Debt-to-income ratios have reached staggering rates in the U.S. Between student loans, credit cards, car loans, and other types of debt, Americans are drowning debt to the tune of $38,000, according to a 2018 article on CNBC.com. This begs the question: Just how does the average American with an average income go about reducing his/ her debt load?

Fortunately, there are many effective debt-reduction strategies in existence even for those who don’t make much money. Some of them require almost monk-like discipline, while others offer a bit of wiggle room. If you’re looking for a way out of debt, here are three strategies that get the job done.

1. Get Honest About Your Debt and Create a Budget

No one likes to look at big debt numbers. However, doing so can feel empowering once you resolve to clear up the debt and finds a plan for doing so. To make this work, it’s first necessary to know how much debt you have.

To start this process, gather up all of your bill statements, credit card and grocery receipts, and your checking ledger if you have one. Take a look at where you’ve spent your money in recent weeks/ months. Identify the expenses that you can’t stop paying for, like rent, utilities, etc.

Once you have identified your necessary spending, then take a look at everything else. You may be surprised at how much money you have spent. Usually, it’s the $10 here and the $7 there that really start to add up and eventually punch a hole in your budget.

Once you determine your spending, then you need to determine your income and how much you’ll need to pay for your necessary bills. If you’re having trouble creating a solid budget, U.S. News and World Report recommends that you use an Excel sheet or an app like Mint.com.

Once you know how much you have to pay versus how much you’ve been spending frivolously, then make a note of what you can cut out. (Think coffee at the drive-through five days a week, gym memberships, dinner out five times a month.)

2. Put Any Extra Money You Have Toward Your Debt

At some point, most people get extra money as work bonuses, from tax returns, as gifts from parents and grandparents, and sometimes as a surprise. If you wind up getting any extra money at all, then resolve that it will go toward your debt.

If you don’t expect any windfalls, then you can still put some extra money toward your debt by getting an extra job at a local restaurant or retail store in the evenings. One savvy debtor, who only made $40,000 a year, got an evening job at Starbucks. He made about $800 a month at the coffee shop, which he put toward his $80K in debt.

These and other debt-reduction strategies, like debt consolidation, allowed him to pay off his debt in three years. For those who don’t know where to start with strategies like consolidation, companies like IVA offer advice on that.

Gigs like Uber and UberEats can also provide you with extra income. The advantage of these types of gigs is that you set your own schedule, something that isn’t always possible to do with a job at a coffee shop or other brick-and-mortar business.

3. Do a Debt Snowball

Financial guru Dave Ramsey made the debt snowball a household name. The principle behind it is simple. You tackle your debt, going from the smallest to the biggest until all of your debt gets paid off.

From a psychological standpoint, starting with the smallest debt and not the one with the highest interest rates nets some interesting results. Once you can see that it is possible to reduce your debt, then you’ll feel more empowered to continue on with your debt reduction strategies, even when the balances get bigger.

On this plan, you first pay off the smallest debt you have while you pay the minimum balance on the rest of your debts. Once that debt is paid off, you then move onto the debt that has the next highest amount. (You’ll use the money you had previously used to pay off the smaller debt to pay off this bigger one.) You continue on with this debt-reduction method until everything gets paid off.

Last Words on Debt Reduction Strategies

Being buried under a mountain of debt can feel just as crushing as being buried under a real mountain. However, plenty of debt strategies exist that allow people to get out of debt, even if their income isn’t very large. Setting a proper budget, putting any extra money you receive toward your debt, and doing the debt snowball count as three of the most powerful and yet simple ways you can start reducing your debt today.

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