Are you Drowning in Debt? Here’s How to Save Yourself

The world gets more expensive every day (gas prices, anybody?). Unfortunately, wages have remained more or less the same. To bridge the gap, many Americans are turning to credit and loans for help. Is it any wonder that nearly half of all 18–34-year-olds feel like they are “drowning in debt”?

When you feel overwhelmed by your debt, other things start to feel less important. For example, if you’re struggling to make ends meet now, how can you possibly afford to build an emergency fund? And did you know that 27% of Americans have no emergency fund?

Are you drowning in debt?

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You’re not alone

The average American has around $90K in debt from credit cards, automobile loans, student loans, and healthcare costs (aka medical bills). 

Federal Reserve data shows that Americans are still paying down a collective $1.75 trillion in student loans. Experian says the average student loan taken out by millennials clocks in at nearly $39K. 

The Survey of Income and Program Participation (SIPP) says that one in ten Americans carry “significant medical debt.” About 6% of American adults owe more than $1K in medical debt, while 1% have medical debt of more than $10K. 

In terms of credit card debt, Americans owe a whopping collective total of $843 billion dollars, with the average cardholder carrying between $5K-$6K. 

Hopefully, the data will help you realize that you are far from the only person who feels like they are drowning. And honestly, what matters isn’t how much debt you have right now but what you plan to do about it. 

Signs you’re drowning in debt

  • Your phone rings all the time because the debt collectors and credit card companies keep calling you
  • Your credit score is falling lower and lower every time you check it
  • Your credit report is mostly negative information
  • You pay a lot of late fees
  • You juggle your bills, paying only some one month and then others the next
  • All of your credit cards are maxed out
  • Even though you pay your payments each month, your credit card balance keeps going up
  • You are depending on high-interest payday loans, title loans and cash advance apps to help you get from payday to payday
  • You’re far enough behind on car payments that you’re worried about repossession
  • You’re so far behind on mortgage payments you’re worried about foreclosure
  • You barely make the rent each month and often face “pay now or get evicted” notices posted on your door

12 steps to save yourself

Even though it might not seem true now, you can dig yourself out of debt. It will take time and some definite work on your part, but it’s possible! Here are some steps to help you get back on track.

1. Acknowledge the problem and research your options

The first step to overcoming a problem is to admit that you have a problem in the first place. Once you’ve faced your debt, you can start figuring out how to deal with it. Many great resources are out there to help you with this. Here are a few to help you get started:

2. Form a plan

The best way to build a plan is to start at the end and work your way backwards. You have a goal. What do you need to have in place to reach that goal? Now, what do you need to do to get those things in place? And what needs to happen so you can take those actions? You get the idea. 

Work your way backward until you have an actionable step (or a few) you can actually take. Then just follow your own roadmap!

3. Start a budget

A budget is sort of like a to-do list for your money. After all, if you don’t know where your money is going (or supposed to go), how will you know where to adjust? 

If you’ve never made a budget or have trouble sticking to one, help is available! Check out our guides to setting up a budget and budget tracking apps!

4. Stop investing

A lot of experts will tell you that you should be saving for retirement. That’s generally true, but the golden rule of investing is don’t invest money you cannot afford to lose. 

Right now, you can’t afford the risk that comes with an investment portfolio or market-based retirement fund. Put these things on pause. You can always go back to them later. The one exception could be if your company offers a company match. If it does, that’s basically doubling any money you invest, so it’s worth contributing that much if you can manage it.

5. Cut back on nonessential purchases

It is all too easy these days to click “add to cart” and something is on the way directly to your home. Is that item food? Shelter? Medication? Essential for transportation to and from work? Is it for a mandatory work dress code? No? Then you probably don’t need to buy it. 

Now, nobody is telling you that you can’t have any fun when you’re paying off your debt! You simply have to get more creative! All that stuff that you’re used to spending money on can usually be found for free if you’re willing to hunt it down. 

Using the envelope method is a good way to ensure you’re not spending money on non-essential stuff. If you need to, you can even make this system cash-based. 

6. Check your credit

Did you know that most people have errors on their credit reports? It’s true! Make sure that your credit report is error-free. Not only will this raise your credit score, but it will help you figure out exactly how much debt you owe. 

7. Establish a repayment plan

There are two basic types of repayment plans: the debt snowball and the debt avalanche. 

  • The debt snowball: you pay the minimum amount due on every debt and any money leftover in your budget is put toward the balance of your smallest debt. When that is paid off, you prioritize the new smallest debt. The idea is that paying off a balance can help you build momentum to stick with your plan.
  • The debt avalanche: you pay the minimum amount due on every debt and put any leftover money toward the debt with the highest interest rate. The idea here is that you will pay your debt down faster and for less than you’d spend using the snowball method. 

You can also put together a plan of your own. For example, maybe you pay the minimum due on every debt and then allocate any leftover money equally across your debts. Or prioritize your oldest debt. Or the debt that most needs to be paid off for you to achieve a specific goal. For example, pay off what you owe to your previous landlord so that you’ll have an easier time moving into someplace new (and hopefully cheaper). 

To learn more about the differences between debt snowball and debt avalanche, check out this video:

8. Cut up (or hide) all of your credit cards but one

In our current digital age, the equivalent of card cutting would be deleting the cards from your Apple or Google wallet. Sure, you can simply click over to your creditor’s website and look up your card info. Hopefully, having to take those extra steps to make a purchase will give you time to consider whether or not it’s essential.

You can also call your credit card companies and ask them to set your cash advance limit to zero and lower your available credit. That allows you to keep the account open but will prevent the risk of overspending.

The one card you keep open (for emergencies only) shouldn’t be easy to access. Remove it from your digital wallet. Only allow auto-payment for necessary bills, like utilities or water. Otherwise, remove it from your nonessential accounts to that whenever you’re tempted to buy something, you have to reenter your card information.

Some people recommend putting it in a bag of water and then putting the bag in the freezer and freezing your card inside, so make it more difficult to access your card number and other numbers.

9. Look for ways to earn extra money

If you can do so, put some work into bringing in more money. For instance, maybe negotiate for a higher salary at work (or find a job that pays better). 

Other options would be to ask for overtime work, take on a second job, or start a side hustle. Side hustles are very popular these days. 

READ MORE: Best ways to find cash in a pinch

10. Negotiate with your lenders

Lenders and creditors would always rather get something from you than nothing. If you’re having trouble making payments, contact your lenders and ask them to help you. Sometimes they’ll give you a lower interest rate or reconfigure your account so that your minimum payments are smaller. 

11. Talk to a credit counselor

You can usually get credit counseling for free or at a very low cost. The trick is to work with a credit counseling agency that is not for profit. 

Your credit counselor will look at your debt situation and help you devise a plan to manage it. If you need help managing your debt or don’t think you can handle managing that plan yourself, they will create what is called a Debt Management Plan (more on this shortly). 

12. Try debt consolidation

Depending on your situation, you might be able to accomplish a lot with debt consolidation. Debt consolidation is exactly what it sounds like: using a single loan to pay off several credit cards or smaller loans. There are even some lenders that will offer personal and debt consolidation loans for borrowers who have bad credit.

Consolidating your debt will dramatically reduce how much of your money goes toward interest payments and can be a great way to save some dough.

READ MORE: Debt consolidation vs. debt settlement

If you’re in immediate crisis, seek help

Forget your pride, it’s time to ask for help. Reach out to your friends and family members for help. Set up a GoFundMe. 

Seek out local food pantries, church programs or other resources.

If you need help now, you can also contact your local department of human services or a nonprofit community agency by dialing 2-1-1. These places can help you access programs like LIHEAP, WIC, emergency rental payments, community health centers, Medicaid, SNAP, etc. 

READ MORE: If you need help now, here’s how to get free money and other assistance

Other debt relief options

If all of your debt is credit-card based and you have a decent credit score, you should look into a balance transfer credit card. These cards offer grace periods of low or even zero interest and work like a debt consolidation loan. Simply use the balance transfer card to pay off your other cards. Now you just have one payment to make. 

Sometimes, though, you simply aren’t able to manage your debt on your own. That’s where professional debt relief comes into play. As previously mentioned, non-profit credit counselors are available all over the country. 

  • Debt settlement: Credit counselors will negotiate with your debtors to allow you to “pay off” your balance for less than you actually owe. It’s a last-ditch effort but worth looking into.
  • Debt Management Plan: Your credit counselor will put together a plan with a single monthly payment. You’ll make that payment to your credit counselor. Your credit counselor will then divide that lump payment up into individual payments to your creditors.
  • Bankruptcy: Filing for bankruptcy will hurt your credit score for several years, but it could also mean a fresh start. It won’t necessarily discharge all of your debts, though, and there will be some filing costs you’ll have to pay.

The bottom line

Remember, you are not the only person struggling with debt. There are many other people facing situations similar to your own. What matters now is how you resolve your debt. Use the tips we’ve shared here to help you do exactly that.


Should I refinance my mortgage or use a home equity loan?

These can be good options when you first start to feel the squeeze of debt. These would pose too much risk if you’re drowning or already scared about foreclosure. The last thing you want is to risk losing your home!

What are Dave Ramsey’s baby steps?

The “baby” steps are the steps you should take to build a financially solid future. They include things like building an emergency fund, paying off your debt, etc. 

What is a credit-builder loan?

A credit-builder loan isn’t really a loan at all. It’s more like building up a savings account that you can then use as a line of credit. As you pay into your account, your payments are reported to the credit agencies, which helps you build a positive payment history and raise your credit score. You can find more info here.

Why are payday loans bad?

The biggest reason that payday loans are bad is that they are designed to keep you dependent on them for survival. Their interest rates are so high that many people have trouble paying off their first loan, so they take out a second and get stuck in a never-ending hell-loop of payday loan payments. 

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