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Digging Your Way Out of Debt

Credit Wise (featured column)
by Jennifer Wallis

If you're buried under a mountain of debt, now is the time to roll up your sleeves and start digging yourself out. With the right plan, some sharp tools, a lot of determination, and some willpower, you can become debt-free.

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Whether your debt load consists of a few dollars or a few thousands of dollars you don't have to live under the strain of debt anymore. Stop charging and take charge. You will breathe a lot easier.

Here's how to dig your way out of debt:

Stop Burying Yourself Deeper 

If you are serious about getting our of debt, the first thing you must do is to STOP CHARGING! You can't dig your way out of a hole if you are shoveling dirt on yourself at the same time. Whether you want to cut up the cards or just hide them from yourself, you will have to stop using them.

Develop a Plan  

No self respecting climber tackles a mountain without a plan; not if he wants to make it out alive anyway. You must know where you are and where you want to go at all times. While a debt reduction plan probably doesn't have life threatening consequences, it's still imperative to know how much you owe and what your goals are. Figure out your take-home pay, living expenses and exactly how much you owe (see our free budget forms). If you're afraid to add it all up, it's probably a good sign that you need to take action now.

Draw a Map

The fastest way to get out of debt is called the "Rollover Method" a.k.a. the "Snowball Method". Using this method, you decide how much you can afford to pay every month toward your consumer debt. If your minimum payments are $500.00 and that's all you can currently afford, that is OK. You have to start somewhere. You will vow to yourself, to your spouse, kids, dog, neighbor, (basically anyone that will listen) that you will pay that amount toward your debt each month.

Roll it Over

As accounts pay off, you roll that money to another debt. As your balances go down, so will your minimum payments but is it OK to decrease your payments? Only if you want to be in debt for the next 20 years. If you are faithful to the Rollover Method, you can usually get out of debt in 5 years or less. While that may sound like a long time, think about this: If you don't start paying your way out of debt now, where will you be in 5 years? You will probably still be struggling with debt.


Negotiate the lowest interest rates. Your debt reduction plan will go much quicker if you have decent interest rates. If you have a good payment history, you may be able to ask your credit card company to give you a better rate. For tips on how to negotiate a lower rate read my column "How to Negotiate Lower Interest Rates."

Stop Shifting the Problem

There may be times where a consolidation loan or home equity loan may be a good idea. If you can really stop charging, are able to qualify, can get better interest rates, and get to deduct the interest from your taxes, a loan can be a better idea than paying high interest rates on credit cards. However, be aware that sometimes a loan can just  perpetuate the problem. You are taking unsecured debt and turning it into debt that is secured with your home so it is putting your home at risk if you are unable to repay that loan.

I have counseled many people who chose a loan to solve their debt problem. The trouble was that it did not teach them any different spending habits and instill any discipline in them. Therefore, they came back to me a year later with a home equity loan that had paid off their previous credit card balances along with the new credit card debt they have incurred since they got the loan. Sometimes, it is better just to start paying off the debt instead of creating more potential problems.

Change Your Spending Habits 

If you have been using credit cards to live beyond your means, it is only natural that you will have to change the way you spend your money in order to get out of debt. Find out where all of your money is going by writing down everything you spend on a tracking sheet. Examine your habits and determine how you can change them.

Take Responsibility  

While it is easy to blame others for your financial mistakes, try to keep it in perspective. If you charged the debt, it is your responsibility, if possible, to pay it back. Blaming others or feeling sorry for yourself for having to "suffer" through paying back your debt won't help anyone. If you realize that you made some incorrect choices but now you are taking steps to correct those mistakes, debt repayment can be a liberating process. It's a great accomplishment to change your ways and fulfill your obligations and you should be proud of yourself.

Sharpen Your Tools

Instead of beating yourself up about your debt issues, learn from them instead. Many local credit counseling agencies offer free or low cost counseling to offer budgeting, credit savvy, and debt repayment advice. Many also offer classes that can give you tips on how to make excellent buying choices in the future. Once you are out of debt, don't repeat the same mistakes. Get educated about how you can make your money work for you and start saving and investing in your future.

While debt can be a tough load to bear, it is a problem that can be solved. Nearly every debt-laden individual will eventually get to the point where they are tired of living that way. Some wait until bankruptcy is their only option. Hopefully, most will learn that there are steps they can take to solve their problem.

The debt elimination process can be difficult but if you learn from it, it can be one of the most life-changing accomplishments that anyone can have. I hope if you are burdened with debt that you will start climbing your way out and toward the light.

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Return to Credit Cards and Debt

Copyright © 2005 by Jennifer Wallis. All rights reserved.

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