How To Cut Your Budget — When There Is Nothing Left To Cut

It is no secret that you need to make a budget.  But, what do you do when you can’t make the numbers work? This is a common question people ask themselves.  So, how do you cut your spending?

what to do when your budget does not work - calculator and pencil doing the math

what to do when your budget does not work - calculator and pencil doing the math

I remember when my husband and I were struggling after I quit my job to stay home with our firstborn.  It was tough, and we all know you can’t get blood from a turnip!

Before you look at what you can do to save on your budget, you need to make sure you have one.  Your budget needs to be in writing. It needs to be a roadmap showing you where you will spend your money.

If you are just learning about budgeting, you will want to check out our page — How to Budget. There, you will learn everything you want to know about budgets and budgeting.


1.  Find ways to bring in more money each month

Of course, you can’t give yourself a raise at your job, but there are other things you can do to bring in more money.  You can sell items you no longer need or find a part-time job.

If your budget is not working no matter what you’ve tried, it is time to make some tough choices.  And, it may mean it’s time for another job to help you make your budget work.

Read More: 75+ Ways To Make Money

2.  Don’t be so hard on yourself

Sit back for a minute and look at where you were before you knew about budgeting and stretching your dollar vs. where you are now.  Be proud of what you’ve done and the changes you’ve made.  Sometimes, just knowing that you’ve made positive financial changes is enough to be proud about.  Just celebrate the small victories.

3.  Don’t compare yourself to others

You may see others who claim that they found a way to shave their budget by hundreds of dollars every month.  While we would all love to be able to do that, it may not be realistic for you.  You may have additional expenses others do not have.

Your income is different than them.  You have your own financial goals.  When you stop comparing yourself to others, the need to keep up and compete will stop, and you can feel better about your budget.

4.  Look at your needs vs. wants

There are probably things you have in your life that are wants rather than needs (and vice versa).  Do you have both a landline and cell phone?  If so, do you need both or do you want both?  Maybe it’s time to drop one of them to save money.

Take a look at your entertainment.  Do you need cable or can you find an alternative that will save you money? Do you need to eat dinner out once a week – or do you want to dine out?

Take our situation for example.  When we were getting out of debt, we did not eat in a restaurant for more than a year.  It was tough, but we survived.  The reason was that we determined that it was a want to dine out and not a need.  Instead, we took the money we would have spent having a dinner out and used it towards our debt instead.

Read More:  How Your Needs vs. Your Wants Can Affect Your Budget

5.  Seek assistance

Now might be the time when you need to reach out to get help.  You may need to look at local programs or services that can help you with your bills. Check with your local government to find ways to get help with utility bills, apply for food stamps, locate a food pantry and even get assistance for child care.

Just because you ask for help does not mean you are not financially responsible.  We all have times when we need a hand, and these organizations are here to help.  Once you get back on your feet, then that will be your chance to pay it forward to help someone else.

6.  Cut your food bill

It sounds simple, but you need to cut back on your spending. Perhaps you need to cut out some of the convenient foods you normally buy or make less expensive meals.

Start to use coupons!  While you may not find them for the fruits, vegetables, and meats you need, you can find them for the household products you use and many other products around your house.  Combine these with sales to ensure you pay the lowest price possible.

You might also consider changing where you shop.  One idea is to shop at Aldi.  If you live near one of these locations, you can easily cut your spending by nearly 50% just by shopping here!

Read More:  How to Cut Your Grocery Bill in Half

7. Lower your utility expenses

You can’t live without water and electricity, but you may be able to steps to reduce how much you spend.  Turn off the lights in rooms when they aren’t in use.  Keep the blinds closed to keep the heat out (or in, depending on the season).

Take a look around the house and unplug anything when not being used.  Electronics can still draw a charge when plugged in, even if you are not using them.

Finally, reach out to a provider like BillCutterz to see if they can’t negotiate rates down on your behalf.

Read more:  50+ Ways to Lower your Monthly Utility Bill

8. Eliminate subscriptions

Take a look at all the monthly services you pay for.  You may have a gym membership, Netflix or streaming service or additional services you are not using regularly.  When you continue to pay for something you are not fully using, you are wasting money.

9.  Use Cash

I know it sounds crazy, but it works.  When you use cash for your discretionary spending you can never overspend.  So, if you need to lower your grocery spending, the simple way to ensure you do not overspend is to get cash.

Cash is defined, and when it is gone, it’s gone. It is a simple tool that you can use to ensure that you always stay on budget and help keep your spending in check.

Read More:  How to create a cash budget

If your budget is not working, then it is time to make some big moves. It will not be fun. It will not be easy. But it is something you just have to do.


The Hidden Cost of Getting Out of Debt

Getting out of debt? That’s great. But make sure you are aware of the hidden cost.

Getting Out of Debt | Family | Prirorities

Getting Out of Debt | Family | Prirorities

If you any debt, you are more than likely doing whatever you can to pay it off.  You might be spending less, selling things or have even picked up a second job. However, is it costing you to try to get out of debt?

This cost is not financial.  The cost is missing out on your life.

Related posts:

If you are working 2 or 3 jobs simply to pay off your debt more quickly, what are you missing?  Perhaps you think you are missing out on just a few family dinners.  What about that home run in little league? Or, what about the first time she rides her bike without the training wheels? You might even miss out on story time with your kids at night.  Is making money and getting out of debt more important than your family?

I agree that it is important to live a debt free life.  However, it is more important to actually live your life.

[clickToTweet tweet=”Getting out of debt is important. But your family is more important via @PennyPinchinMom” quote=”Getting out of debt is important. But your family is more important via @PennyPinchinMom”]

You can’t miss what matters just for a few extra bucks.  Otherwise, you are living an empty life rather than a debt free one.  Life goes by so quickly and we need to enjoy the moments that matter.

My sister passed away when she was 29 years old.  She lived a full life and one without regrets.  None of us ever knew when she would get sick again.  She didn’t know when she might end up in the hospital.  Instead, she lived each day to it’s fullest — almost as if it were her last.  I learned a lot from her.  There are more important things in life than just finances.  My family means more to me.

There is never a reason to give up on your family just to earn more money.  It isn’t worth it.  Who, on their death bed will ever say “I wish I’d spent a little more time working.”  No one.

Just make sure that you find a balance.  Yes, work yourself out of debt, but make sure you are there for the moments that matter.  And yes, even bath time can be a special moment.


11 Steps to Avoid Burnout When Paying off Debt

This post may contain affiliate links. Please read my disclosure for more information.

The key to avoiding burnout while paying off debt is to reinvigorate your motivation. Here are 11 ways you can stay motivated and energized to avoid burnout when paying off debt.

1. Work With Purpose

The first step to any journey is identifying the destination. It’s no different in becoming debt free. But debt freedom isn’t the destination. It’s an essential stop along the way, but understanding that there’s life after debt is imperative to making it out of debt and staying there.

What’s your purpose for getting out of debt? Ours is to have career and lifestyle freedom. We want to be able to quit or be let go from our jobs and have savings to hold us over until we find something else or create our own career.

When the struggle is real it’s this purpose that will grab you from your whiney tower and pull you back down to reality.

2. Use Time Management Hacks

Do you feel like you need more hours in the day? Maybe you just need better management of those hours.

There are productivity methods you can use to be more efficient and avoid burnout. I’ve been really interested in the Pomodoro method of breaking tasks into 25-minute chunks with 5-minute breaks. Lots of freelancers swear by it.

Start with the tasks you have, do those more efficiently and see if extra time to rest doesn’t pop up right when you need it.

3. Eliminate Tasks

Maybe with the best productivity hacks, you still can’t fit it all in. Between multiple jobs, family, friends, errands, keeping a semi-clean house, cooking, etc, etc, etc; you can’t do everything.

If your time is worth more working than doing simple tasks then you can afford to delegate rather than work less. You can hire someone to clean your house, have your groceries delivered, or buy the precut veggies.

Prioritize the tasks that get you closer to your goal and eliminate the ones that don’t.

4. Give

Giving time or money can feel like you’re connecting to the world even in your gazelle-intense bubble. We do it by volunteering and giving to our church but there’s no shortage of options for you to sacrifice a little to make a big difference in others lives.

I also think giving of your experience is helpful. It’s cathartic, reminds me what I’ve accomplished and helps others learn how to live through my story. You can do it through Facebook, Instagram, or by starting a blog.

I’m obviously an advocate for sharing stories through a blog. The number of people you can reach is huge. It’s also a way to pad your income and lay a foundation for establishing career freedom. You can read my how-to on starting and monetizing a blog here.

5. Exercise

I use exercise to break up the monotony of my day. When I was working three very inactive jobs exercising was the outlet where I could make the stank face I wanted to make all day and no one would ask me what was wrong.

And I don’t need to remind you of the physical benefits exercising has on improving energy, sleep, and motivation — but clearly I will.

I pay big bucks for Crossfit because the community and direction are invaluable to me. But there are plenty of ways to work out for free or cheap if it’s not as high on your priority list.

6. Celebrate Wins

Every time we pay off a loan we have a little celebration. Sometimes it’s as small as texting a ton of emojis back and forth and sometimes it’s having a meal out.

More than once my disdain for cooking has motivated me to put a little extra on a loan to clear it up and go out for dinner. Having fun times to look forward to keeps us motivated and has ultimately helped us get where we are quicker.

7. Stop Being a Perfectionist

Perfectionism is the enemy of progress. Relinquish the need to have a perfect budget, perfect income, or perfect life circumstances.

Emergencies will come up, weaknesses will win, and income may fluctuate but if you drive yourself crazy over every setback you’ll never win!

Embrace the mistakes and “Murphies” and you’ll have a much better time getting through this thing.

8. Track Progress

In our apartment we had a thermometer we’d color in when whenever we made a payment. It got lost in our recent move (RIP thermometer).

People have come up with really cool ways to visually track their debt progress. You can check them out here where I also have a downloadable thermometer pdf you can print off and color yourself!

9. Share Your Successes

I have a friend living 1200 miles away from me who texts me whenever she pays off a debt or makes a substantially good money decision. It allows me to encourage her by telling her how proud I am of her, how great she’s doing and I send lots of bitmojis.

Travis and I do this too. When we do well with money we lift each other up and encourage each other in our strengths.

Hearing from someone else that you’re doing well isn’t fishing for compliments, it’s reassurance that you’re making it! Find someone you can share with. This is really easy with a spouse but a supportive friend works just as well.

10. Keep Good Company

Having friends that are also paying off debt or are supportive of you doing it is clutch. Saying no to spending money can be isolating. Having friends who want to hang out at home or at parks instead of bars and restaurants make the weekends much easier.

Some people don’t care about their financial future right now. It doesn’t make them bad people or even irresponsible.

I repeat: It doesn’t make them bad people or irresponsible.

But you’re in a different place than they are and you need to keep company that’s on the same page or you’ll keep spending and spending because saying no every week is near impossible.

11. Be Real

Don’t be fakin it. If you’re behind on your debt snowball don’t pretend you’re doing fine.

The more you lie about your progress the more backed up you’ll feel which could lead to giving up. When you’re honest with yourself and the people around you, you’ll stay committed to the process and help more people with your story.

I hope these steps will help you avoid burnout and stay committed to this process, because it is worth every sacrifice and every no that comes out of your mouth. And I’ll be here every step of the way to see you through it.

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avoid burnout when paying off debt

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avoid burnout when paying off debt

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Tips to help you payoff a ton of debt without burning out. Tips and tricks from a woman who paid off over $78,000 in under 2 years on average salaries. #debtpayofftips #debtpayoffmotivation #budgetingtips #budgetinghacks #moneytipsformillennials

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Jen Smith is a personal finance expert, founder of Modern Frugality and co-host of the Frugal Friends Podcast. Her work has been featured in the Wall Street Journal, Lifehacker, Money Magazine, U.S. News and World Report, Business Insider, and more. She’s passionate about helping people gain control of their spending.


Interest Rates vs. Balances: Which Do You Pay Off First?

If you are trying to get out of debt, there is a lot of discussion as to how you should pay off your debts.  Some experts say it should be paid off by the lowest balance and others say the higher interest rate?  While there is not a “right” way to do it, I will share what we did to get out of debt and the reasons why.

how should I pay off my debt

how should I pay off my debt

First of all, let’s talk about credit cards and why it is not good to carry a balance.  When you owe on your credit cards, your interest keeps compounding and that increases the amount you owe. Here is an analogy for you:

If you have a large fire going and dump a cup of water on it, you will do nothing.  You might make the flames go down for a minute, but they will return.  At this point, you need to figure out a way to really tackle it and get it under control.

However, if you dump a bucket of water on that same fire, you may not put it out completely.  But, you will probably make it smaller.  If you throw two or three more buckets it, you can actually extinguish it.

The same is true with credit card debts.  When you make small, minimum payments you are throwing cups of water on a fire.  However, if you send in a larger amount, you can actually pay it off much more quickly.  But of course, you can’t send in larger amounts to everyone at once, so you have to prioritize.


There is a lot of discussion about paying down higher interest rate cards first or those with a lowered balance first. There is no right or wrong answer, as it will be different each time you talk to another expert.

Both options are listed below.  Read through them carefully to determine which is the right one for you.


Many financial experts will recommend that you list your debts in order of the interest rate, from high to low.  Then, focus on paying on the one at the top of your list first.  They recommend this method as the one with the highest rate is the one which usually will cause you the most financial stress.

Your monthly payment is around 4 – 5% of the balance  That means if you pay the minimum payment, 95% of what you pay is strictly paying interest.

For instance, if your rate on a $1,000 loan is 15% and you pay $40 each month, it will take you 5 1/2 yrs to pay it in full! OUCH!   During that time, you will have paid out more than $360 in interest alone – double OUCH!!  That makes your $1,000 purchase now $1360 (and chances are what you bought has not appreciated in value).

Start by making larger payments on the loan with the highest rate.  Continue making the minimum payments on your other debts.  Once you get the first debt paid in full, roll the amount you were paying on that card to the one with the next highest rate.

The only downside to this method is that it may take you a long time to pay the balance in full.  That might lead you to get discouraged – but don’t let it! If you find that you feel this way, perhaps you should consider paying the lowest balance first, which we explain next.


We followed this method when paying off off our debts. It was the right answer for us and countless others.  The reason it can work better is realizing faster progress.

To begin, list your debts by the least amount owed down to the greatest.  Toss any additional funds you can at the bill with the lowest balance.  Continue making your regular minimum payments to the other debts on the list.  As you get this each debt paid off, roll those payments to the next one and continue until all debt is eliminated.

You may end up accruing more in interest, but you might be better off psychologically.  When you can see that you are making progress, you will be more likely to continue and not be as quick to quit otherwise.

Paying down debts in this method allows for short-term, attainable goals and that can make all of the difference.


Whichever way you decide to tackle those credit cards, it is good that you are doing just that.  While there is no such thing as good debt, credit card debt is the worst debt.  One day you will be able to live a debt free life — and it will be the most amazing feeling in the world!

If you are just getting started trying to get out of debt, catch up with our other steps shared previously on our How To Get Out Of Debt Page.

pay off debts by balance first

pay off debts by balance first


Get Out Of Debt: Net Worth and Debt Pay Down Forms

I am proud of many things I’ve done in my lifetime (with my kids and husband topping the list).  Another thing I’ve done is paid down more than $37,000 in debt and fully funded our 6-month emergency fund.   Not having debts looming over our heads has afforded us many more opportunities — the best of which is just freedom from debt!

how to figure your net worth

how to figure your net worth

Like so many others, my husband and I were not as savvy with our finances as should have been.  As a result, we had quite a bit of debt and often, we would find ourselves living paycheck to paycheck.  In November 2007, we found the answer to our problems.  We read Dave Ramsey’s Total Money Makeover.

It might sound cliche, but it really was life changing for us.  For the first time in both of our adult lives, our financial life was more secure.  Not only that, my husband and I have grown closer and our marriage is stronger as a result (which was a benefit neither of us ever expected, but are so grateful for).

If you find yourself wandering down the same path of financial mayhem and are ready to commit to making a change, then you will want to read further to learn how you can get out of debt! Are you ready?  Because there is no time like right now to get started on working your way out of debt.

Of course, we can’t just jump in and start to pay off those bills.  There are some steps you should take in order to get a true picture of your finances.  Trust me when I say that I KNOW this will be difficult.  However, you will need to do this in order to fully commit to getting out of debt.



The first thing you must do in order to get out of debt is to determine your Net Worth.  This provides you with an overview of your assets and liabilities and gives you an overall picture of what you ….well….are worth (financially only, of course).  If, when you prepare yours you find you are in the red – or have a negative net worth — remember that is is OK!!!  This is part of the journey to financial independence.

The way you can determine your net worth is to add up all of your assets and then subtract your liabilities.  You can just do this on notebook paper or in a spreadsheet.  You can get your own Net Worth Form by clicking on the image below.

If, when you prepare yours you find you are in the red (or have a negative net worth), that is OK.  This is part of the journey to financial independence.  You are working to turn this around and end up with a positive net worth!


At this time, you will prepare another form as well.  This one is entitled The Debt Pay Down.  This one should be simple as it will stem from the liabilities you will record on your Net Worth Worksheet. Get a debt paydown form by clicking on the image below.

Find all of your debts. List the one you owe the least amount to first.  Include the balance due as well as the minimum required monthly payments.  Continue to do this and list all of your debts in this same order.  The method my husband and I used meant to pay down lowest balances first and not consider interest rates.  However, you can list your debts in that manner instead (read more about paying down balances or interest rates first).

That is the very FIRST step in getting out of debt!  The next thing you’ll do is create a budget!  You can then continue with the other steps on how to get out of debt as listed here.


How Can You Get Out of Debt with Bad Credit?

  • Get Out of Debt

As many as 8 out of 10 American adults have some form of debt and the vast majority are stuck in a persistent cycle of interest, penalty fees, and escalating APRs. It’s not always something they accumulated through careless abandon or something they acquired as a means of paying for a lifestyle they otherwise can’t afford. 

In fact, close to a quarter are using debt to pay for necessities like food and utilities. 

Many of these persistent debtors feel trapped. They’re making monthly payments they can barely afford, dealing with creditors that penalize them for every setback, and struggling with credit scores so low they have no hope of acquiring additional loans or credit cards, let alone a mortgage.

So, what should you do if you’re in this position? How can you clear your debt if you have bad credit?

Challenges to Getting out of Debt with Bad Credit

A good credit score makes a massive difference when it comes to escaping debt. You have creditors at your mercy, because they see you as a trustworthy, reliable borrower. You can refinance, consolidate, and generally reduce the size and scale of your debts by using your credit score as leverage.

If your credit score is poor, you can still acquire new credit cards and personal loans, but the interest will be so high and the fees so severe that you’ll become trapped in an endless cycle of escalating repayments and penalty fees. 

The Difference a Good Credit Score Can Make

Let’s forget about consolidation loans for a moment and focus purely on credit cards. If you have an exceptional credit score, there’s no reason why you can’t get a rewards card with an APR as low as 15%. On a balance of $10,000 and with a minimum monthly payment of $300, it will take you 44 months to clear this debt. In that time, you’ll pay $3,017 in interest.

If you have a bad score, your options are a little more limited and you may be stuck with a rate of 26% APR. In this case, it will take you 60 months to clear the debt and cost you close to $8,000 in interest.

The debtor with bad credit clearly needs the money more, but over the course of several years, they’ll have $5,000 less and be forced to deal with the debt for 16 months more.

Statistics like this are why it’s so hard for individuals to escape the cycle of bad credit.

How Much Debt is too Much?

There is no such thing as “too much debt”. The United States has trillions worth of debt and Apple, one of the biggest companies in the world, has billions. You can be rich, have a positive cash flow, and still have a lot of debt. However, everyone has a ceiling point, and this is based on their income.

To estimate yours you can use something known as the debt-to-income ratio. This is calculated by combining your total monthly payments and comparing them to your gross income.

If, for instance, you earn $10,000 a month and have total monthly payments of $3,000 ($1,000 in credit cards; $1,000 in personal loans, and a $1,000 mortgage payment) then your debt-to-income ratio is 30%. 

This ratio doesn’t directly affect your credit score, but it is used by mortgage lenders to determine your creditworthiness. You can also use it yourself to assess your financial situation.

A debt-to-income ratio below 30% is optimal and anything below 20% is ideal. If it climbs above 43%, you’ll start being rejected for mortgages and other major loans and if it climbs above 50%, it’s time to seek help.

A 50% debt to income ratio means, for example, that your monthly payment is $2,500 and your income is $5,000. Once you add utility bills, food, and other essentials to the mix, you won’t have a lot of money to play with and you’ll be one medical disaster away from financial ruin.

What Qualifies as Bad Debt?

All debt can be considered bad as you’ll always pay interest and run the risk of receiving derogatory marks. But some debts are worse than others and these are known as “Bad Debts”.

Generally speaking, bad debt is any form of debt that doesn’t increase your net worth. A mortgage, therefore, is classed as good debt, because it gives you a sizable asset that will likely appreciate in value; a brand-new car is bad debt, because its value will plummet as soon as you drive it away.

Student loans are also considered to be good debts as they help you build towards your future.

Debt is a common part of modern life. If you want a good education, a home, and a clean bill of health in the United States of America, you need to accumulate debt. By focusing only on “good debt” and avoiding “bad debt” (store cards, credit cards, car loans, retail loans) you can increase your chances of turning your life around and greatly improving your financial situation.

Options for Clearing Debt with a Bad Credit Score

Now that we’ve established just how damaging bad credit can be, it’s time to look at your options. There are a few ways you can pay off debt with a Poor or Very Poor credit score, but they may not all be available to you.

Build Your Credit Score

If time is on your side then your first step should be to improve your credit score, thus increasing your chances of making the following options work. This is easier said than done, but in just 3 months you could add up to 200 points to your credit score, which is enough to move from Very Poor to Good or from Fair to Excellent.

Credit scores are calculated based on 5 criteria, each weighted differently. Improving your score is a simple case of understanding what these criteria are and knowing how to manipulate them in your favor:

  • 10% – New Credit Accounts: Avoid opening any new accounts or applying for anything unless it is absolutely necessary. If you do apply for new loans, make sure those applications occur within a 14- to 30-day period (depending on the credit scoring system) so that all inquiries merge into one.
  • 10% – Mixture of Credit: This can only be improved by adding a variety of credit accounts to your credit report. However, in the short-term, this will do more harm than good and is therefore not something you should do simply for the sake of improving your score. It’s worth keeping in mind for the future, though.
  • 15% – Age of Accounts: Age is key. The older the accounts are, the better. Don’t open anything new and keep all cleared accounts active where possible.
  • 30% – Credit Utilization: This aspect of your credit score compares your available credit (such as the combined limits of all credit cards) to the used credit (such as the balance on those cards). You can improve it by increasing the number of payments you make every month but also by requesting an increased credit limit. This won’t reduce your score and will simply add some much-needed percentage points to your utilization ratio. You can also add yourself as an authorized user to a friend’s or family member’s credit card and keep all cleared credit cards active.
  • 35% – Payment History: Dispute all errors on your report and do everything you can to remove them. Keep meeting your minimum monthly payment obligations and every month your payment history will improve and your credit score will improve with it.

If you’re in such dire straits that you can’t increase your limits, acquire any new credit or do anything else discussed below, then seek to build your credit score with the following:

  • A Secured Credit Card: Offered by many credit card companies, these cards are secured against a cash deposit. You get all the benefits (including the convenience of a secure credit card) without the risks that large, unsecured debts can bring.
  • Online Lending Circles: These services bring many debtors together. They essentially just move money around, but everything is reported to the credit bureaus and if you meet the terms of service you can slowly build your score.
  • Credit Counselor: An expert in finance, budgeting, and debt relief who can help you find a solution that is tailor made for your specific needs. They can’t improve your credit score directly, but they can show you how.

Get a Cosigner

A cosigner with good credit can help you acquire a personal loan, consolidation learn, or low-interest credit card. If your parents are homeowners, you can also consider home equity loans or reverse mortgages, swapping home equity for a cash sum that you can use to clear your debts.

It’s not an option for everyone, however, and you’ll need to find someone who trusts you and has a strong credit score or a home to use as collateral.

A Debt Management Plan

You can get a debt management plan through a credit counseling agency or credit union. They work with debtors suffering hardship and essentially consolidate and then manage debts on their behalf.

You can reduce all debts to a single monthly payment, eliminating the risk of penalty rates, extra fees, and escalating payments.

They often require that you cancel all your credit cards except for one, which should only be used in emergencies. This is really the only downside to debt management, as canceling cards and other credit accounts will reduce your credit utilization score. 

If you fail to make your monthly payment during any given month the agreement may be canceled, at which point your creditors will defer to the original terms of the loan/credit.

A Debt Consolidation Loan

Consolidation loans are somewhat misunderstood. The idea behind these loans is that you consolidate multiple high-interest debts into one low-interest personal loan. The problem is, you can’t acquire this personal loan yourself, because if you have bad credit then low-interest loans are not exactly easy to come by.

You have to go through a debt consolidation company. These companies work with all kinds of credit scores and provide a debt consolidation loan that is large enough to cover your debts and has an interest rate low enough to reduce your monthly payment.

But, of course, creditors are not there to do you any favors. While the interest rates and monthly repayments are lower, the loan term is extended, which means you’ll have the debts for longer and will repay more interest over the term.

This is something that few debtors take into consideration as they get too caught up in the APR and monthly payment. As an example, let’s imagine that you have three credit cards totaling $20,000 and charging an average of 25% interest. With a minimum payment of $800 a month, it will take you 3 years to clear the debt and cost you over $8,500 in total interest.

If you consolidate that debt with a 10% interest rate, you can reduce the monthly payment to $264.30, but in doing so you’ll have the debt for 10 years and will repay over $11,700 in total interest.

A Balance Transfer Credit Card

A balance transfer credit card is basically a debt consolidation loan, only you’re moving multiple credit card balances onto a single card. Balance transfer cards offer introductory 0% interest rates that last for up to 18 months. 

You’ll need to pay a transfer fee of between 3% and 5%, which means a $20,000 balance will grow to $21,000, but if you continue making that $800 monthly payment then you’ll reduce your balance to just $6,600 by the time that introductory period ends.

Your credit score will drop temporarily when you sign up for a new credit card, but the drop will be small and will diminish over time. 

Your credit score will also drop if you close all credit cards that you clear, so keep these open if you can.

Debt Settlement

Debt settlement companies work best when you have bad credit resulting from multiple missed payments, collections, and charge-offs. At this point, your creditors/collectors are desperate to cut their losses and get a return, even if it’s just a fraction of the original balance. They’re open for negotiations and a debt settlement specialist will use this to their advantage and try to settle for between 40% and 90% of the balance.

The problem is, they will also request that you stop making payments as soon as the debt settlement process begins. This deprives your creditors of interest payments and makes them more inclined to settle. It also gives you more money to use towards the settlements. 

At the same time, it destroys your credit score, or what’s left of it, and there’s a risk you’ll be sued. This process can also last for up to 4 or 5 years and it may take several more years to rebuild your credit score after this.

Staying out of Debt and Building Your Credit Score

Clearing your debts is just half the battle. If you think your credit score is low now, wait until you go through debt settlement, bankruptcy, and even debt management. These debt relief methods will clear your debts, but they’ll do so in a way that damages your credit score and leaves derogatory marks that may remain for years.

The good news is that you have a clean slate and can slowly rebuild your credit score and get back on your feet. Just keep the following tips in mind:

Spend What you Can Afford

Don’t deprive yourself of credit cards just because you spent years battling credit card debt. A credit card gives you a secure and convenient way to spend money. It can help you during an emergency and cover you several days before payday when money is tight and your options are limited. A credit card with a large and relatively untouched credit limit is also hugely beneficial for your credit score.

So, by all means, keep your credit cards active, but be careful how you use them in the future. Only spend the money that you’re 100% confident you can repay. In most cases, you should limit yourself to spending money that you already have in your bank and then transferring that money across every couple of weeks. 

Not only will this prevent your balance from growing, in which case you’re one financial disaster away from that balance rolling over, but it will also improve your credit score.

Credit cards are reported to the credit bureaus once every 30 days and your balance will show as credit card debt even if you have every intention of paying the balance in full and have done so for every previous month. By clearing that balance early or repaying large quantities of it, your debt will be much lower at the end of the month.

Give Yourself a Strict Budget

Set a strict spending budget every month based on incomings and outgoings. Don’t just calculate your debt-to-income ratio—include all outgoings, such as food, bills, and other essentials, and calculate your incomings after tax. The figure you arrive at is your disposable income, at which point you can reduce it by 70%. This is the amount of money that you can comfortably spend every month, with the rest going towards your savings.

As an example, let’s imagine that you earn $4,000 per month after tax and have all the following obligations:

  • Credit Card Debt: $500
  • Personal Loan Debt: $500
  • Other Creditors: $100
  • Utility Bills: $300
  • Food: $600
  • Subscriptions: $200
  • Other Payments: $300
  • Remaining Balance = $1,500 – 70% = $450

Every month you have $450 to spend on eating out, day trips, clothes, electronics, and other luxuries. This ensures that your debts are paid, and you don’t spend money you don’t have. It will also prioritize your savings, which can help you during a future emergency.

Reduce Housing Expenses

A growing number of Americans are spending up to 50% of their income on housing expenses, including rent and insurance. If you have a mortgage, 50% is still a huge amount to spend, but it’s excusable because every month you move one step close to owning your home.

But if you’re spending all that income on rent, then you’re not moving any closer to acquiring an asset and are just flushing money down the drain. Try to reduce your housing expenses by moving to cheaper accommodation. If you move out of the city you get better accommodation for less, albeit with the added expense of an extended commute.

Reduce Your Subscriptions

The average American household spends several thousand dollars on nonessential subscription services every year. These packages cost just $5 to $30 each and seem insignificant at first, but if you have 5 of them that’s between $25 and $150 a month or $300 and $1,800 a month.

Amazon Prime, Netflix, Hulu, Xbox Live, PlayStation Plus, Beauty Boxes, Music Streaming Services, Meal Delivery Services, Diet Clubs, Gift Boxes—it’s easy to accumulate thousands of dollars’ worth of annual debt without even realizing it. Get rid of the services that you don’t use and focus on the bare essentials.

Summary: Which Option is Right for you?

Your options are pretty limited if you have bad credit, but there are still a few things that you can do. If you have trusting parents who own their own home, begin by asking them to cosign or help you in other ways. If you have money for settlements, lots of derogatory marks and heaps of unsecured debt, then debt settlement might be the way to go.

If you’re struggling to make a decision, contact a credit counseling service in the first instance. They will ask you a few basic questions, asses your situation, and then recommend the best course of action. This service is provided for free by settlement companies, but you may not get the best advice as they’re more inclined to direct you towards their own services. However, even the best counseling services will charge you less than $40 for a short 30- to 60-minute appointment and this is all you need.


10 Lies We Tell Ourselves About Debt

We all hear it repeatedly.  Debt is bad! But, when it happens, many of us try to pretend it is not that bad.  The truth is, we are lying to ourselves.

the lies you tell you about debt

the lies you tell you about debt

While we know that this is how we should live financially, many of us just don’t listen.  Even I knew better and lead myself down a path of financial ruin (thankfully, I’ve recovered and will not allow it to ever happen to me again).

The thing is, I believed the lies and fell for the hype.  I did not listen to what the so-called experts had to say.  I just did what I thought was right based on what I was reading and had been told by others in my situation.  The sad truth is that I was just lying to myself.

If you are struggling with paying off your debt, these folks may be able to help:
Call 866-948-5666.

The thing is, debt is bad.  There is no other way to say it.  You don’t want it.  You don’t need it.  So why then, do we all continue to believe the myths and lies?  Perhaps it is because we just do not even know that is what they are.  Here are some of the lies I told myself when I was in debt — and hopefully I help you realize them too.


1. Debt is needed for my credit score

The thing is if you don’t need to borrow money ever again, why do you even need credit?  You may think that you can’t get a mortgage or a vehicle loan if you do not have a great credit score.  That is not true.  Many of them will, especially if you have no debt.

It has been years since we’ve been out of debt.  We cut up our cards in November of 2016.  Since that time, we’ve had a mortgage and one auto loan (which we paid off in just 4 months).  That’s it.  And you know what?  My credit is better than it was before I had the debt!  I’m in the 800 club now and proud of it.  I did not need a credit card to get there.  I did not need debt to build that score.

So, you may think you need debt to increase credit, but that is not the truth.

2.  Everyone has SOME debt

Nope.  Not everyone.  There are many Americans who have no debt at all.  Some do not even have a mortgage payment.  Just like I tell my kids “If everyone was jumping off a bridge, would you jump too?”  Of course not.  You have more common sense than to do that, right? Why then, do you think that just because everyone has debt that it is OK for you to have it too.

That was the way we thought about it.  We thought it was normal to have debt.  It turns out; we don’t want to be normal.  Maybe you should try it too.

Read More:  Creating a Plan to Get Out of Debt

3. I am not good with money

Sorry folks. That is not a good excuse. The internet has hundreds of thousands of resources available to help you learn about money.

If you don’t know about how to set up a budget, just Google it! If you are confused about how to set up a plan to get out of debt, you can Google that too.

We live in a time where information is quite literally at our fingertips.  The information is there.  You just have to go and find it.  No one is going to give it to you.  You need to do some work on your own.

Read More: How to Create a Budget (even if you suck at budgeting)

4. I deserve to spend my money

I agree with you on this.  However, you need to spend YOUR money.  Not money you do not have (which is what a credit card is).  If you don’t have the money in the bank to buy something, then you can’t just use a credit card.

It might make you happy in the moment when you buy it.  However, how will you feel when you are still paying for the expensive dinner out 6 months from now.  Probably not worth it as much when you look at it that way.

Read More:  How to Include the FUN STUFF in Your Budget

5.  We are in debt because of an emergency

I am not doubting anyone that sometimes, medical emergencies come up.  There are instances where you lose your job and must somehow get food on the table.  Those are emergencies.  These are things that you really did not know would happen.

Saying that you had to go into debt to pay your taxes is not an emergency.  You know that your taxes are due at the same time, every year.  That was a result of poor planning and is not an emergency.

It is essential that you have an emergency fund to plan for both the things you know are going to come up (such as paying taxes) and those that you may not expect (like the furnace going out).

Read More:  Ideas to Quickly Build Your Emergency Fund

6.  It was a great deal

The catch 22!!! Yes, we all love getting a great deal.  However, is it a deal if you are spending money on something you would not normally purchase?

This is all too common with people who start using coupons for the first time.  They see all of these little papers sharing savings on them and want to use them.  The sad truth is that many couponers actually spend more money when they start out than they realize.  They are trying to use every coupon.  However, if they are buying things they normally would not have on their shopping list, they are spending money just to save money.

The same is true with anything.  Just because you see that it is good deal or on clearance does not mean that it is the green light to go ahead and buy it.  Don’t spend just because.  Spend with a purpose.

Read More:  50 Ways to Save at the Grocery Store

7. I don’t have that much debt

Any debt is bad debt. It is the truth.  It doesn’t matter if you owe $50 or $50,000.  The fact is this – you have debt.  You have to take the steps on your own to eliminate your debt and change your way of thinking.

8. I just need to make more money

I don’t buy this one either. If you are already living beyond your means, what will more money do to help that?  Chances are you will live further beyond what you can afford.

More money is not a guarantee of not debt.  Look at stars who have had to declare bankruptcy because they have no money.  Just because you have more does not mean you can manage it well.

Learn to gain control of your money now – no matter how much you are making.  Only then, will a pay increase help you to pay off your debts.

Read More:  Defining Your Needs vs. Your Wants

9. I will start my debt plan next month

Why are you waiting? What is the reason? It is like a diet. People so often say they will start it on Monday and then come up with an excuse and say they will start the following week. Before you know it, 6 months have gone by and 6 more lbs. have been added to your waistline.

Start today. Don’t put it off. The sooner you start, the sooner you will be able to shout it loud – I’M DEBT FREE!

10. It is impossible to be debt free

I get this as I once thought the same thing. We were a one income family with two young kids and were struggling to live paycheck to paycheck. There was no WAY we could do it. I could not have been more wrong.

We talked to friends who were in the same situation and gained support from them. We knew we were not alone. Together we celebrated the little victories. The key was that we needed to remind ourselves that anything was possible. It took us 27 months, but that $37,000 in debt was gone before we knew it. And that was the best feeling in the world.

Read more about my family’s journey to become debt free.

Don’t fall for the hype. Stop trying to tell yourself these lies (and others you might be thinking about right now).  Only when you believe the REAL truth about debt will you be able to commit and work towards becoming debt free.

why am I still in debt

why am I still in debt


Fact or Fiction? Not Having Debt Affects My Credit Score

Does not having debt affect your credit score? Not necessarily.

If you don't have debt, will it affect your credit score? We break this down for you and explain why you must have debt in order to have a good score (no way around it).

If you don't have debt, will it affect your credit score? We break this down for you and explain why you must have debt in order to have a good score (no way around it).

When you are working yourself out from debt, you do not use credit cards.  Or, at least, you should not use them.  Using cash is important while you are on the path to financial freedom. After all, credit cards are the reason many people are in debt in the first place.

Many people who are debt free choose not to use credit cards at all.  This is very common.  People who used credit incorrectly in the past worry that they will fall into the same spending traps again.  I get that.

However, those who do not use credit cards worry about their FICO score (i.e. credit score).  After all, if they have no debt at all, will this number not go down?

It is true, your FICO score is based upon your debt and how will you repay it back to the debtor.  Your FICO score takes several components into consideration:

10% based upon your type of debt
10% based upon new debt
15% based upon the length of time you have been in debt
30% based upon your debt level
30% based upon your debt history

What is important to realize is that your FICO score does not take into consideration your debt to income ratio.  It also does not consider what you have in savings.  So, if your debt to income ratio is only 15% and you have $25,000 in the bank, is your score really indicative of how you manage money?  Of course not.

Something that many people may not realize is that paying loans off early has absolutely no effect on your credit score.  It does not improve (nor hurt) it in any way.  In fact, there is no “bonus” to your score for paying off items early.  It simply only looks at if the loan was paid on time.  That’s it.  So paying off your loan early doesn’t hurt nor help your score in any way.  However, those debts where you are missing payments will absolutely hurt your score.


If you want to maintain a good FICO score, you have to borrow money.  There is no other way to do it.  That means you must have debt.  Even if you pay off a card every month, for a short time, you carry debt.  Here is now debt is defined:

Debt (n)-

Debt (n)-

You’ll notice that it doesn’t say “unless you plan on paying it off at the end of the month, then it is really not debt.” Anytime you use money that is not yours, it is debt.

[clickToTweet tweet=”Anytime you use money that is not yours, it is debt.” quote=”Anytime you use money that is not yours, it is debt.”]

Whether or not you pay your balances in full every month, it is still debt.  However, that doesn’t mean it is a bad thing.  It can actually help you with your score.


If you really want to increase your credit score, the simplest way to do that is with a credit card.  Just make sure you use it the right way.   The reason this is the recommended method of creating credit is so that your utilization rate can be calculated.  So, what is a credit utilization rate?

Utilization rate

Utilization rate

Here is a way to look at this in a practical sense, if you have a credit limit of $2,000 on your card and you have charged a total of $500, then your utilization rate would be 25%.  That could end up lowering your credit score.  The reason is that creditors believe that the higher your balance in relation to your credit limit, the less likely you will be to replay it (you as in “general public).

Of course, the best way to use a credit card is to always pay it in full every month and never charge too much on it.  These are tips which can help to keep your score on the rise.


It really is fact that you must have debt to have a good credit score.  That doesn’t mean long term debt.  That doesn’t mean you do not pay it off every month.  Debt is debt – no matter if you pay it back 3 days or 3 years from the time you made the purchase with a loan or credit card.

Whatever you do, do not let your FICO score control how you handle money.  It is one small part of your financial health.  What matters most is the manner in which you live your life – debt free to live like you want rather than being tied to a three digit number.

(I am not a financial advisor and the information listed within these posts is not to be construed a financial advice.   Financial concerns/issues should be addressed with a professional in order to receive advice and assistance.)


4 Tips For Paying Off Credit Cards

Have you found yourself in credit card debt? If so, don’t worry – you’re not alone.

Researchers estimate that as many as 50% of U.S. households have credit card debt. I know from personal experience how it feels, because I had a $3,000 balance on my own credit card as recently as last year. It wasn’t easy, but I paid it all off and along the way I learned some important lessons about credit cards.

Below, I’ll share 4 tips that can help anyone pay off their credit cards:

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different strategies when it comes to paying off credit cards. One strategy is to take aim at the card with the lowest balance – in other words, the one that can be paid off the quickest. While this strategy can work for some people, a better option is to focus on the card with the highest interest rate, especially if that rate is 15-20% or more.

The reason you want to eliminate that high-interest debt first is it will save you a ton of money over the long run. There is little reason to leave that high-interest debt festering and building up more and more interest charges. Instead, just dedicate all your extra money and all your attention to destroying the highest-interest debt. And in the meantime, pay the minimum payments on your other debts to avoid any fees or penalties. Once you’ve destroyed the first balance, move on to the balance with the next-highest interest rate. For more tips on how to do this, check out our Credit Card Debt resource center.

2. See If A Balance Transfer Could Help You

If you happen to have a really high interest rate on one (or several) of your cards, you should consider doing a balance transfer. The term “balance transfer” means switching your credit card balance from one credit card to another one, usually with an entirely different company. For example, you might transfer your balance from a Chase card to a Citi card, or vice versa.

With a balance transfer, if you have a high credit score, you can sometimes get a much lower interest rate than what you have currently. The way it works is you will usually have to pay a fee up front (about 3-5% of your balance) and then get an introductory period with no interest, which can help give you the incentive to pay off that debt rapidly. It’s really important to read the fine print on balance transfer offers, though, because some of the offers have hidden fees.

3. Find New Ways To Save Money

In order to get your credit cards paid off as fast as possible, you’ll need to maximize your income every month, and that means finding new ways to save money. It’s always a good idea to have a monthly budget or spending plan. If you don’t have one yet, it’s time to create one, so that you can see how much of your money goes to each category of spending in a given month.

Once you can see where your money is going, you’ll be able to identify areas you can cut back on. For example, if you are spending $400 at the grocery store each month and spending $300 eating at restaurants each month, then you can no doubt save money on food by cutting down on the number of times you eat out. You must change your habits in order to save – try planning your meals ahead of time and going to the grocery store with a list of ingredients that will get you through the entire week on home-cooked food. If you can make it a habit, you’ll begin saving money each month that can go toward debt.

The same is true if you realize that you’ve been spending lots of money on things like clothes, music, or anything else that qualifies as a “want” instead of a “need.” Change your habits to avoid the stores or websites that are tempting you to spend, and you’ll be able to save more. For further advice, check out our Budgeting Tips resource center.

4. Get Support To Boost Your Motivation

One of the biggest obstacles to actually paying off your credit cards is the fact that it’s so hard to stay motivated. Let’s be honest: paying off debt can be hard. So how do you keep your focus and persevere until you reach your goal of being debt free? We’ve found that sharing your goal with others is a really important part of the process, because it gives you a support network of people who can give you encouragement during the hard times, when you feel like stopping or giving up.

Decide on a few people you can trust to be positive and to treat you well, and tell them your goal. Then ask them to help you stay on track! As an alternative, or an added boost, write down your goal on a piece of paper and add a photo to remind you of what you’re striving for. Put it somewhere you’ll see it often, and it will help you stay focused throughout your journey to being debt free.

Hopefully these tips will help you pay off your credit cards faster than you even think you can! Let us know in the comments if you have any questions. You can also check out these additional tips on how to get out of debt which may be helpful if you have other types of debt besides credit cards.