4 Ways To Break Free of ‘Survival Debt’ and Get Back on Track
Written by
John Schmoll
Edited by
Amen Oyiboke
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Financial strain is a growing concern for more Americans. Inflation has remained burdensome for months, and 29% of Americans say the increased cost of living is the most important financial problem facing their family, according to Gallup.
It’s no surprise that a recent Zety survey reveals 48% of Americans have relied on borrowing to pay for essentials like food and utilities. The survey also shows that 71% carry credit card debt, and 56% say their salary isn’t enough to both pay off debt and save for future needs — a reality many now call “survival debt.” Digging yourself out of that cycle is challenging, but it is possible.
Here are four ways to attack survival debt and get back on track.
Eliminate Non-Essential Debt
Getting your hands on what you absolutely need to live is vital for many struggling with debt. Asking yourself what you need to have your essentials is a good place to begin.
Four areas are traditionally the most important: food, utilities, shelter and transportation, otherwise known as the Four Walls, according to Dave Ramsey. Everything else should be on the table to cut as you analyze your spending.
Don’t overlook possibilities like downsizing your car to save on monthly payments and avoiding buy now, pay later (BNPL). Both can be a drag on a budget.
Get a Side Hustle
A day job is the most typical form of income for many Americans. Unfortunately, wage growth has fallen behind inflation in recent months, according to CBS News. The Zety study bears this out, with 56% of respondents saying their income isn’t enough to cover debt and savings.
Getting a side hustle is an effective way to counteract this problem if you have the time. Consider an on-demand side job such as delivering food or walking dogs. If you have a marketable skill, such as bookkeeping or graphic design, consider monetizing it. Either option can be lucrative and devote a majority of your earnings towards debt repayment.
Make a Plan To Attack the Debt
High-interest debt can be an overwhelming problem, but it is possible to overcome it. Often, the best way to pay off debt is to begin with a plan. Identify all of your debts, so you know where you stand. Take note of the interest rates and how much you owe on each credit card.
If you have good credit, opening a balance transfer credit card can be a powerful tool to pay off debt. For those who don’t want that route, pursuing credit consolidation can be a wise choice. Whichever route you choose, do your due diligence and don’t use it as an excuse to incur more debt.
Start Growing an Emergency Fund
Saving while in debt feels impossible, but it is achievable. An emergency fund is an effective tool for avoiding debt in the future and provides peace of mind.
Americans who have at least $2,000 saved for emergencies have a 21% increase in financial well-being, according to Vanguard. Achieving $2,000 in savings may seem unachievable, so be gracious to yourself in the beginning.
You don’t have to save that amount immediately. Start small, even if it’s $20 or $30 monthly to begin. That helps develop the savings muscle. Begin with a goal of saving $250 or $500, and use that momentum to reach your ultimate savings goal.
Financial struggles make it difficult to avoid debt and plan for the future. With planning and actionable steps, you can break free of debt and get on track.
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