How To Get Out Of Debt Even When You’re Broke

Get out of debt when you're broke

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Debt sucks. But not all hope is lost. Even when you’re broke AF, you can still make the right moves and put yourself in a position to get out of debt for good.

And I’m here to help you put together a step-by-step plan to eliminate your debt once and for all.

Even if you have bad credit, are on a low income, or are broke, you can still use this debt payoff guide.

But first, are you in really bad shape? Here are some ways to find out if you are.

Read also: How to lower your student loan debts

8 signs you have too much credit card debt

If used correctly, credit cards can be used to your advantage. You can accrue reward points and end up essentially getting paid to use a credit card.

But playing this game is dangerous, as one missed payment leads to paying interest, paying late fees and a bad credit score.

The average American household is saddled with $10,000 in credit card debt. But the total amount of your debt isn’t the number the credit bureaus are looking at.

They’re looking at your credit utilization rate and debt to income ratio. A good credit utilization rate is anything less than 25% while a good debt to income ratio is anything less than 36%.

Rather than look at data to determine whether you have too much credit card debt, you can also determine whether you’re in over your head by looking at these 8 signals.

  • You’re In Denial

If the thought of your credit card debt enters your mind throughout the day and you brush it off as no big deal, you’re lying to yourself.

If you then lie to your spouse about the severity of your debt, you truly have more debt than you can handle.

Being in denial about your issues isn’t going to help. The only way to get out of credit card debt is to first admit that you’re in trouble. Then, and only then, can you begin to create a plan to get out of debt.

  • You Don’t Know How Bad It Is

How much debt do you have? If your answer to this question is “a lot” then that’s a clear signal you have too much credit card debt.?

If you fear checking the balance so much that you ignore it, you need to realize you’re in deep trouble.

In order to dig yourself out of this hole, you first need to know the size of the problem so you can create a plan of attack.

  • You Only Make The Minimum Payments

Paying the minimum payment may make you feel like you have control of your debt. After all, you’re not in collections and there’s no late fees, so what’s the problem?

The problem is that you’re not really reducing what you owe, you’re only paying the interest. Your balance then grows and pretty soon you’re in a situation where it can take you a lifetime to pay off your credit card debt.

The only way you’re going to get out of debt is to pay at least double the minimum payment so that you can take a chunk of the principal each month.

  • You Have A Maxed Out Credit Card

Having a credit card that’s maxed out is a big sign you have too much credit card debt.

For the sake of your credit score, you should never use more than a quarter of your available credit.

  • You Use Your Credit Card For Everything

If you are a responsible credit card user, you can use a rewards credit card to make all of your purchases.

But if you don’t have a rewards credit card and you can’t pay off the balance each month, you should not use your credit card for everything.

If you find yourself using your credit card for groceries, gas and other everyday purchases, it’s a sign that something is wrong.

  • You Can’t Save Money

When you can’t save money from each paycheck you’re forced to use your credit card to make ends meet each month.

A lack of an emergency savings account is a leading cause of credit card debt because you’re not able to handle an unexpected emergency.

  • You Can’t Get Another Credit Card

You know you’re in too much credit card debt when you need another card and you get denied for it.

When the credit card company deems you as too much of a risk, it is validation that you have too much debt.

  • You Pay One Card With Another

Paying one credit card off by transferring the balance to another may work, if done correctly. You can transfer the balance of your 29% interest card to a card with a 0% introductory interest rate.

It sounds like the solution to your problem, but if you don’t pay off the balance before the introductory period ends, you’ll begin paying interest again.

Another thing that happens when you juggle your balances is that you acquire new credit and you feel like it gives you a license to spend some more.

If you have the need to pay one credit card off with another, it’s a sign that your credit card debt has gotten out of control.

How to pay off your debt early even when you're broke

Identify why you’re in debt

There are all sorts of reasons why debt can become a major problem in people’s everyday lives. It doesn’t take a whole lot to turn your finances upside down.

Knowing how to try and avoid debt is crucial to ensure you don’t make bad mistakes. One way of doing this is to equip yourself with the knowledge of how most people find themselves in debt.?

So, here are the top ten causes of debt.

Lack Of Income

Failing to make enough money in your job will eventually lead to debt. It’s that simple! If you’re finding it difficult to obtain employment in the first place, you’ll be in an even tougher position.

Trying to figure out what you can do about it is a little difficult. Obviously, you should be taking the time to better yourself. If you can find any opportunities to progress in your career, you should take them.

Get help from career advisors and find a way to get yourself back on your feet. You’ll also be entitled to benefits if you’re struggling to make ends meet.


Unfortunately, addictions don’t offer any long-term positives, but plenty of negatives. As well as all the damage you’re doing to your body; you’ll be putting yourself at serious financial risk. In time, addictions like drugs, alcohol, and especially gambling will lead to huge money loss.

It’d be naive of me to suggest that you should stop right away. Instead, think about investing savings into a rehab program. If you can recognize that there’s an issue, here, that’s a great start. Now, seek the help of others to ensure you don’t go any further into debt.

Hopefully, you’ll get your life back on track as well.


The separation of a couple often leads to money worries. Disagreements about who is entitled to the money will arise, and one person inevitably ends up worse off than the other.

Divorce is another one of those circumstances that can strike at any time. You might have had some healthy finances before, but now you’re in trouble. You can seek assistance once again, such as consulting some family law firms mayfair has to get the help you need and preserve what finances you have. But overall this might be a case of living carefully for a while until you’re back on your feet.

Get used to living a simpler lifestyle without some of the luxuries that you will have become accustomed to. If possible, seek help from family and friends at this difficult time.


You don’t get a warning when illness strikes, and there’s no hesitation to spend money on reviving the ill. Unfortunately, some illnesses are very costly to treat. Your savings could be zapped in a matter of months, and there’s nothing you can do about it.

This is where you’d hope that everyone will chip in to help the person out. You could even get creative and run a fundraising scheme to obtain the necessary funds. If this isn’t possible, you might have to seek out a loan to help you in the meantime.

You could always talk to medical professionals about your concerns and get their expert advice on how to proceed. They might suggest taking an alternate route to solve your money worries and still pay for the necessary treatment.

Bad Loans

There are all sorts of loans out there for you to utilize. The key to being successful with them is knowing which ones to seek out. It’s a myth that personal loans are a pathway to debt. There are great ones out there that will be of massive assistance to you in the right circumstances.

At the end of the day, obtaining a loan is a big responsibility. Too many people jump on them because of the promise of free money without understanding them properly.

Knowing how much you’ll have to pay back and putting an effective plan in place is crucial. Without it, your finances will spiral out of control, and that’s what leads to debt. You may even find that you need to get in touch with someone like this law firm who deal with bankruptcy Maricopa County in order to help you create a more realistic repayment plan so that you will be able to clear your debts and start your financial journey again from scratch.

Improper Credit Card Usage

This is very similar to the point we just mentioned. If you don’t feel comfortable with using credit cards, you really should stick to debit.

It’s all too common that people see credit cards as a way of buying expensive things without any consequences. Those consequences will arise eventually, though, and that’s when debt problems begin to occur.

Anyone who struggles to manage their budget will run into problems like this.

So, what can you do? You either start managing your budget more effectively or stay away from them entirely. It’s totally up to you!

Poor Money Management

Following on from that last point, let’s discuss poor money management a little further. In this day and age, managing your budget effectively has never been easier.

The internet is your pathway to all sorts of budget management tools. You could download an app to your phone or buy a piece of software for your laptop.

You could even go on a website that offers budget management tools for free. It doesn’t get much easier than that. With just a bit of research, you’ll find a lot of options at your disposal.

Business Costs

We’re living in a world where more and more people are attracted by the idea of running their own business. In the initial stages, particularly, running a business is very expensive.

You haven’t built up the profits to be able to spend money without worrying about the consequences, either. That’s why you’ll probably have to take out loans and dip into your personal savings.

Unfortunately, when things go wrong, you’ll suffer the consequences. It can never be guaranteed that a business will succeed, so debt is a very real possibility.

The only way to really guard against this is to have a backup plan in place, as we’ll explore shortly.


Deciding to have a child isn’t only a big life commitment, but a big financial one, too. Sometimes, birth isn’t necessarily planned, leading to many financial worries arising.

Spending funds on creating a new bedroom and all the facilities they’ll need will drain your bank account!

The same goes for funerals, which are draining in all sorts of ways. They’re expensive things if you’re left to deal with the costs, and you obviously want to give them the best send-off possible. Again, this is where having a backup plan is almost crucial.

Not Having A Backup Plan

It isn’t always possible for backup plans to be in place, but it’s the best way to protect against debt. You never know what’s going to happen in your life.

We’ve already mentioned many of the possibilities including divorce and illnesses. Money problems can strike at any time. If you’ve got a backup plan in place (savings), you’ll hopefully be in a position to avoid debt.

The only way you can try and ensure this is the case is to be careful with your money. Try and put a certain amount into a savings account every month. If you don’t feel you can afford to do this, think about your current spending habits.

Could you alter them to help save for the future? It’s worth considering.

Final Word

You might be looking at this list and getting a little worried that debt could spring upon you at any second. Don’t be worried about it; just be proactive!

Now that you’ve seen how potentially damaging it could be to your life, take small steps to protect against it. This isn’t something you can do overnight.

Start putting some money in a savings account and use tools to manage your budget more effectively. Research the right types of loans that you want to take out, and read the small print!

It’s all about making sure you’ve taken enough time and consideration in every decision you make. That’s what will protect you against debt in the long run.

If you find yourself in a situation where you feel you can’t get out of it, don’t sit in silence. Talk to your friends and family and see if they can provide help. There are all sorts of companies that will offer assistance to those in debt, as well as help them to get out of it.

Be warned that if you do get into debt, you’ll suffer from bad credit in the future. This will affect purchases you make, including important ones like trying to buy a house.

That’s a whole different problem that you’ll have to deal with, as restoring credit to a healthy state can take a long time.

For now, focus on the issue at hand and deal with it one day at a time. You won’t be in debt forever just as long as you follow our tips and manage the issue carefully.

Develop a solid strategy for getting out of debt

1. How much do you owe?

You have to know what you’re up against. Often times people hide their debt – even from themselves. They would rather avoid looking at the paperwork.

But you have to know just how bad of a spot you’re in first.

Don’t worry, this is actually the hardest step so it will get easier from here on out.

Here’s what I want you to do:

Write down every debt you have. I want the amount, the interest rate and what your minimum payment is. On a spreadsheet, stat!

We need to know this because you need to target your most urgent debt first.

Okay, got the numbers yet? I’m waiting…

…. still waiting.

Oh snap! That’s a lot.

That’s okay though, your debt will never be as high as it is this very second. From here on out, we’re going to start murdering this thing like it owes us money!

Debt avalance or debt snowball strategy

2. Choose a debt payoff strategy

There are two main ways to attack your debt. One is the Debt Snowball strategy and the other is the Debt Avalanche strategy.

Here’s how to do each. You can choose whichever one, it doesn’t matter.

Debt Avalanche

In this strategy, the goal is to save money on interest. So with this debt payoff strategy, the aim is to prioritize high interest debt.

  • Step 1. Sort your debt (from your spreadsheet) from the highest interest debt to the lowest one.
  • Step 2. Pay only the minimum balance on your low interest debts.
  • Step 3. Put the rest of the money every month toward paying off your single highest interest debt.
  • Step 4. Completely pay off one high interest debt account as quickly as possible.
  • Step 5. When you’re done with one debt, congratulate yourself and move on to the next highest interest debt.
  • Step 6. Continue doing this until all of your debts are gone. Yes this will take time.

Debt Snowball

With this strategy, you first concentrate on paying off your smallest debts and work your way up.

This method lets you build momentum as you pay off your debts one after the other. Here’s how it works.

  • Step 1. Sort that debt list from the debt with the lowest balance to the one that has the highest.
  • Step 2. Make your minimum payment on all your debts except the small one.
  • Step 3. Put the rest of your money into your smallest debt.
  • Step 4. Continue doing this strategy of paying your smaller debts first.

Very quickly your long list of debts will dwindle down to just a few creditors using this strategy.

Which strategy is best?

If you want to save as much money as possible and pay less overall debt, you want the Debt Avalanche method.


If you like celebrating wins and getting rid of creditors quickly, you want the Debt Snowball approach.

3. Create a 50/30/20 budget

If you want to get out of debt you need to set a strict budget and stick to it.

I like the 50/30/20 budget because of its simplicity.

In this system, you allocate:

  • 50% of your earnings into NEEDS.
  • 30% of your earnings into WANTS.
  • 20% of your earnings into DEBTS.

Get the 50/30/20 budget printable below.

50 30 20 Smart Budget Printable

Yes, this means you will have to make some sacrifices. But that’s the situation we find ourselves in.

To help you with this, create a spreadsheet and list your typically monthly expenses.

You want to categorize them by your needs and your wants. The aim is to cut non-essential expenses as much as possible.

What’s non-essential? If it helps you breathe or stay alive, it’s essential. Otherwise you can (literally) live without it.

Once you have this barebones budget built, you will have money left over to pay off your debt.

Lower your interest rates to pay off debt

4. Lower your interest rates

The lower your interest percentage rate, the less painful this whole debt payoff thing will be.

Let’s see how to reduce your interest rates.

  • Refinance your student loans with SoFi here.

If you have student loan debt, look into whether you can lower your interest rate. It doesn’t hurt to look at your options.

You can see your student loan refinancing options here.

  • Balance transfer credit cards

Say you owe $5,000 at 20%. Getting a new credit card with an attractive balance transfer option might be a good idea.

Typically, they charge an upfront 3% or 5% fee.

Afterward, you enjoy 0% interest during the introductory period, which can be 18 months.

Doing this can keep your high interest debt at bay for an extended period of time. This gives you the time you need to get back in control of your finances.

  • Negotiate a lower interest rate

There’s a lot of competition in the credit card space. Call and ask for a reduction in your interest rate. The worst that can happen is they say no.

It helps if you’ve been a member for a long time, don’t have missed payments and have an improving credit score.

Improve your spending habits to get out of debt early

5. Improve your spending habits

If you don’t control your bad spending habits, you will never get out of debt.

Start by eliminating what you don’t need and develop better spending habits.

  • Stop impulse purchases.
  • Give up expensive hobbies.
  • Avoid eating out often.
  • Cancel subscriptions you don’t need.
  • Learn how to say no to yourself and others.
Find a side hustle to pay off your debt fast

6. Find a side hustle

If you truly want to get out of debt fast, you need to bring in more money. There’s just no way around it.

You can follow all of the steps to pay off your debt early here, and while they will work, you still will have a lot of debt to pay off.

There are many ways to make money, both online and off.

The best one I’ve found is to start a blog and make money with ads, affiliate products and eventually your own digital products (printables, courses, ebooks, etc.).

Don’t have time? I don’t believe you.

You probably watch one of these: sports, soap operas, late night tv or sitcoms. Seriously, who gives a fuck about any of these things?

Don’t have the money to invest? I don’t believe you either.

If you can afford a cup of coffee, you can afford the hosting fee to start a blog.

I bet you can look around right now and find tons of useless stuff you have spent money on.

I have a better idea: invest in you, not in physical things that just don’t matter.

7. Make a realistic budget with your partner

In your budget, you’ll list your income and your expenses. You need to have money left over every month or else you’ll never get control of your debt. Simple enough right?

If you can’t make ends meet, you will either need more money or less expenses. Since getting a second job may be out of the question, you will need to cut back and make sacrifices.

8. Cell phone bill

One of the best ways to cut your monthly spending is to look at your cell phone bill.

You can call your cell phone provider and ask them to audit your account to see if you can be placed on a cheaper plan based on your past usage.

9. Cable TV

You should also look at your cable/satellite bill. Are you paying for channels you don’t need? Do you have a DVR you can live without?

Better yet, can you live without cable and choose a cheaper option like streaming through Roku, Amazon Fire TV and Netflix?

10. Restaurants

Finally, you can tackle unnecessary expenses such as Starbucks coffee runs, fast food trips and nights out at Olive Garden.

If you’re unwilling to make these sacrifices, then you are truly not serious about getting out of debt in 2021.

11. Putting your leftover money to work

After you’re done creating your budget, how much money is left over? The money left over in your budget will be the amount you can pay every month toward your debt.

Make sure it’s at least $200 per month or you will not make a dent in your debt.

12. Make your budget flexible

As you continue working on your ‘get out of debt plan’, you will of course need to continue to make adjustments to your budget along the way. This is normal and expected.

But if you want to budget for something new, you’ve got to get rid of something else.

13. Make A List Of Your Debts

I know you’ve probably avoided even looking at your debts because you’re afraid of just how bad it is. But if you want to tackle this monster you need to know what you’re up against first.

So gather up your recent statements for all of your credit cards, auto loans and other personal loans and see the complete picture of what you owe.

List these debts on a piece of paper with the name of the debt, total amount owed, interest rate and monthly payment.

Don’t forget to write down all of your debts, including old unpaid medical bills and personal loans from family members. We’re going to destroy all of your debt in 2021.

14. Credit Card Spending Freeze

First, implement a spending freeze on your credit card accounts. It’s impossible to pay off debt if you continue accruing it!

15. Start With High-Interest Debt

Second, we will tackle high interest debt gets eliminated first. These are the ones that are costing you the most.

16. Write Down Your Progress

Third, you will write down your progress as you continue eliminating your debts one by one. You need to keep track of your victories too.

17. Lower Your Interest Rates

If your credit score is bad, it can be difficult to get companies to lower their interest rate. But if you have begun paying down your debts already, it’s possible that your credit score today is better than it was when you got your debt in the first place.

Even though most don’t recommend borrowing from Peter to pay Paul, this strategy works.

You need to first get a low interest loan: either from a bank, a friend or even by opening up a new credit card.

18. Use a Balance Transfer

Many credit cards offer 0% interest rates on balance transfers for up to 18 months. Take advantage of these offers and then move your high interest credit card debt over to this account.

I have personally used this to get rid of a $5,000 debt at a 29% interest. I moved it over to a zero percent credit card and got it paid off in 18 months!

It’s true, with a monthly payment of $278, I got rid of a debt in 18 months that would have taken me more than 2 years and an extra $1,500 in finance charges to pay off.

19. Consolidate Your Debt

Consolidate your debt with a peer to peer lender or another lender who is offering personal loans.?

The way it works is simple, you apply for a loan, submit documents such as pay stubs, and after they check your credit, they make an offer. If that interest rate offered is lower than your current ones, it makes financial sense to switch your debt over.

20. Trade Your Car

Are you still stuck making high car payments? If you want to truly eliminate your debt in 2021 you’ll need to make some changes. You can choose to sell your car and instead buy a more economical one at a much lower payment.

21. Track Your Progress And Adjust

Now that you have a plan of action, don’t relax and get comfortable. Work is still required to keep you on track. Monitor your behavior and track your progress to ensure you’re still on the right track to becoming debt free in 2021.

22. Monitor Your Credit Score

Use the Credit Karma app to check your credit score. If you are lowering your balances and paying off debt, your credit score should improve every month.

23. Celebrate Your Wins

Did you just pay off a high interest debt or an account that was in collections? Congratulations! Celebrate your wins, no matter how big or small. It will keep you motivated to continue on this journey.

24. Adjust Your Plan

Did you just get a raise at work, a bonus or an unexpected tax refund? Time to party, right? No! Your number one goal in life is to pay off your debt in 2021, so be sure to put any extra money toward your goal. It will only help you get out of debt faster.

Listen, just like shedding pounds at the gym, getting rid of your debt takes time. In this fast paced world of smartphones and breaking news, we all want things to happen right away.

But the one trait that will help you get out of debt in 2021 is perseverance. Don’t give up and keep your eyes on the prize. I know you can do it and you have to believe in yourself too.

Pay off your debt and become debt free

You can do this!

It doesn’t matter if you are broke, have low income or bad credit. If you stick with the steps in this article, you will get out of debt.


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