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Earn a high-yield savings rate with JG Wentworth Debt Relief
How to Become Debt-Free (In a Nutshell)
by
JG Wentworth
•
July 26, 2024
•
8 min
A recent Clever Real Estate survey found that 3 in 5 Americans (61%) are in credit card debt, owing an average of $5,875. So, if you find yourself struggling to keep up with your payments, you are far from alone.
Being debt-free is a more common financial goal than ever, but becoming completely free from the burden of owing money is often easier said than done. From credit cards and student loans to mortgages and auto loans, debt can weigh heavily and make it difficult to get by, let alone build wealth. However, with discipline and the right strategies, it is absolutely possible to eliminate debt from your life.
In this article, we’ll outline a step-by-step process for getting out of debt through budgeting, debt repayment methods, lifestyle changes, and more. While there’s no magic solution, consistent effort following these principles can put you on the path to financial freedom.
This information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.
Step 1: Get organized and take stock
The first step is to fully understand what you owe by gathering statements for all outstanding debts – credit cards, loans, bills in collections, etc. Make a list including the debt amount, interest rate, minimum payment, and payment due date for each. Prioritize by focusing on high-interest debts first.
Step 2: Build a realistic budget
Create a monthly budget that aligns your income and expenses. List sources of income, then track all expenses – housing, food, transportation, etc. Categorize expenses as wants (nice-to-haves) and needs (essentials). The goal is to maximize the gap between income and needs as much as possible to free up cash flow for debt payments.
Step 3: Cut expenses and increase income
With visibility into income and expenses, look for areas to cut costs and increase earnings. Reduce wants as much as possible – cancel unused subscriptions (don’t forget the streaming subscriptions you thought you cancelled) downgrade cable/phone plans, etc. Explore options to boost income through a raise (ideally), side jobs, or selling items you don’t need. Even small savings add up greatly when devoted to debts over time, so don’t be discouraged if you find yourself chipping away rather than making great leaps and bounds.
Step 4: Use a debt repayment strategy
Prioritize deploying your maximum cash flow towards debts each month using a method like:
- Debt snowball: Pay minimums on all debts except the smallest, which gets as much extra payment as possible until paid off. Then roll those payments to the next debt.
- Debt avalanche: Make minimum payments on all debts except the highest interest rate one, which gets the available extra payment amount. Ensures paying less interest over time.
Either way, stick to one strategy and visually track your progress to stay motivated.
Step 5: Curb new debt as you pay off old balances
As you pay down balances, resist the urge to rack up new debt. Cut up credit cards if need be and live within a strict cash budget. Carrying new balances will undo your hard work.
Step 6: Develop positive money habits
To avoid future debt issues, build habits like saving automatically, paying bills on time, living within your means, and cash budgeting. An emergency fund equal to 3-6 months’ expenses protects against going back into debt for unexpected costs that may pop up. And let’s face it, in life there are always unexpected costs.
Step 8: Stay motivated and persistent
It may sound cliché, but becoming debt-free is truly a marathon, not a sprint. Expect setbacks and renew motivation by celebrating small wins. Keep your goal top of mind and know what you’re working towards – the financial peace and flexibility of being debt-free so that you can live your best life.
Need a little extra motivation? Try our 70 Day Financial Fitness Challenge to keep you on track.
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Time for debt relief?
If your mounting debt is becoming more than you can reasonably manage by yourself, you might want to consider debt relief. At JG Wentworth, we’ve helped countless individuals resolve their debt through our Debt Relief Program.* In fact, if you have $10,000 or more in unsecured debt, there’s a good chance you’ll qualify and get the JGW advantage.
- One monthly payment
- We negotiate on your behalf
- Average debt resolution in as little as 48-60 months
- 24/7 support
- We only get paid if we settle your debt
If you think you qualify for our program, give us a call today so we can go over the best options for your specific financial needs. Why go it alone when you can have a dedicated team on your side?
SOURCES CITED
Olya, G., “Jaw-Dropping Stats About the State of Debt in America.” Yahoo! Finance. January 17, 2024.
About the author
* Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 43% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”)). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required.
Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment.
JG Wentworth does not pay or assume any debts or provide legal, financial, tax advice, or credit repair services. You should consult with independent professionals for such advice or services. Please consult with a bankruptcy attorney for information on bankruptcy.
