Anyone living with a mountain of debt knows that getting into debt is an absolute breeze. But digging your way out? Now, that’s the hard part.
Most of the time, something drastic has to happen for us to realize our debts have become an emergency — and that it’s time to make a change. But where do you begin?
When you’re bleeding money in so many directions you can barely keep it straight, figuring out what step to take first is the worst (and hardest) part. And sometimes, the complexity of your situation can even leave you paralyzed. When you’ve got debt coming out of your ears, it’s easy to stick your head in the sand and hope it all goes away.
Sadly, it never does.
The First Step Out of Debt: It’s Different for Everyone
Everyone who has ever dug their way out of debt already knows exactly what this feels like, yet they managed to create a plan of escape that worked. But how?
In an effort to share some of the best “first steps” out of debt that could work for anyone, we asked several popular debt bloggers how they got started at the very beginning. Here’s what they said:
First Step: ‘I prioritized my loans by interest rate or sense of urgency.’
“The first thing I did to get out of debt was find out how much I owed and look at my interest rates,” says Melanie Lockert of DearDebt.com. She began her debt-free journey by taking a look at everything she owed and organizing it by interest rate. Using this method, she says, she was able to get a mental picture of her situation in its entirety, which allowed her to create the best plan of attack.
“Once I saw that my graduate loans’ rates were much higher than my undergraduate loans, I decided to focus on the avalanche method, getting rid of high-interest debt first,” she says. “It’s important for me to save money even while paying off debt, so I knew tackling the higher interest would work best for me.”
Whether you opt for the debt avalanche, debt snowball, or some other method, seeing how much interest you’re paying might be enough to shock you into action regardless.
Paula Pant of AffordAnything.com took an entirely different approach when it came to paying off her rental properties. To get the ball rolling, she says, she started throwing extra cash at the loan “that’s most emotionally annoying.” It had neither the highest rate nor the lowest balance, but it was the one she wants to get rid of most. “That’s a motivating strategy,” she says.
In other words, you can begin the process by attacking any loan or debt you want. The main step to remember is to pick one and get started.
First Step: ‘I created a budget.’
“The first step I took to get out of debt was start a budget,” says John Schmoll of FrugalRules.com. “I had no idea where my money was going — that’s what got me into trouble in the first place.”
After realizing he was using credit cards to finance a lifestyle he couldn’t truly afford, Schmoll decided it was finally time to figure out where his money was going and create a budget that could fix the problem. For Schmoll, that meant tracking his spending and forming a budget that would keep his family accountable.
Here at The Simple Dollar, we’re big fans of the zero-sum budget. However, there are several other popular budgeting methods to explore, each with their own set of pros and cons.
No matter which one you choose, you’ll likely end up in a much better spot. For Schmoll and his family, budgeting was “the beginning of what began the journey of killing my debt once and for all.”
But creating a budget isn’t always enough, says Chris Peach of MoneyPeach.com. While it’s cute to say you’re going to pay down debt, says Chris, “cute doesn’t get it done.”
“You must tell your money what to do or it takes off and does what it wants. Get on a budget and start telling your money what to do.”
When you’re ready to leave your debt behind, here’s how to take that first step. Photo: Kristaps Bergfelds