No one wants to be in debt, but it’s a situation many people find themselves in.

Americans on average owe $5,875 in credit card debt and 40% have been in credit card debt for more than 5 years. It’s time to get out!

Even if you have a low income and have been trapped for years, there are effective steps you can take to manage your debt and break free. Let’s go over how you can turn your debt-free dream into a reality.

1. Stop Taking on New Debt

The first and most crucial step is to stop accruing new debt.

This means avoiding using your credit card, not opening new credit accounts, resisting loans for non-essential items (a debt consolidation loan with a low-interest rate may be a good idea), and not taking on any financial obligations that will increase your debt. It can be difficult if your income barely covers your monthly expenses but is necessary.

2. Create a Budget

List all your sources of income so you know exaclty how much you make in a month. Then determine your essential expenses, both recurring and variable.

Once you have those numbers subtract your expenses from your income. The rest of the money goes to paying off your debt. A budget is your financial roadmap.

3. Know How Much You Owe

Facing what you owe can be intimidating but essential if you want to get out of debt.

Gather all your financial statements and make a list of all your debts, including their interest rates, monthly minimum payments, late fees, and any other penalties. Now that you have this data, you can form a repayment plan.

4. Cut Your Spending

Look for ways to reduce your expenses!

Maybe you can cut cable, reduce utility bills, switch phone plans, cook at home, ditch the gym, or look for coupons and promo codes. The possibilities are endless!

Every dollar saved is a dollar that can go towards reducing your debt.

5. Earn Extra Money

There are plenty of ways these days to increase your income. The gig economy has expanded options to include dog walking, ride-sharing, food delivery, and more. Or you could choose to sell unused items, become a tasker on Task Rabbit, or find a more traditional part-time job.

Anyway you do it, it’s important to increase your income and put all the extra money towards your debt.

6. Try the Snowball or Avalanche Methods

The two tried and true strategies to get you out of debt are the snowball method and the avalanche method.

The snowball method involves paying off the smallest debts first while making minimum payments on the rest. You get to celebrate small milestones and have instant motivation to keep going.

The avalanche method, on the other hand, focuses on paying off debts with the highest interest rates first. This way you keep more money in your pocket.

Choose the method that best suits your situation and your personality.

7. Negotiate with Creditors

If the interest rates are making it impossible for you to keep up, reach out to your creditors to negotiate better terms. This could mean lower interest rates, extended payment periods, or even reducing the total amount owed.

Creditors are often willing to negotiate if they believe it increases their chances of getting repaid and you’ve kept up with payments in the past. Be polite and respectful and you may get the terms you need.

8. Explore Debt Relief

If your debt situation is particularly dire and no matter what you do it doesn’t seem to make a difference, consider exploring debt relief.

Debt relief options include debt consolidation, credit counseling, debt settlement, or even bankruptcy as a last resort.

Debt relief companies can negotiate with creditors on your behalf to get better terms and/or decrease the amount you owe. Research and understand the implications of each option before proceeding.

Final Thoughts

Debt can feel like a trap, especially if you have a low income and not much money to spare. But it is possible to get out!

Follow these strategies and you’ll make progress eliminating your bills one by one. Remember it may take time, but the freedom from debt is worth the effort.