Life can be expensive, especially today, when the coronavirus pandemic has left millions of Americans unemployed when the economy shut down.
Mortgage payment, credit card bills, student loans, auto loans—these are just some of the bills you might have fallen behind in, leaving you in piles of debt.
While being in debt is not ideal, it’s a stark reality for many. And for those in debt, it’s extremely stressful knowing every day you owe money to someone, which can put a serious damper on your life. If you want to get out of the red and on a path to a successful financial future, it’s time to take action. Take a look at our top tips for getting out of debt on your own below.
Make a list of how much money you owe and to who
Your first line of duty to getting out of debt on your own is making a list of how much money you owe and to who. Depending on your financial circumstances, you may be in debt to more than one entity. For example, you may have the following debts looming over your head:
- Credit card debt
- Auto loan payments
- Student loan payments
- Mortgage payments
- Other loans, such as personal loans
It’s best to keep your list organized, such as in an online spreadsheet or a notebook, so you can track how much you owe and how much you’ve paid off.
During this step, it’s also worth gathering other important financial documents, such as your credit score and report, as doing so can help you determine whether your credit score is good enough to qualify for lower interest payments on any of your loans.
Get your taxes in order
With so many bills to pay, one payment you can fall behind on is your taxes. While leaving your taxes on the back burner might seem like a good idea when you’re trying to pay off other large debts, ignoring your taxes is illegal and can land you in some seriously troubled waters.
Failing to pay federal or state income taxes can lead to wage garnishment, a lien on your property or assets, or even the seizure of your assets or property. If you’re in a situation where the IRS sent you a notice of intent to lien or levy, you need to act fast. To stop a tax levy, you can work with a tax professional to file for an Offer in Compromise, Installment Agreement, or Currently Not Collectible Status. Each option comes with its own terms and conditions, so working with a tax professional can help you decide which route is the best to take.
Understand what got you into debt and make changes
If you’re in debt and go on with your normal life, you can be sinking yourself further and further into the hole. It’s essential you take a good hard look at your life and life choices to see what got you into debt in the first place. Did you max out all of your credit cards? Did you buy the most expensive house on the block when you couldn’t afford to? These are some of the hard questions you might have to ask yourself before you make any changes. However, identifying the areas that landed you in financial trouble is a great way to get back on track and get your finances in order.
Find additional sources of income
Being in debt is a common reality for millions of Americans. No matter where you go, you’ll find someone who has car payments to make, student loans to pay off, and a mortgage to stay on top of. For most people, managing this debt isn’t difficult if they budgeted correctly. However, for some, they may be in excessive debt where their current income can’t support their minimum monthly payments.
If you’re one of these people, you may want to consider additional sources of income. While working more hours a week isn’t ideal, making sacrifices can help you get out of debt faster. Some options you may want to consider include:
- Becoming a freelance worker in your spare time
- Monetizing your hobbies and selling your products online
- Picking up a part-time job
- Becoming a dog-walker or babysitter
There are plenty of opportunities out there that can provide you with additional income to go toward your debt. Use job hunting platforms, send in some applications, prepare for interviews, and you’ll be good to go.
The bottom line
Being in debt is extremely stressful, especially when there seems to be no end in sight. However, with these four tips, you’ll be one step closer to getting out of debt on your own.
