You can get out of debt on your own! I paid off $80,000 in credit card debt in about 3 years. It's not easy, but these rules helped me do it. Learn how.

If you want to get out of debt on your own (and fast), this is the post that will help you do it.

Not someday. Not tomorrow. Right. Freaking. Now.

Yes, you CAN get out of debt

I managed to pay off $80,000 in auto, credit card, and student loans debt in just over three years. I know how to get out of debt and I know you can do it, too.

As a debt junkie for almost ten years, I ran up credit card after credit card living like my salary was about four times its actual size. Stupid things I bought on credit included flying lessons, weekends in Las Vegas, and a brand new pickup truck. Hey, I never said I wasn’t having fun. (Remember, I’m on the other side of 25 now, so I started college pre-recession… during the dot-com boom. Back then, I actually thought I could graduate with a sociology major and find a $75k a year job—because I knew people who did!)

We all know that didn’t happen, and soon enough, the debt caught up with me. As I approached my 26th birthday, I maxed out with debt of around $80,000. All of a sudden, I couldn’t keep borrowing my way out of trouble anymore. At the same time, I realized that the stress of barely making my monthly payments and owing twice what I earned in a year was taking its toll.

So I decided to change.

I’m a smart guy. And I don’t consider myself afraid of a little hard work. So several years ago, I resolved to:

  1. Get out of debt on my own.
  2. Go a step further and achieve a kind of financial stability that most people never do.
  3. Blog about it in a way that makes it accessible to others.

And I did.

Today, I have no consumer debt. By choice, I’m not debt-free. I do have a mortgage on my primary residence even though I could pay it off. I also did not pay off my student loans early. In these cases, I’m using debt conservatively and consciously to advance my financial goals. But all the nasty stuff—credit cards, personal loans, and an auto loan—is long gone.

Contrary to what hundreds of marketers and self-described personal finance “experts” will try to sell you—there is no secret to getting out of debt. No right way. No silver bullet.

That said, I think it is fair to say there are a few requirements to permanently ridding yourself of consumer debt.

  1. You must confront your debt by calculating your debt ratio.
  2. Permanently change the behaviors that got you into debt.
  3. You must make enough money to repay the debt.

Throughout all the years I carried this debt around with me, I never wanted to be in debt. But it wasn’t until I met the three criteria above that I was able to do something about it. First, I had to stop living in denial, telling myself my debt “wasn’t that bad.” I needed a reality check and to stare down exactly how much debt I had and what it would take to get out.

Second, I needed to figure out why I was in debt and stop doing those things. I had to tone down my lifestyle. By a lot.

Finally, I had to find a way to earn enough to repay the debt. So I got a second job, worked on a series of job changes that increased my income, and started this blog which—in time—created yet another income stream.

Now, let’s break this down and see how you can apply these three requirements to your debt.

1. Confront it: How much debt do you have?

I know you might be afraid of how much debt you have, but ignoring the problem will never make it go away.

There was a time in my early 20s, when my debts were steadily mounting, that I knew I was in trouble, but I was too scared to actually tally up how much debt I was in.

I paid minimum payments and forgot about them until the following month. If this is you, or if you simply need a refresher as to your current (negative) net worth, let’s go take a look. Tally up all your debts.

Credit cards. Student loans. Auto loans. And anything else. For now, we’ll leave your mortgage out of it.

That’s your number.

Although your absolute total debt is important, it’s not as important as how that debt compares to your annual income. It’s time to calculate…

Your debt to income ratio

This is a commonly used figure that puts your debt into perspective relative to how much money you earn.

A debt-to-income ratio (DTI) is often calculated different ways. For example, when you apply for a mortgage, the banks calculate your DTI as the percentage of monthly debt payments of your monthly income.

A few years ago, I reviewed the book Your Money Ratios by CBS MoneyWatch columnist Charles Farrell. I liked Farrell’s idea of simplifying financial planning by applying ratios to personal finance (something that financial professionals do all the time, anyway).

Although not one of Farrell’s ratios, I like to calculate a debt ratio as the amount of total debt (excluding mortgages) as a percentage of gross annual income.

  • Example 1: You earn $50,000 a year and have $25,000 in debt. Your Debt Ratio = 0.5.
  • Example 2: You earn $100,000 and have $250,000 in debt. Your Debt Ratio = 2.5.

This gives you a benchmark for how indebted you are (and what it will take to escape).

In case you’re wondering, my debt was way above 2.0 for a while.

So whatever your debt ratio, don’t despair. If yours is way up there, it just means you have some work to do.

2. Change the behaviors that got you into debt

Getting out of debt begins by eliminating the reasons you went into debt in the first place. Even winning the lottery won’t solve your problem if you never learn how to spend less than you have.

People get into debt for different reasons. School, job loss, medical bills, or, if you’re like me, stupidity. But why you got into debt doesn’t really matter. What matters is that you don’t let it happen again! Here’s what not to do.

  • If you took out $50k in student loans for a bachelor’s degree, don’t take out $100k more for a PhD.
  • Did you fall into a pile of debt after losing your job? Resolve (once you get out of debt), to work on an emergency fund so this will never happen again.
  • If you, like me, spent years living a life you couldn’t afford, then figure out what the life you can afford looks like, and get there.

This last step is easier said than done. In fact, that goal alone is responsible for about a third of every personal finance article every written. “Live within your means,” “Spend less than you earn,” etc., etc. Why has so much written about such a simple concept?

Because once we get accustomed to living a certain way, it’s incredibly difficult to change. You know, how do you start living on ramen after two years of The Capital Grille?

That’s where this comes in:

3. Earn enough to get out of debt

If you want to get out of debt by yourself, you need to earn enough money to survive AND enough money to pay down your debts.

Put another way: You need to go from a situation in which you’re spending more than you earn into one where you’re earning more than you spend. And the faster you want to become debt-free, the more you have to earn above and beyond what you spend.

Why earning more works

Personally, I knew I was never going to get out of debt just by cutting spending—unless, perhaps, I lived with my parents until 35. (No offense, Mom and Dad, but no thanks.) I simply didn’t earn enough money. I had to earn more.

So I did several things: I got a second job (at Starbucks), I looked for higher-paying day jobs and moved (a couple of times), and I started this blog. Between the second job, a career change, and starting this blog, I added $15,000 to my annual income.

And in about four years, I went from earning just over $30,000 to making over six figures.

I do not say this to brag or to claim that I’m anything special. I say it only to make a point. If you put your mind to it, you can get out of debt, you can increase your income, and you can get a better job. If you put your mind to it, you can start a part-time business.

Not everybody has to earn more money to get out of debt, but it makes it a lot easier.

There are literally endless ways to earn extra money, but all could fall into these three categories.

1. Sell stuff

If you have stuff, then you can make money. Find stuff you don’t use anymore and hit up eBay or Craigslist or a yard sale.

The good thing about selling stuff is you can get cash fast. The bad news is, it’s not sustainable; sooner or later, you’re going to run out of crap to sell.

2. Work harder

Get a second job or work overtime, if available. I’ll be blunt, second jobs are no fun, but they sure do help pay the bills. Think of how tired/stressed/soulless you feel after your 9-5 already; now imagine getting in your car, battling rush hour traffic, and putting in another four hours from 6 to 10. Then you get home around 11, just in time to watch the Daily Show and pass out.

Putting in extra hours earns extra dollars, but it can suck the life out of you. If this is the route you want to go, however, there are options: food service, babysitting, mall stores, delivery routes, security guarding, tutoring, teaching prep classes, bartending, cab driving, etc.

3.Work smarter

This is my personal favorite way to increase your income, and you’ll see why. Working smarter is about getting promoted at work. Or, if your job won’t promote you, finding a higher-paying job. Or, if you can’t find a higher-paying job, working for yourself. If you make the decision to earn more money by working smarter, you just have to do.

Note: I can’t take the space here to list a million business ideas, but I have always found inspiration in the Inc. 5000, a list of the fastest-growing companies in America. My first college internship was with Inc.—my job was to interview the CEOs of these companies to ask about the secrets of their success. It was one of the best experiences of my life. I still think of that list as “5000 ways to make money.”

Tools to help you get out of debt

Motivation is half the battle, but if there are tools available to help you get out of debt yourself, why not take them?

Someone looking to get out of debt in 2017 has it way easier than debt fighters of just a few years ago. The credit crunch is long gone. Unless you totally scorched your credit score, you should be able to use the credit system to climb your way out of the hole.

Balance transfers

In some cases, a 0% balance transfer credit card can provide immediate relief from high APR credit card debt. But balance transfers are not, by any means, a cure-all.

Here’s how balance transfers work: As a way of attracting new customers, credit card companies will let you transfer a balance—in other words, a debt—from one credit card to a new credit card at 0% interest for a certain number of months. For example, if you were to transfer a $2,000 balance from one card (15% APR) to a new card (0% APR for 12 months), you could save up to $300 in interest.

But there are plenty of pitfalls to this approach.

  • There is often a fee to transfer a balance, which can eat into your savings.
  • Transferring a balance doesn’t solve your debt problem if you can’t make big enough payments—it simply buys you some time.
  • You need very good credit to get approved for new credit card, and if the balances on your current credit cards are too high, you might be denied anyway.
  • More credit means more temptation to spend.

How much could you save? Try our balance transfer calculator to find out.

Debt consolidation loans

It’s becoming much easier to find unsecured personal loans that you can use to consolidate multiple debts into one affordable monthly payment.

Eventually, I got to a point where:

  1. I had too much debt to get new credit cards and
  2. Balance transfers obviously didn’t work for me because I would transfer the balance and just spend again on the old credit card. Sound familiar? If so, you may find help in peer-to-peer lending.

In 2006, I consolidated my credit card debt with a personal loan.

You’ll still need good credit to get a personal loan, but you may be able to get a loan when you wouldn’t be approved for a credit card. And if you’ve got excellent credit, you might even get a lower interest rate with a personal loan. Either way, the thing I love about personal loans is that you get a fixed term, usually three or five years, and monthly payment—you can’t be tempted to make minimum payments and you know your debt will be paid off at the end of the term.

If you’re serious about this route, Fiona is a great company we’re partnered with that finds you the optimum personal loan based on your individual needs and situation. Check out our full review here.

Monevo is another loan marketplace that can help you find the right loan for your credit score and budget. They partner with over 30 lenders, so you’ll have a wide variety of options. Check out our full review here.

If you think a consolidation loan could help, learn more about when a personal loan makes sense for debt consolidation or compare some of the best personal loan options.

See if You’re Pre-Approved for a Personal Loan Up to $100,000

Cash advance apps

One great alternative to a debt consolidation loan is a cash advance app. These apps give you an advance on your upcoming paycheck without forcing you to pay the high interest you’d be charged by a payday loan service.

Cash advance apps are best for small amounts just to get you through until payday since the full amount will be taken out of your next deposit.

An excellent choice is Empower, offering no-interest Cash Advances¹ on your paycheck from $25 to $250. The full balance of the advance will automatically be taken out of your next direct deposit, so you don’t need to worry about pesky late fees and longer repayment terms. Plus, you won’t need to submit a credit check in order to secure an advance.

You can also sign up for the Empower Card which offers no overdraft fees, no minimums, up to 10% cashback and you can get paid up to two days early*.

*Empower is a financial technology company, not a bank. Banking services provided by nbkc bank, Member FDIC.

Credit counseling and debt management

Although you can save money by getting out of debt on your own, sometimes it just doesn’t work. That’s where credit counseling and/or debt management may help.

But proceed carefully. Although the government has cracked down a bit in recent years, there are a lot of companies out there that advertise these kinds of services that will only make matters worse. Avoid debt settlement scams or any service that promises to reduce the total amount you owe. Avoid any service that charges big upfront fees.

The National Foundation for Credit Counseling is a nonprofit organization of reputable credit counselors that can direct you to somebody in your area that can help you make a plan to get out of debt. They may charge a fee for their time or on a monthly basis.

Another reputable organization is Accredited Debt Relief. They partner with well-known Debt Relief companies to negotiate your credit card debt. The process takes two to four years (in some cases a little longer) where you are paying set monthly payments towards your debt while the negotiation takes place.

You may also want to research (either through your counselor or on your own) entering a debt management plan. Under such a plan, a third-party company negotiates interest rates, payment amounts, and fees with your creditors. You make one monthly payment to the third-party company and they pay all your creditors.

Read 10 things to know about debt management companies to help you decide if this is a route you want to go.

Now, take action!

Are you still reading this? Amazing. Thank you! The bottom line is, none of all that I’ve just written is worth anything unless you take action. Getting out of debt is a long process, you CAN start today. And that’s what I ask you to do:

Within 24 hours I want you to do something—anything—towards getting out of debt.

Here are just a few ideas of things you could do, but I urge you to get creative!

  1. Cut up a credit card
  2. Post something you own for sale
  3. Write down a goal to earn more money
  4. Submit an application to a new (higher paying or additional) job
  5. Transfer a high-interest rate balance
  6. Confront your debt (write down your total debt and debt ratio)
  7. Reexamine your budget
  8. Make an extra debt payment
  9. Look into credit counseling

How are you going to get started?

Want more powerful ways to earn and save more money? Join over 31,052 other successful readers on my free email list now.

Empower Disclosure - * Eligibility requirements apply.
* Early access to paycheck deposit funds depends on the timing of the employer's submission of deposits. Empower generally posts such deposits on the day they are received which may be up to 2 days earlier than the employer's scheduled payment date. Cashback deals on Empower Card purchases, including categories, merchants, and percentages, will vary and must be selected in the app. Cashback will be applied automatically when the final transaction posts, which may be up to a week after the qualifying purchase.

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About the author

David Weliver
Total Articles: 304
David Weliver is the founder of Money Under 30. He's a cited authority on personal finance and the unique money issues he faced during his first two decades as an adult. He lives in Maine with his wife and two children.