Simple Steps to Take If You're Drowning in Debt

Debt can feel challenging, making it seem like your paycheck disappears as soon as it arrives. Bills pile up, interest grows, and financial stress affects your well-being. If you're struggling to keep up, you're not alone—over 60% of Americans struggle with debt management, and this number continues to rise. Mortgage debt alone has reached a staggering $12.61 trillion, while credit card balances now exceed $1.21 trillion, making it harder than ever for individuals to regain financial stability.

The problem isn’t just the amount you owe—it’s how debt limits your freedom. It delays homeownership, prevents savings for emergencies, and adds emotional stress to daily life. The good news? There are clear, actionable steps you can take to regain control of your finances, reduce your debt, and build a stable future.

In this post, we'll provide practical, step-by-step strategies for managing debt effectively.

From creating a budget and cutting unnecessary expenses to choosing the right repayment method and negotiating with creditors, these simple actions can set you on the path to financial freedom.

Simple Steps to Take If You're Drowning in Debt

Debt doesn't have to define your financial future. With the right approach, you can regain control, ease financial stress, and work toward a debt-free life. Here are the key steps to help you move forward.

Step 1: Assess Your Financial Situation

Before tackling debt, you need a clear picture of your financial standing. This step helps you understand your total debt, identify spending patterns, and find opportunities to free up money for repayment.

List All Your Debts

Gather all your loan statements, credit card bills, and any other outstanding balances. Write down key details, including:

• Total balance owed

• Minimum monthly payments

• Interest rates

• Due dates

This list will help you see which debts cost you the most and prioritize repayment accordingly.

Review Your Income and Expenses

Track all sources of income, including your salary, side gigs, or government benefits. Then, list your monthly expenses, breaking them into two categories:

• Essential expenses: Rent or mortgage, utilities, groceries, insurance, and transportation

• Non-essential expenses: Subscriptions, dining out, entertainment, and impulse purchases

Once you have everything laid out, look for areas where you can cut back and redirect funds toward paying off debt.

Check Your Credit Report

Your credit report gives insight into your financial history and can help you spot any errors or accounts you may have forgotten. Every year, you're entitled to a free credit report from each of the three major credit bureaus—Experian, Equifax, and TransUnion. Review your report for:

• Accuracy of balances and payment history

• Any missed payments or accounts in collections

• Credit utilization (how much credit you're using compared to your limit)

If you find any mistakes, dispute them with the credit bureau to ensure your financial records are correct.

Identify Your Debt-to-Income Ratio

Your debt-to-income ratio (DTI) measures how much of your income goes toward debt repayment. To calculate it:

1. Add up all your monthly debt payments.

2. Divide that total by your gross monthly income.

3. Multiply by 100 to get a percentage.

   
   

For example, if you pay $1,500 in total debt each month and earn $5,000 before taxes, your DTI is 30%. A lower DTI improves your financial health and makes it easier to qualify for better loan terms in the future.

Set a Clear Debt Repayment Goal

After fully understanding your financial situation, set a realistic goal for reducing your debt. Whether it’s paying off a specific loan first, reducing total balances by a certain amount, or becoming debt-free within a set timeframe, having a clear objective will keep you motivated.

Assessing your financial situation is the foundation for developing an effective debt repayment strategy. The next step is creating a structured budget to allocate your money wisely.

Step 2: Prioritize Essential Expenses & Create a Budget

Reducing non-essential expenses is one of the fastest ways to free up money for debt repayment. Many small, everyday costs add up over time, making it harder to break free from financial strain. By making mindful adjustments to your spending habits, you can redirect more money toward paying off debt without drastically changing your lifestyle.

Identify Unnecessary Expenses

Start by reviewing your bank and credit card statements for the past three months. Look for recurring charges, impulse purchases, and non-essential spending, such as:

• Streaming services or unused subscriptions

• Frequent dining out and takeout orders

• Unplanned shopping or impulse buys

• Premium memberships or services that can be downgraded

Once you have a clear picture, decide which expenses you can eliminate or reduce.

Adopt a Budgeting Method

A budget helps you control spending and ensures that more of your money goes toward debt repayment. Consider using a simple budgeting method, such as:

Budgeting Method	Description
50/30/20 Rule	Allocate 50% of income to necessities, 30% to discretionary spending, and 20% to savings or debt repayment.
Zero-Based Budgeting	Assign every dollar to a specific expense or savings goal, ensuring no money is left unaccounted for.
Cash Envelope System	Withdraw cash for discretionary spending categories (e.g., groceries, entertainment, dining out) and stop spending when the envelope is empty.

Choose a method that aligns with your financial situation and stick to it.

Lower Everyday Expenses

There are many ways to cut costs without sacrificing quality of life:

• Cook at home instead of dining out. Meal planning and batch cooking can significantly reduce food expenses.

• Cancel unused subscriptions and switch to free alternatives where possible.

• Buy in bulk for household essentials to save money in the long run.

• Use public transportation or carpool to cut down on gas and maintenance costs.

• Look for discounts and cashback offers when shopping. Many apps and credit cards provide cashback rewards that can be used to offset expenses.

Avoid Impulse Purchases

Impulse buying can quickly derail your debt repayment efforts. To resist unnecessary spending:

• Wait 24 hours before making a purchase—this helps separate needs from wants.

• Unsubscribe from marketing emails that tempt you with discounts and limited-time offers.

• Use a shopping list when grocery shopping to prevent overspending.

Each time you cut an expense, reallocate the saved amount to your debt. For example, if you save $50 monthly by canceling a streaming service, apply that amount to your loan payments instead. Even minor adjustments can make a big difference over time.

Trimming unnecessary expenses and focusing on essentials allows you to make room for larger debt payments in your budget. 

Step 3: Stop Accumulating New Debt

One of the biggest challenges in getting out of debt is avoiding new debt. If you continue borrowing while trying to pay off existing balances, you will feel like you are taking two steps forward and one step back. To break the cycle, focus on minimizing your reliance on credit and making smarter financial choices.

Put a Pause on Credit Card Spending

Using credit cards for everyday expenses can lead to more debt accumulation, especially if you're not paying the balance in full. Here's how to take control:

• Use cash or a debit card: Pay for purchases with money you already have instead of relying on credit.

• Leave credit cards at home: Removing easy access to credit can prevent impulsive spending.

• Set spending limits: If you must use credit, keep your purchases within an amount you can pay off each month.

• Disable saved payment methods: Deleting stored credit card details from online shopping sites reduces the temptation to make impulse purchases.

Avoid High-Interest Loans

Taking out payday loans, personal loans, or using buy-now-pay-later services can increase your financial burden. Instead of borrowing:

• Negotiate payment plans with creditors if you're struggling to make payments.

• Use emergency savings for urgent expenses rather than taking on new debt.

• Explore side income opportunities to cover unexpected costs instead of relying on loans.

Cancel Unnecessary Credit Accounts

If you have multiple credit cards or lines of credit, consider reducing the temptation by closing accounts you no longer need. However, be mindful of how this may impact your credit score—closing older accounts can shorten your credit history and affect your credit utilization ratio.

Create a Plan for Responsible Borrowing

Some forms of debt, like mortgages or student loans, may be necessary, but it’s important to borrow responsibly.

• Only take on debt when absolutely necessary and with a clear repayment plan in place.

• Compare loan options to ensure you're getting the lowest interest rate possible.

• Understand loan terms before signing any agreement to avoid hidden fees or high-interest rates.

By cutting off new debt sources, you can focus entirely on reducing what you already owe.

₹The next step is to explore additional ways to increase your income and accelerate your repayment strategy.

Step 4: Increase Your Income & Pay Off Debt Faster

While cutting back on expenses helps free up money for debt repayment, increasing your income can speed up the process significantly. By earning extra cash, you can make larger payments, reduce interest costs, and become debt-free sooner.

Take on a Side Hustle

A side hustle can provide additional income without interfering with your primary job. Consider options that fit your skills and schedule, such as:

• Freelancing: Offer services like writing, graphic design, video editing, or programming.

• Gig Economy Jobs: Drive for Uber, deliver food with DoorDash, or walk dogs using apps like Rover.

• Online Selling: Sell unused items on eBay, Facebook Marketplace, or Poshmark.

• Tutoring or Teaching: Teach a skill online through platforms like VIPKid, Udemy, or Teachable.

Even a few hundred extra dollars per month can make a big difference in tackling debt.

Ask for a Raise or Work Overtime

If you have been at your job for a while and have a strong performance record, consider negotiating a raise. Here's how to approach it:

• Research salary benchmarks to understand what others in your field earn.

• Highlight your accomplishments and contributions to the company.

• Practice your request so you can confidently present your case to your employer.

If a raise isn’t possible, ask about overtime opportunities or performance-based bonuses to increase your take-home pay. Some employers offer debt repayment assistance, student loan contributions, or tuition reimbursement. Check with your HR department to see if you qualify for any programs that can help reduce your debt burden.

Monetize Your Skills or Hobbies

Turning your skills or hobbies into income streams can help accelerate debt repayment. Some ideas include:

• Photography: Offer event photography or sell stock photos online.

• Handmade Crafts: Sell products on Etsy or at local markets.

• Fitness Coaching: If you're into fitness, consider becoming a personal trainer or offering online workout plans.

Look for ways to make money doing something you already enjoy—it won't feel like extra work!

Step 5: Choose a Debt Repayment Strategy

Paying off debt becomes much easier when you follow a structured plan. There are several proven debt repayment strategies, each with unique benefits. Choosing the right one depends on your financial situation, motivation, and goals.

Debt Snowball Method

The debt snowball method focuses on paying off your smallest debts first while making minimum payments on the rest. Once you clear the smallest debt, you roll that payment into the next smallest, creating momentum—like a snowball rolling downhill.

How it works:

1. List all debts from smallest to largest (ignoring interest rates).

2. Pay as much as possible toward the smallest debt while making minimum payments on others.

3. Once the smallest debt is gone, move to the next smallest and repeat.

   
   

Best for: People who need quick wins to stay motivated, especially those managing multiple small debts that feel overwhelming.

Downside: You may end up paying more interest over time if larger, high-interest debts take longer to pay off.

Debt Avalanche Method

The debt avalanche method prioritizes debts with the highest interest rates first, helping you save the most money over time.

How it works:

1. List all debts from highest to lowest interest rate.

2. Pay as much as possible toward the highest-interest debt while making minimum payments on others.

3. Once the highest-interest debt is cleared, move to the next highest and repeat.

   
   

Best for: People who want to pay less interest over time and have the financial discipline to stick to a long-term plan.

Downside: It may take longer to see progress, which can feel discouraging.

Hybrid Approach (Customized Plan)

If neither method feels like the right fit, you can create a hybrid strategy. Some people start with the snowball method to eliminate a few small debts and build confidence, then switch to the avalanche method to tackle high-interest loans more efficiently.

Best for:

• People who need motivation but still want to minimize interest payments.

• Those with a mix of large and small debts at varying interest rates.

No matter which method you choose, the key is consistency. Sticking to a structured repayment plan helps you stay on track, avoid accumulating new debt, and move closer to financial freedom.

Step 6: Build an Emergency Fund to Stay Out of Debt

An emergency fund is a financial safety net that helps you cover unexpected expenses without relying on credit cards or loans. Many people turn to credit cards when faced with sudden costs, which can worsen financial stress. 

In fact, unexpected medical bills (15%), car repairs (9%), and home repairs (7%) are the most common reasons for credit card debt. Without savings, these expenses can quickly push you back into debt. 

How Much Should You Save?

The amount you need depends on your financial situation:

• Starter Emergency Fund: Save at least $500 to $1,000 while actively paying off debt. This covers small emergencies like car repairs or medical bills.

• Fully Funded Emergency Fund: Once you're debt-free, aim to save three to six months’ worth of living expenses. This protects you in case of job loss or major unexpected costs.

Where to Keep Your Emergency Fund

Your emergency fund should be:

• Easily accessible but not too easy to spend (avoid keeping it in your regular checking account).

• Stored in a high-yield savings account for easy access and growth through interest.

• Separate from your everyday spending money to reduce temptation.

While paying off debt is important, setting aside a small emergency fund—even $500 to $1,000—can provide a financial cushion, reducing stress and keeping you on track toward debt freedom.

Step 7: Seek Professional Debt Assistance (If Needed)

Sometimes, despite your best efforts, debt can feel too overwhelming to tackle alone. If you’re struggling to make payments, facing legal action from creditors, or unsure how to move forward, seeking professional debt assistance can provide the guidance you need.

Experts can help you explore options tailored to your financial situation, ensuring you take the most effective path toward debt relief.

When to Seek Professional Help

• You are behind on multiple payments and can't catch up.

• You're receiving constant calls from creditors or debt collectors.

• You are considering bankruptcy but want to explore alternatives first.

• Your debt is so high that your income alone won't cover repayment.

At Shepherd Outsourcing Services, we specialize in helping individuals like you tackle debt repayment with strategic solutions that reduce financial stress and improve long-term stability. 

Our team works directly with creditors to negotiate better terms, create a structured repayment plan, and guide you toward a debt-free future. Whether you need a debt management plan or expert advice, we're here to help you regain control of your finances.

Types of Professional Debt Assistance

• Credit counseling: Helps you understand your debt, create a repayment plan, and improve your financial habits. Many non-profit organizations offer free or low-cost counseling services.

• Debt management plans (DMPs): Consolidate multiple debts into one manageable payment. A credit counseling agency works with your creditors to lower interest rates and waive fees, making repayment easier. These plans typically last three to five years.

• Debt settlement: Involves negotiating with creditors to reduce the total amount you owe. This can impact your credit score, and some companies charge high fees. It is best suited for those who cannot afford full repayment.

• Bankruptcy (last resort option): Provides legal protection from creditors but has serious long-term consequences on your credit and financial future. It should be considered only when no other options are available.

If your debt feels overwhelming, don't wait until it's too late. Professional assistance can provide relief and prevent further financial damage.

Conclusion

Getting out of debt isn’t just about paying off what you owe—it’s about reclaiming your peace of mind and setting yourself up for a stress-free financial future. It might feel overwhelming now, but every small step you take adds up. 

Whether it’s cutting unnecessary expenses, following a smart repayment strategy, or finding ways to boost your income, progress happens when you stay consistent.

And remember, you don't have to do this alone. Shepherd Outsourcing Services is here to help you tackle the debt repayment process with expert guidance and personalized strategies. Our team works with you to negotiate better terms, structure a manageable plan, and provide the support you need to break free from debt faster.

Take control of your finances today. Reach out to Shepherd Outsourcing Services to start your journey toward a debt-free future!

Frequently Asked Questions (FAQs)

Here are answers to some common questions about managing and paying off debt effectively.

1. What is the first step to getting out of debt?

A: The first step is assessing your financial situation. List all your debts, including balances, interest rates, and minimum payments. Then, create a budget to see where your money is going and identify areas where you can cut back.

2. Which debt repayment method is best: debt snowball or debt avalanche?

A: It depends on your financial goals. The debt snowball method helps you stay motivated by paying off smaller debts first, while the debt avalanche method saves you more money in the long run by targeting high-interest debt first.

3. Should I stop using credit cards while paying off debt?

A: Yes, if you struggle with overspending. Sticking to cash or a debit card can prevent you from adding new debt. However, if you use credit responsibly and pay off your balance in full each month, it can help maintain your credit score.

4. How much should I save in an emergency fund while paying off debt?

A: Aim for at least $1,000 to $2,000 in an emergency fund before aggressively paying down debt. Once your debts are under control, work toward saving three to six months' worth of expenses to prevent future financial setbacks.

5. Can professional debt assistance help me become debt-free faster?

A: Yes. Services like debt settlement, credit counseling, and debt management plans can provide structured solutions and negotiate better terms with creditors. Shepherd Outsourcing Services specializes in helping individuals find the best debt relief options tailored to their needs. Our team works directly with creditors to reduce your debt burden and create a repayment strategy that fits your financial situation.

6. Is debt consolidation a good idea?

A: Debt consolidation can be beneficial if you qualify for a lower interest rate than what you’re currently paying. However, avoiding accumulating new debt while repaying the consolidated loan is essential.

7. What if I can’t afford my minimum payments?

A: Contact your creditors immediately to discuss hardship options, such as temporary forbearance or reduced payment plans. Seeking help from debt relief experts like Shepherd Outsourcing Services can also provide solutions tailored to your financial situation.