8 Legit Ways to Eliminate Your Debt for Good

There are many ways to chip away at your debt starting today — here’s eight you can work on right now.

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Updated May 13, 2024
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If you’re overwhelmed thinking about how to pay off debt, you’re not the only one. The New York Federal Reserve reported that in the first quarter of 2022, U.S. household debt climbed to $15.84 trillion.

Whether you fell into debt by overspending on credit cards or faced an unexpected emergency expense, your debt doesn’t have to be a daily struggle.

Regardless of the amount you need to repay, these tips could help you get rid of debt faster and stay debt-free longer.

8 ways to pay down your debt

Looking at your debt as a ballooning balance can feel debilitating. But making changes in your day-to-day choices can turn into impactful results.

1. Make a budget

It sounds simple enough, but creating a budget — and sticking to it — can be one of the most powerful measures against debt. When figuring out your budget, you need to account for necessities, discretionary spending, and building up rainy day savings.

To set up a budget, consider the following:

  • Know your net income. This is your “take-home” income, after taxes.
  • Calculate your necessities. Subtract necessary expenses from your net income. Include your debt payments (such as credit cards, auto loans, and student loans) and other recurring bills.
  • Automate your emergency savings. One of the best ways to prevent falling further into debt is having an emergency fund ready. Automatically deposit money into a savings account each month — even just $20 a month adds up over time.
  • Track your spending. Use a budgeting tool such as Mint to easily track your debt and savings goals, and see where you’re overspending so you can make adjustments.

Finally, the most important step when creating a budget is committing to it. It takes time to chip away at your debt, so give yourself a chance to see progress.

2. Downsize your life

Consider temporarily downsizing your lifestyle until you’ve paid off your debt. This can include downsizing your space or relocating to a cheaper neighborhood. If you live by yourself, consider getting a roommate to help with rent and other household expenses.

If your area offers reliable public transportation, doing away with your car cuts costs like gas, auto insurance, and maintenance.

3. Pause pricey habits

With a debt-free future in mind, now is the time to drop expensive habits and hobbies. For example, instead of going out for dinner and drinks with friends every week, invite them over for a movie and potluck affair.

And although your physical health is important, it’s just as important to prevent debt from affecting your mental health. Exchange premium fitness memberships and meal delivery subscriptions for a free jog around your neighborhood and home-cooked meals.

4. Increase your income

Search for ways to earn more income, either at your existing job or by taking on a new job. Be your own advocate by noting the reasons your job performance merits a raise, and talk your manager to see what can be done.

You can also look into side hustles for supplemental income, such as driving for Lyft, freelancing, or tutoring to earn more on the side.

5. Negotiate lower interest rates

A meaningful way to help you reduce credit card debt in particular is negotiating your interest rates. According to the Consumer Financial Protection Bureau’s latest Consumer Credit Card Market report, the average APR for general purpose credit cards is as high as 19.2%.

Lowering your interest rates could save you hundreds, if not thousands of dollars. For example, if you have $4,000 in credit card debt at 19.2% APR and make $200 monthly payments, you’ll accrue an additional $859 in interest charges. But if you negotiated down to 15% APR, you’d lower your interest charges to $632 — that’s $227 saved from one phone call.

Reach out to your credit card issuers and simply ask for an interest rate reduction. If they don’t offer it outright, explain why you deserve a lower rate and mention a competitor rate to see if they’re willing to match it.

6. Look at your tax withholdings

For most employees, your employer withholds a portion of each paycheck and diverts it to the IRS for your income taxes. But if you consistently get a big tax refund each April, your employer may be withholding too much money from each paycheck. That means you’re essentially giving the government an interest-free loan while you’re struggling to repay your debt.

Instead, ask your employer to adjust the amount withheld so you’re not overpaying income taxes throughout the year. Check out the IRS tax withholding calculator to see how much you should be withholding from each paycheck.

7. Make extra payments

As you pay down your balances, funnel any additional funds toward extra debt payments. By directing additional payments toward your principal balance, you’ll cut down on accruing interest and get out of debt faster.

When you get additional income, such as a bonus, tax refund, or inheritance, consider using it to repay your principal. As soon as you’re out of debt, you’ll be able to pursue other financial goals, such as starting a down-payment fund for a home.

8. Try the debt snowball method

Paying off your can feel paralyzing — especially if you have a lot of it. But creating a structured plan may help you strategically pay off debt.

One popular method is the debt snowball strategy. To enact it, list all your debts by balance from smallest to largest. Continue to make the minimum payments on all your debts, but funnel any extra money you have toward the smallest debt. After you’ve paid off that debt completely, move on to attacking the next smallest debt, and so on — continue doing this until you’ve paid off all your debt.

This strategy is popular because you can accomplish wins relatively quickly. By eliminating one debt and crossing it off your list, the psychological boost can keep you motivated.

There’s no one-size solution when paying down your debt. During this process, avoid adding more to your total debt, and try a few strategies that not only feel right to you but are sustainable.

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Author Details

Jennifer Calonia

Jennifer Calonia is a native Los Angeles-based writer and editor with eight years of experience in personal finance. She's passionate about helping others pay off debt, navigate family finance, and use rewards credit cards, responsibly. She's been featured on Forbes, The Huffington Post, Business Insider, Credit Karma, Nerdwallet, and more. To find more information about her work, visit JenniferCalonia.com.