How can us middle-class hard-working Americans get out of the endless cycle of debt? Is it even possible? We’ll get into all the details of that in a moment, but when it comes to getting out of debt, the answer on how to do it pretty simple, the execution, however, isn’t quite so easy.
Honestly, this concept of feeling like the debt cycle will just never end has been really getting to me lately myself, so I’ll try to keep a positive spin on this one. But instead of just thinking of the doom and gloom why don’t we break down exactly what needs to be done to end this miserable cycle of debt.
Look, it isn’t any secret on what to do. It’s simple, you either make more money or spend less. Let’s look at each of these and go over exactly what you can do.
Before we do, it’s important to know a couple of things. I’m not a financial advisor, and this isn’t financial advice, this is simply my opinion and is designed to give you ideas to consider. Here are those ideas.
Cut Your Expenses
Let’s start with the boring part. Cutting expenses. It isn’t what any of us want to do, but it’s something you can immediately do to help get you on the right path. The problem is that people only want to do this for a couple weeks when really it needs to be for like…ever, or until you actually make more money.
And truth be told, if you’re a middle-class American then you’re probably living above your means. Look, there is no judgment here, I do it too. But it’s the reality of the situation. Just about ALL OF US OUR DOING THIS. We go to work 40-50 hours a week, never see our family and complain that life shouldn’t be this way.
But you may not have to work so much if you actually lived by some basic math. What am I talking about? I’m talking about not spending more than you make. Crazy concept right? And another crazy concept is to actually create discretionary income so that you can invest in the right things.
But wait, you’re already living paycheck to paycheck right? So this doesn’t apply to you. You’re already stuck with debt and there isn’t a whole lot you can do about it. Ok, fine. Here is what you need to do.
Track Your Spending
It’s important that we spend money wisely. And I know it’s no fun, but a good way to do this is to track everything you spend money on. Have a budget of how much you’re going to spend and stick to it. Don’t just go out to eat whenever you feel like it, only do it if it’s in your budget! What I’m primarily speaking about here are not your monthly bills but your everyday expenses like food, gas, and entertainment.
It’s a good idea to get a breakdown of what you’re spending on these each pay period when you go over your budget. Basically have a budget and if you go over that budget then you need to sit back and look at everything you spent money on during that pay period and figure out where you can cut back.
If you are able to just live your life naturally and stay under your spending budget then great, you don’t really need to audit yourself too much. But if you’re surpassing this number make sure to get a breakdown of all your expenses and then wherever you screwed up, don’t do again.
Get Rid of Unnecessary Debt
Have a car loan and want to get rid of it? Well, what most people do is trade it in for a more expensive car and just roll that loan into another loan. This is a horrible idea. Don’t do that if you’re trying to get out of debt.
Even if your car is worth way less than what you owe on it there are crafty ways to get out of the loan.
What other loans are you paying money on that you might be able to sell instead of “own” and get some money in your pocket? An RV or boat you never use? Are these something you could sell to help get out of debt?
Look, there may be some things you are paying money on that you like but really aren’t worth what you’re paying, and if you’re in debt or living paycheck to paycheck selling some of these items are a great way to rid yourself of some extra debt.
Can’t sell them or just have way too much unnecessary debt? Maybe bankruptcy could be an option to consider. But you’ll want to really do your homework before taking any drastic option like that.
Improve Your Credit
Once you’ve cut back on things you don’t need, hopefully, you’ll be able to pay your bills on time. This the most important part of building your credit up. And this is something that shouldn’t be overlooked.
The thing is if you have a massive amount of debt then it’s unlikely you’re going to be paying it off over the next year, two, or even 5 years (a lot of us are on pace to stay in debt our entire life). Building up your credit is going to be important to tackle this endeavor.
Do you realize just how much money you’re paying interest every year? Every month? Or even daily? Most of us take the route of ignorance is bliss because it’s upsetting to look at.
The bottom line is that having good credit can save you tens of thousands if not hundreds of thousands of dollars over time.
Of course, we all want to get out of debt, but how about refinancing high-interest rate loans to a better rate to lower your monthly obligations? This saves you money upfront and long-term, and if you have a lot of debt will be crucial in helping you pay it off.
Make More Money
Ok, time to get to the fun part. This is the best way to get out of debt. Easier said than done? Maybe. But that shouldn’t stand in your way of making this your main priority to end your massive debt cycle.
At the end of the day, we can cut back, work the same job we currently do and pay off all of our middle-class debt when we turn 75. Sounds like a ripoff if you ask me.
The best solution outright is to make more money. The first way to look at this is to get a promotion at your job or get a new higher-paying job. These are things we all should be pursuing, but another way is to make a side income aka take the entrepreneurial route.
Clearly, there are several different ways to go about this. You could get into real estate, you could do MLM (I wouldn’t), you could create a product to sell, or you could learn how to make money online (my favorite choice).
This is a fun way to create additional income with the possibility of creating a full-time income that could potentially replace your job (with endless potential).
Summary
Most people are on their way to an endless debt cycle that is going to last a lifetime. The only way to change this trajectory is to do something different. If not you’re likely to follow the masses and remain maxed out with debt.
It doesn’t have to be that way though, however, unless you have a plan in place and take massive action then this is the path you’re likely on.
So what has to change is your mindset. One step at a time with a goal ahead of you that you can accomplish. Maybe it isn’t your goal to be completely debt-free. Maybe you just want to put yourself in a better position financially. That’s fine as well.
It all starts with taking that first step and then consistently following your goals. Oh, but by the way. There are actual people who live their life without debt. It is truly possible. Keep that in mind, so who knows, maybe you should set high goals for yourself and end the “endless” debt cycle.