are things that are not of use anymore, do a yard sale or sell them on Craigslist or eBay. Better yet, if one possesses the talent to create stuff like woodcraft, jewelry, paintings, and other things that people need, you can sell them on Etsy or build your e-commerce store. Click here to learn more about starting an e-commerce side hustle.
Motivation is half the battle, but if there are tools available to help a consumer get out of debt on your own, why not take them?
The Bottom Line
Eliminating debt for good is a great motivation to work harder and smarter. There are many ways out there if one only do research. But these will not be worth anything if a person into debt doesn’t lift a finger at all. Stop asking “How to get out of debt fast on my own?” The solutions are already here.