Getting Out Of Debt In 2023: 5 Easy Steps

Nothing sucks more than carrying over debt to a new year. You are still taking money meant for your savings to pay down debt in order to get out of debt. This is because the responsibility of paying down on your debt has not ended.

It does not have to be this way in 2023. Since it is a new year, one is expected to tackle debt issues with new vigor and strategies to ensure financial success. This is what I am going to be offering to you in this article- new and easy ways to become debt free.

This article is more focused on the psychology of being debt-free, rather than a preaching-kinda ordeal. Surely, you will have a lot going into your savings when you are not actively making payments on monthly debts. Am I right?

This is the goal. By the end of 2023, I expect you to do exactly what I advice here in order to be debt free one year from now. Having said, here are what you need to do.

Practical Tips On Becoming Debt Free

Getting out of financial debt can be difficult. This is especially for debts, which accumulate interests and fees. The following below can help you gain an upper hand in your debt management, when you are struggling to make ends meet.

1. Renegotiate Your Debts

It is a new year. Most creditors will happy to see you continue to make successive payments toward your debt. It is also a great time to call your creditor for debt renegotiation.

By debt renegotiation here, I refer to trying to get a lower monthly payment on your debt. This is especially, when your current monthly debt repayment is creating financial stress for you.

Some creditors are willing to work with you, if the financial stress created by your debt payments can impede future payments. You probably saw it during the COVID-19 pandemic, did you not?

Usually, some lenders will ask for your annual salary to be able to come up with a new monthly payment. Be sure to be sincere, when dealing with them. If you have a solid history of making consistent payment, remind them of it during the renegotiation. It will work in your favor.

2. Stay Out Of Debt

It is smart to live debt free. This is because any extra money you have, is going into your savings or investment accounts. But, let us be realistic.

Sometimes, it is not easy to stay out of debt, is it now?

As American adults, we are saddled with good debts- car loans and student loans. Not by choice, but as necessity demands. And, it is very hard to stay out of these kinds of debts since we need them to maintain a semblance of life.

Although it is hard to stay out of debts like the ones mentioned above, it is not impossible though. You need to do one of the following below to stay out of debt:

Start Paying For Products Or Services With Cash And Debit Card

It will reduce the temptation of using a credit card. According to an MIT Sloan School of Management research, credit cards drive people to spend compared to cash. Besides the easy access to money, credit card promises to reward you for spending too.

As a result, you are more likely to get into debt since you are subconsciously reminded of the rewards during expenditures. This is in contrast to paying with cash or debit card.

Look at it this way, my good reader.

You can easily walk away from a service or a product, when you cannot afford it. But, it is not easy to walk out, when your credit card has unlimited cash for you to purchase with. Does it make sense now?

Avoid High Interest Credit Cards

If you are going to have a credit card, I highly recommend you go for the ones with little or no interest. Some credit card companies affiliated with banks, offer little or no interest credit card. So, avoid credit card piranhas because there are many of them.

Additionally, go for credit cards with no maintenance fees. Why is this important?

The smartest way to get out of credit card debt, is not to entangled yourself with additional credit card fees. What these fees do, is to get you to give a piece of your hard-earned money away. The interest cost on a credit card is enough to get you into deeper debt, if left unchecked.

Read my article on what to consider when getting a credit card. It will help you avoid getting into credit card debt traps.

Use Available Resources To Get Out Of Student Loan Debt

Did you read about how I graduated college debt free, my dear reader?

If you read the article, you will learn I graduated college twice with no student loan at all. Yes- you can pay for college without getting into debt. You do not even have to do it the way I did it.

Nowadays, there are thousands of programs designed to give graduates a shot at debt free living. The health field has the highest number of these loan forgiveness programs. Other majors have them too, but they may not be willing to pay 100% of your student loan debt like the health professionals.

Read my article, who qualifies for student loan forgiveness to see which career can get your student loan debt forgiven. Do not be shy to take advantage of these loan forgiveness programs to get out of debt. They are there for you and they work.

Spend Within Your Budget

A good budget is a great plan to be debt free. What it does, is to make sure you live within your means. As a working class adult, I highly recommend you create a personal monthly budget.

You can avoid getting into a debt, because a budget makes sure you do not spend your money unnecessarily. When you are strict on monthly expenditures, you can hardly get into a debt. And, this is what a budget does for you since it also tracks and categorizes your monthly spending.

With that said, let us consider the third tip on getting out of debt.

3. Take All Your Debts Into Account

If you have a lot of debts you are paying down on, it will be tricky keeping track of them all. There are two ways you can take your debts into account. Firstly, you can do this through budgeting apps which allows you to categorize your debts.

Or, you can do it through expenses tracking apps which add the debts as part of ongoing monthly expenses.

Be sure to download these app to categorize your debts. Set payment reminders on them too, so you do not miss payments. This is especially in situations where you have a lot of debts.

4. Seek Debt Consolidation Help

A debt consolidation is taking out a loan to pay all your loan debts. The goal of debt consolidation is to have one loan repayment, instead of multiple. This is a good idea for people with a lot of loan debts that end in loan default.

The best way to go about this, is to find a bank or financial institution which is willing to give you a low interest loan to pay off all your debts. As long as you have a steady income and a good credit history, this will not be hard to get.

Debt consolidation is one of the steps to becoming debt free. This is because you are now focused on paying down one loan instead of multiple loans. Also, you decrease the chances of you defaulting on loan payment since you are no longer struggling to keep up.

If you have defaulted on your student loans, read my article on getting out of student loan default. It will help you start your debt free living journey.

5. Do not Skip Your Debt Payments

There are consequences to skipping a payment. Besides incurring charges, most creditors will report you to a credit bureau. As a result, your credit history will look bad.

This is something you do not want at all. Creditors and financial institutions find it hard to lend to anyone with bad credit history.

So, be sure to set reminders on your phone for debt payments. Even better, I will advice you set automatic payment deductions from your bank account. Yes- your bank can help you set automatic deductions to any debt you have.

This way, you do not ruin your life in this new year over some debts.

Should You Save Or Pay Off Debt First In 2023

I recommend paying off your debt first, before trying to save any money. This is because it is hard to save money, when you are in debt. In fact, it is smart to pay off debt early.

Here are my reasons why.

Firstly, you have available cash after paying your debt early. Instead of debt eating through your income, you can now save any available money monthly.

Secondly, you do not have to worry about going into a loan default during financial crisis. By financial crisis, I refer to unpredictable events like the Covid-19 pandemic which happened a few years ago. The last thing you want, is debtors calling when you are trying to survive.

And this was the case for many who lost their jobs during the pandemic, was it not?

Well, we cannot put ourselves in such positions because we hope to save a little money. Take care of your debts first in 2023, then save after your debts are paid off. This is especially, when your debt is not a mortgage or a big debt whose payment is spread over decades.

What To Do After Becoming Debt Free

I do not know whether you have heard, but being debt-free is the new rich. This is because 22.2% to 43.9% percent of American households are in various debts. This is according to a Federal Reserve Bank of Chicago article.

So yeah, you have made it.

Now, it is time for you to start building your emergency fund. An emergency fund makes it necessary for you not to get into debt easily, during a disruption of your monthly income. You start by taking an account of your necessary monthly expenses and save at least six months worth of the expenses.

This will save as a buffer in case your income is disrupted in any way, which could cause you to go into debt. This is why your emergency fund cannot be touched, until the conditions which warrant the fund are met.

After having an emergency fund set, it is time for you to start contributing money to your savings. Your emergency fund is not your savings. Your savings are money you pay yourself, after before taking care of your monthly expenses. It can be a certain percentage of your monthly income.

Personally, I say start with at least 10% of your monthly income. If you bring home $3000 a month, save $300 monthly. Do not tell me it is not going to be possible doing this. Using a budget and an expense tracker app can help you make this possible.

Finally, try to put money aside for fun. You could trying saving money monthly for vacation, dates, hangouts, shopping and such. Just because you are trying to pay off debt in 2023, does not mean you should neglect other beautiful aspects of life. Be very engaged with life in this new year.

Just be sure to follow a strict budget and you will be going debt free for years!