Money Management

Three steps to take when you’re drowning in debt

By  Karen Banes

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No matter how overwhelming your debt might seem, there are three easy steps you can take to help you get back on track.


You can’t get debt under control until you know exactly what you owe, and what you’re paying back (or not) each month. Not knowing what you owe is one of the signs that you’re carrying too much debt, but it’s surprisingly common. Painful as it is, you need to sit down and work it out. Apart from anything else, it will save you time if you decide to seek help, which is an optional but highly advisable part of the second step in this process. Any advisor or agency you approach is going to need all the facts, in order to give you sound advice.

You’ll need to know:

  • How many debts you have, and who they’re with
  • What the outstanding amount is left to pay on each debt
  • How much the interest rate is on each debt
  • What monthly payment you’re making on each debt

This will help you get a clear picture and perhaps indicate which method you should use to start paying down debt. But first you can probably benefit from taking the second step.


If you have more than one or two sources of debt, you can almost certainly save money by consolidating. Debt consolidation simply involves rolling your various debts into one monthly payment. Except it’s not that simple, of course. You’re aiming to do one of three things, and preferably all three. You want to:

  • Reduce the amount of interest you pay
  • Simplify your repayments
  • Lower the amount you actually repay each month

Unsurprisingly this can be complicated.

It’s highly advisable you talk to a qualified credit counselor or financial advisor if you’re considering consolidating your loans. There are a few different ways to do it, especially if you’re a home owner. You may be able to take out a home equity loan or a home equity line of credit, or re-mortgage your home (maybe at a lower interest rate than you’re currently paying) to pay off more expensive debts. However, as you no doubt already know, all these options involve loans secured against the value of your property, which means your home will be at risk if you don’t keep up repayments.

That’s why you need to take advice before you consolidate debt. The right advisor will help you look at your finances and work out what you can afford to pay back. They’ll also advise you on things like whether it’s a good idea, given your circumstances, to consolidate your debts into a secured loan, an unsecured loan, or to simply leave them where they are and pay them down. See if you qualify for advice from a non-profit service such as the National Federation for Credit Counseling, before hiring an advisor elsewhere.

Take (significant) action

Many personal finance articles will tell you to start with the little things. Ditch your daily latte. Turn the thermostat down. I’m a big fan of changing the little things, but there is also an obvious problem with this advice.

Little things take a long time to add up. We’ve talked here at Wealthtender before about how the average lifetime bill for impulse spending is around $300,000. That’s a lot of money, but a lifetime is a lot of years. By all means change the little things. They will make a huge difference long-term, but if you’re looking for a short-term plan to pay off significant debt, they simply won’t be enough.

Look at changing something bigger, like where you live or what you drive. According to USA Today, housing is by far the biggest expense for US households, and many US households are occupying homes that are much bigger than they need, or in expensive areas that they don’t need to be in. If you’re single and have your own place, it might be time to consider an apartment share for a while. If you have a family, remember kids don’t care about square footage or enviable zip codes. They’d rather have happier, less stressed parents.

Depending on your circumstances, job mobility, and family circumstances, it might actually be worth moving to a whole different part of the country, moving in with family for a while, or looking at some of the more extreme forms of alternative housing out there. Sometimes saving money can actually lead to new adventures.

After housing, the next biggest expense (again by a significant amount) is transportation. For most Americans, this includes car payments, insurance, gas and maintenance. A change of vehicle can, for some people, reduce every one of those outgoings at one go. Getting rid of a vehicle will have an even bigger impact.

Sure, there are many parts of America where a car really is necessary, but if you’re living in a big city with affordable public transport and restricted parking opportunities anyway, it may be a feasible option, especially if you’re a couple that can go from two vehicles to one. The point here is that changing something expensive like housing or transportation, will add up a lot sooner than ditching your designer coffees.

Getting debt under control is never simple, but these three steps are definitely worth considering if your monthly repayments are starting to overwhelm you.

Karen Banes

About the Author

Karen Banes

I’m a freelance writer specializing in online business, personal finance, travel and lifestyle. I also work as a content creator for hire, helping brands and businesses tell their stories, grow their audiences, and reach their ideal customers. I’ve lived, worked and studied in six countries, across three continents. Stop by my blog to learn how to run your own (very) small business on your own terms. You can also connect with me at my website or follow me on

Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.

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