Money Matters

10 Proven Strategies to Eliminate Debt and Achieve Financial Freedom

Like many Americans, you can focus on saving more money and getting out of debt. But eliminating debt doesn’t happen overnight, especially if you’re working on getting out of debt on a low income. Developing a debt reduction plan can help increase your chances of success, especially if you set a time to achieve your goal.

Start at 12 months. How much progress can you make in reducing your debt over the next year? Below are some simple steps and strategies you can use today. These strategies can help you reduce debt and hopefully become debt-free.

1. Save More Than Your Budget

Start by carefully reviewing your monthly expenses. Consider using budget tracking software to understand where every dollar is going. Some of the best budget apps are free or charge a small monthly fee after a free trial. Use these programs to look for opportunities to cut costs and dedicate more money to debt relief.

Even small spending cuts add up quickly. For example, if you can find a $200 expense to cut from your regular monthly budget, you’ll put $2,400 toward your debt after 12 months.

2. Automate Your Debt Payments

Frugal savers need to automate their savings. If you want to become debt-free, try putting your debt payments on autopilot using these tools and techniques:

    • Use automatic transfers from your bank account to your credit card.
    • Use a calendar or automated reminders to keep track of due dates, especially if you’re paying off multiple credit cards or debts at once.
    • Track your progress as you pay off debt using debt management software, budgeting software, or your bank or credit union’s built-in online tools.

3. Adopt a Debt Settlement Strategy

Two strategies for paying off debt are the debt snowball and debt avalanche techniques. These methods look like this:

  • Debt Snowball: With this method, you start by paying off the smallest debt first while still making the minimum payments on your other debts. Then you move to the next smallest debt. This method gives you a sense of momentum building up over time, like a “snowball” rolling down a hill.
  • Debt Avalanche: With this method, you start by paying off the highest-interest debt first while making minimum payments on all other debts. Then you move to the next highest interest rate debt. Over time, you can pay less interest by paying off higher-interest debts first.

While the debt avalanche strategy can help you save money on interest, you may prefer the sense of accomplishment you get from the debt snowball method when paying off small debts first. Whichever way works for you, what matters is the result: debt freedom.

4. Apply for a Balance Transfer Credit Card

If you have good credit and carry one or more credit card balances with high APRs, consider applying for a balance transfer credit card. Some balance transfer credit cards offer 0% APR on the balance transfer amount for an introductory period of several months. This allows you to open a new credit card account with a lower introductory interest rate.

A balance transfer credit card doesn’t eliminate your debt, but it does allow you to pay off your debt at a lower, 0% interest rate for a fixed period. Cutting your APR can help you pay off debt faster. But be sure to read the fine print. Be aware of any balance transfer fees, and be sure to pay your balance before the introductory period expires.

5. Consider a Debt Consolidation Loan

To pay off your credit card debt or other debts, you can get a better deal by consolidating those debts into one new loan. This is called a debt consolidation loan. Generally, you’ll need fair credit or better to qualify for a consolidation loan.

Similar to a balance transfer card, the best debt consolidation loans offer a lower APR on your debt. This helps you save money on interest and pay off debt faster. With both a balance transfer card and a personal loan, the challenge is not to take on additional debt while paying off the card or consolidation loan.

6. Pay Off Debt with a Cash-Out Mortgage Refinance

If you own a home, have sufficient equity in your home, and qualify to refinance your mortgage at a lower interest rate, consider a cash-out refinance. This allows you to take out some of the money in your home equity and use it for other purposes, such as paying off high-interest debt.

Think of the cash-out refinance as a debt consolidation loan that you give yourself. For example, if your credit card debt with an APR of 20% is $20,000, you can get cash back and pay off your credit card debt. This can be a good financial move to save money on interest and get out of debt faster. But remember that this loan is secured by your home.

7. Earn Extra Money with a Side Hustle

Earning extra income can help you pay off your debt faster. Consider taking some free time each week to earn extra income. This depends on your career situation, skill set, and how much free time you have outside of work. Whether you’re picking up extra hours at work, taking on a part-time job, or a lucrative side hustle, there are plenty of options for earning extra cash.

For example, if you were able to earn an extra $500 a month, you could pay off an extra $6,000 in debt after 12 months.

8. Get Advice on Consumer Loans

If you are struggling to pay your bills and falling behind on your debts, consider talking to a consumer credit counselling service. These businesses, often non-profit organizations, can help you take a close look at your budget and expenses and create a debt management plan to help you pay off debt faster. These businesses can also work directly with your lenders to help you save money on interest and fees.

If you feel overwhelmed by debt and don’t want to file for bankruptcy, consumer credit counselling services can help you get back on track.

9. Ask to Renegotiate the Debt

If you have fallen behind on your debt payments, one option is to seek debt relief by asking your creditors to renegotiate your debt and accept a smaller payment than the amount owed. This is known as debt settlement. You can try debt settlement negotiations yourself or hire a debt settlement company. Debt settlement companies work for you with your creditors for a fee, usually a percentage of the settled debt amount.

Debt settlement can be risky and expensive, so it is usually considered a last resort option. There is no guarantee that a creditor will agree to accept a lower payment than what you owe. Delinquency can seriously damage your credit score.

10. Discharge Your Debts by Filing Bankruptcy

When debts are piling up and you don’t see a logical way forward, filing for bankruptcy may be an option. Bankruptcy can help you discharge your debts and create a fresh start.

But remember that bankruptcy will seriously damage your credit score. Also, not all debts can be discharged in bankruptcy – it depends on your overall financial situation and whether you file Chapter 7 or Chapter 13 bankruptcy. You may also need to agree to a court-ordered payment plan for some of your debts.


Getting out of debt requires dedication, strategic planning, and often a multi-faceted approach. By implementing these ten strategies, you can make significant strides toward financial freedom. Whether you’re saving more than your budget, automating debt payments, adopting a debt settlement strategy, or exploring options like balance transfer credit cards and debt consolidation loans, each step brings you closer to your goal. Additional income through side hustles, advice from consumer credit counseling services, renegotiating debt, or even considering bankruptcy in extreme cases, can also be part of your journey to becoming debt-free.

Remember, the key is persistence and making informed decisions that align with your financial situation and goals. Debt reduction is not an overnight process, but with a solid plan and consistent effort, achieving debt freedom is possible. By taking control of your finances today, you can build a more secure and prosperous future.

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