We all know how much easier it is to get into debt than it is to get out of it. You might find yourself in debt after having to pay for a costly emergency, like a sudden illness or a totaled car. You may be one of the millions of Americans who took on debt to finance an education, a vehicle or a home—or all of the above. Or you may simply find yourself accumulating debt over the years on credit card balances, even if you pay the minimum amount due each month.
Sometimes this cycle of spending and borrowing feels like a carnival ride you just can’t escape. Once you’re buckled in, you may feel like you’re at the mercy of the machine—helpless to control the situation. So, you just close your eyes and hope for the best.
But there is something you can do: understand what the debt spiral is and how to get out.
What’s the Debt Spiral?
The basis of the debt spiral is that there are always going to be costs of living, and they often feel like they crop up faster than your income can keep pace.
Many young people borrow money to pay for college. So, six months after graduation, bills start arriving in the mail. If you’re working an entry level job, or still searching for employment, you may find yourself needing to use credit cards to float daily expenses—groceries, gas, travel, rent, utilities, etc. Unless you live in a public transportation-friendly city, you may need to buy a car around this time, too.
Then there’s housing: Most people either find themselves paying a hefty percentage of their monthly income to rent or decide to buy a home at some point. This means taking on a mortgage. Expenses only tend to increase as you pursue other life milestones: marriage, having children, getting a post-secondary degree, traveling, etc.
At this point you’re juggling multiple debts with varying interest rates, some that will take many years to pay off. The cherry on top is that unexpected expenses can rear their heads at any point throughout our lives, rendering your precariously balanced budget useless in the face of urgent costs.
Breaking the Cycle: Debt Elimination Strategies
Want to get out of the debt spiral? It’s possible, but it will require strategic action. The sooner you end this detrimental cycle, the sooner you’ll be able to reduce or eliminate your debt. Even if you’re very deep in debt, you absolutely have options.
- Debt management: Getting on a multi-year Debt Management Plan (DMP) through a nonprofit credit counseling organization can help you earn lower interest rates while streamlining your debts into a single monthly payment.
- Debt consolidation: If you have multiple high-interest debts, you may find it helpful to take out a single lower-interest loan and using it to pay them in full. Then you’ll be able to focus on repaying this loan at fixed terms over time.
- Debt settlement: If you have more than $10,000 in debt and are falling behind on even minimum payments, enrolling in a debt settlement program may help you negotiate with creditors and potentially reach a lower settlement than your original balance. For more information and stories from people who’ve tried this strategy, read through Freedom Debt Relief reviews.
- Bankruptcy: An extreme option, bankruptcy allows some consumers to discharge their debts. This strategy can provide a clean slate, but you may have to surrender some assets, pay attorney fees and rebuild your credit.
- Do-it-yourself: Tightening your budget and devoting the savings to debt repayment may be enough to end the debt spiral if you stick to it over time. Make sure you decide the order in which you’ll tackle your debts while still paying the minimum on all of them.
Getting out of the debt spiral requires acknowledging it and pursuing the right debt relief strategy for your needs.