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Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo
Falling into debt can happen easily, but climbing out of it when you have no money can seem nearly impossible. According to a study by the Federal Reserve, 40% of Americans would have trouble covering an unexpected $400 expense. With so many people living paycheck to paycheck, an unexpected crisis like job loss, medical bills, or car trouble can quickly snowball into a major debt problem.
When you’re facing debt with an empty wallet, the situation can feel hopeless. But there are ways to dig yourself out of debt even when money is tight. It will take discipline, sacrifice, and some creative thinking, but debt freedom is possible for anyone willing to put in the work. Here are 8 effective strategies to get out of debt when you have no money:
1. Get on a bare-bones budget
The first step is to cut your expenses to the bone. Review all of your spending over the past 2 months. Categorize every expense and look for places to trim the fat. Target discretionary spending first – dining out, entertainment, shopping etc. Then look for ways to cut back on variable expenses like groceries and transportation. The stricter you can be, the faster you can get out of debt. Use budgeting apps or spreadsheets to track spending.
2. Increase your income
Bringing in more money each month is crucial when you’re trying to get out of debt. First, ask for a raise or promotion at your current job. If that’s not an option, get a side hustle, part-time job, or freelance work. Drive for a rideshare service, deliver food, walk dogs, mow lawns, or offer services on TaskRabbit. Sell unwanted items online. Every extra dollar goes toward debt repayment.
3. Lower interest rates
Call each of your creditors and negotiate for lower interest rates. Be persistent and explain your financial hardship. Often creditors will lower rates for borrowers who have shown a willingness to pay. This can really accelerate debt repayment. If they won’t budge on rates, negotiate for lower payments or waived fees.
4. Pay minimums on all debts except the smallest
The debt snowball method prioritizes paying off your smallest debts first Attack the smallest debt with a vengeance while paying minimums on the rest Once the smallest is paid off, focus all efforts on the next smallest debt. Eliminating small debts frees up cash flow fast so you can move up the list.
5. Consider debt consolidation
If you have high-interest credit card balances, consolidating using a 0% balance transfer credit card or personal loan can drastically cut interest costs. Make sure to calculate how much you’ll pay in fees first. Set a calendar reminder for when the 0% intro rate ends to avoid deferred interest.
6. Use your tax refund wisely
Many people squander their tax refund on impulse purchases. But smart money management is using that influx of cash to pay down debt right away. Also adjust your payroll withholdings so you get more cash upfront rather than a big refund check.
7. Avoid new debt
It may be tempting to open new credit cards or take out loans when you’re struggling, but new debt only exacerbates the problem. Vow to not take on new debt sticking to this rule no matter what until you’re back in the black.
8. Seek free debt help
Non-profit credit counseling agencies like Money Management International offer free advice on getting out of debt. They can help you negotiate with creditors, develop a budget, and encourage you. There are many ethical options for help if debt feels overwhelming.
Living with debt you can’t immediately pay off can be demoralizing. But developing tunnel vision on debt freedom and taking focused action can make all the difference. Implement these strategies and watch the balances start dropping. With commitment and grit, you can take control of your debt, even when the budget is empty. The sense of accomplishment you’ll feel is well worth the momentary sacrifices.
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Amy Sorter is an award-winning business, finance, and real estate journalist.
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At Bankrate, we take the accuracy of our content seriously.
“Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced.
Their reviews hold us accountable for publishing high-quality and trustworthy content.
Bankrate is always editorially independent. While we adhere to strict , this post may contain references to products from our partners. Heres an explanation for . Our is to ensure everything we publish is objective, accurate and trustworthy. Bankrate logo
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our banking reporters and editors focus on the points consumers care about most — the best banks, latest rates, different types of accounts, money-saving tips and more — so you can feel confident as you’re managing your money. Bankrate logo
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo
Create a budget
A monthly budget is a list of your income and expenses. It allows you to see where your money goes and look for ways to manage your money more efficiently.
“Creating a budget is important for anyone who has a financial goal, especially when it comes to reducing credit card debt,” says Evan Press, a Certified Financial Planner with Equitable Advisors, LLC. “Doing so helps manage a person’s finances, so they can pay off that debt as soon as possible to avoid high interest rates.”
Whether you build your budget on a spreadsheet, rely on a budgeting app or simply jot it down on paper, be sure to:
- List all sources of income.
- Determine fixed expenses (which don’t change), including auto payments, student loan payments and rent.
- Figure out variable expenses (which do change), including groceries, utilities, clothing and other costs.
- Subtract the total expenses from the total income.
The remaining amount, if there’s any left, is known as discretionary income.That discretionary income is what you’ll use to pay down debt faster so you can get out of debt sooner. If you don’t have any extra money, you’ll need to find ways to increase the income you have or spend less on variable expenses.
How to Pay Off Your Maxed Out Credit Cards with ZERO Cashflow!!!| @JustJWoodfin
FAQ
How can I pay off my debt if I have no money?
- Assess your debt load.
- Look into DIY debt payoff methods.
- Consider debt consolidation.
- Create a budget and stick to it.
- Find ways to lower your bills.
- Get a second job.
- Explore debt relief options.
How do I pay off debt if I live paycheck to paycheck?
- Tip #1: Don’t wait. …
- Tip #2: Pay close attention to your budget. …
- Tip #3: Increase your income. …
- Tip #4: Start an emergency fund – even if it’s just pennies. …
- Tip #5: Be patient.
How to get rid of debt without paying?
- Bankruptcy: Writes off unsecured debts if you cannot repay them. Any assets like a house or car may be sold.
- Debt relief order (DRO): Writes off debts if you have a relatively low level of debt. Must also have few assets.
- Individual voluntary arrangement (IVA): A formal agreement.
How to get out of debt when you’re poor?
- Know what you owe. …
- Create a budget. …
- Resist taking on new debt. …
- Pick a debt paydown strategy. …
- Explore aggressive debt paydown options. …
- Earn extra money.