How To Get Out Of Debt Even When You’re Broke

Debt sucks. But not all hope is lost. Even when you're broke AF you can still make the right moves and put yourself in position to get out of debt for good.

And I'm here to help you put together a step by step plan to eliminate your debt once and for all.

Even if you have bad credit, are on low income or are broke, you can still use this debt payoff guide.

But first, are you in really bad shape? Here are some ways to find out if you are.

8 signs you have too much credit card debt

If used correctly, credit cards can be used to your advantage. You can accrue reward points and end up essentially getting paid to use a credit card.

But playing this game is dangerous, as one missed payment leads to paying interest, paying late fees and a bad credit score.

The average American household is saddled with $10,000 in credit card debt. But the total amount of your debt isn’t the number the credit bureaus are looking at.

They’re looking at your credit utilization rate and debt to income ratio. A good credit utilization rate is anything less than 25% while a good debt to income ratio is anything less than 36%.

Rather than look at data to determine whether you have too much credit card debt, you can also determine whether you’re in over your head by looking at these 8 signals.

  • You’re In Denial

If the thought of your credit card debt enters your mind throughout the day and you brush it off as no big deal, you’re lying to yourself.

If you then lie to your spouse about the severity of your debt, you truly have more debt than you can handle.

Being in denial about your issues isn’t going to help. The only way to get out of credit card debt is to first admit that you’re in trouble. Then, and only then, can you begin to create a plan to get out of debt.

  • You Don’t Know How Bad It Is

How much debt do you have? If your answer to this question is “a lot” then that’s a clear signal you have too much credit card debt.?

If you fear checking the balance so much that you ignore it, you need to realize you’re in deep trouble.

In order to dig yourself out of this hole, you first need to know the size of the problem so you can create a plan of attack.

  • You Only Make The Minimum Payments

Paying the minimum payment may make you feel like you have control of your debt. After all, you’re not in collections and there’s no late fees, so what’s the problem?

The problem is that you’re not really reducing what you owe, you’re only paying the interest. Your balance then grows and pretty soon you’re in a situation where it can take you a lifetime to pay off your credit card debt.

The only way you’re going to get out of debt is to pay at least double the minimum payment so that you can take a chunk of the principal each month.

  • You Have A Maxed Out Credit Card

Having a credit card that’s maxed out is a big sign you have too much credit card debt.

For the sake of your credit score, you should never use more than a quarter of your available credit.

  • You Use Your Credit Card For Everything

If you are a responsible credit card user, you can use a rewards credit card to make all of your purchases.

But if you don’t have a rewards credit card and you can’t pay off the balance each month, you should not use your credit card for everything.

If you find yourself using your credit card for groceries, gas and other everyday purchases, it’s a sign that something is wrong.

  • You Can’t Save Money

When you can’t save money from each paycheck you’re forced to use your credit card to make ends meet each month.

A lack of an emergency savings account is a leading cause of credit card debt because you’re not able to handle an unexpected emergency.

  • You Can’t Get Another Credit Card

You know you’re in too much credit card debt when you need another card and you get denied for it.

When the credit card company deems you as too much of a risk, it is validation that you have too much debt.

  • You Pay One Card With Another

Paying one credit card off by transferring the balance to another may work, if done correctly. You can transfer the balance of your 29% interest card to a card with a 0% introductory interest rate.

It sounds like the solution to your problem, but if you don’t pay off the balance before the introductory period ends, you’ll begin paying interest again.

Another thing that happens when you juggle your balances is that you acquire new credit and you feel like it gives you a license to spend some more.

If you have the need to pay one credit card off with another, it’s a sign that your credit card debt has gotten out of control.

How to pay off your debt early even when you're broke

1. How much do you owe?

You have to know what you're up against. Often times people hide their debt - even from themselves. They would rather avoid looking at the paperwork.

But you have to know just how bad of a spot you're in first.

Don't worry, this is actually the hardest step so it will get easier from here on out.

Here's what I want you to do:

Write down every debt you have. I want the amount, the interest rate and what your minimum payment is. On a spreadsheet, stat!

We need to know this because you need to target your most urgent debt first.

Okay, got the numbers yet? I'm waiting...

.... still waiting.

Oh snap! That's a lot.

That's okay though, your debt will never be as high as it is this very second. From here on out, we're going to start murdering this thing like it owes us money!

Debt avalance or debt snowball strategy

2. Choose a debt payoff strategy

There are two main ways to attack your debt. One is the Debt Snowball strategy and the other is the Debt Avalanche strategy.

Here's how to do each. You can choose whichever one, it doesn't matter.

Debt Avalanche

In this strategy, the goal is to save money on interest. So with this debt payoff strategy, the aim is to prioritize high interest debt.

  • Step 1. Sort your debt (from your spreadsheet) from the highest interest debt to the lowest one.
  • Step 2. Pay only the minimum balance on your low interest debts.
  • Step 3. Put the rest of the money every month toward paying off your single highest interest debt.
  • Step 4. Completely pay off one high interest debt account as quickly as possible.
  • Step 5. When you're done with one debt, congratulate yourself and move on to the next highest interest debt.
  • Step 6. Continue doing this until all of your debts are gone. Yes this will take time.

Debt Snowball

With this strategy, you first concentrate on paying off your smallest debts and work your way up.

This method lets you build momentum as you pay off your debts one after the other. Here's how it works.

  • Step 1. Sort that debt list from the debt with the lowest balance to the one that has the highest.
  • Step 2. Make your minimum payment on all your debts except the small one.
  • Step 3. Put the rest of your money into your smallest debt.
  • Step 4. Continue doing this strategy of paying your smaller debts first.

Very quickly your long list of debts will dwindle down to just a few creditors using this strategy.

Which strategy is best?

If you want to save as much money as possible and pay less overall debt, you want the Debt Avalanche method.


If you like celebrating wins and getting rid of creditors quickly, you want the Debt Snowball approach.

3. Create a 50/30/20 budget

If you want to get out of debt you need to set a strict budget and stick to it.

I like the 50/30/20 budget because of its simplicity.

In this system, you allocate:

  • 50% of your earnings into NEEDS.
  • 30% of your earnings into WANTS.
  • 20% of your earnings into DEBTS.

Get the 50/30/20 budget printable below.

50 30 20 Smart Budget Printable

Yes, this means you will have to make some sacrifices. But that's the situation we find ourselves in.

To help you with this, create a spreadsheet and list your typically monthly expenses.

You want to categorize them by your needs and your wants. The aim is to cut non-essential expenses as much as possible.

What's non-essential? If it helps you breathe or stay alive it's essential. Otherwise you can (literally) live without it.

Once you have this barebones budget built, you will have money left over to pay off your debt.

Lower your interest rates to pay off debt

4. Lower your interest rates

The lower your interest percentage rate, the less painful this whole debt payoff thing will be.

Let's see how to reduce your interest rates.

If you have student loan debt, look into whether you can lower your interest rate. It doesn't hurt to look at your options.

You can see your student loan refinancing options here.

  • Balance transfer credit cards

Say you owe $5,000 at 20%. Getting a new credit card with an attractive balance transfer option might be a good idea.

Typically, they charge an upfront 3% or 5% fee.

Afterward, you enjoy 0% interest during the introductory period, which can be 18 months.

Doing this can keep your high interest debt at bay for an extended period of time. This gives you the time you need to get back in control of your finances.

  • Negotiate a lower interest rate

There's a lot of competition in the credit card space. Call and ask for a reduction in your interest rate. The worst that can happen is they say no.

It helps if you've been a member for a long time, don't have missed payments and have an improving credit score.

Improve your spending habits to get out of debt early

5. Improve your spending habits

If you don't control your bad spending habits, you will never get out of debt.

Start by eliminating what you don't need and develop better spending habits.

  • Stop impulse purchases.
  • Give up expensive hobbies.
  • Avoid eating out often.
  • Cancel subscriptions you don't need.
  • Learn how to say no to yourself and others.
Find a side hustle to pay off your debt fast

6. Find a side hustle

If you truly want to get out of debt fast, you need to bring in more money. There's just no way around it.

You can follow all of the steps to pay off your debt early here, and while they will work, you still will have a lot of debt to pay off.

There are many ways to make money, both online and off.

The best one I've found is to start a blog and make money with ads, affiliate products and eventually your own digital products (printables, courses, ebooks, etc.).

Don't have time? I don't believe you.

You probably watch one of these: sports, soap operas, late night tv or sitcoms. Seriously, who gives a fuck about any of these things?

Don't have the money to invest? I don't believe you either.

If you can afford a cup of coffee, you can afford the hosting fee to start a blog.

I bet you can look around right now and find tons of useless stuff you have spent money on.

I have a better idea: invest in you, not in physical things that just don't matter.

Pay off your debt and become debt free

You can do this!

It doesn't matter if you are broke, have low income or bad credit. If you stick with the steps in this article, you will get out of debt.

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Edwin Contreras

Edwin Contreras is the money hacking millennial behind Cash The Checks. He lives a minimalist lifestyle and is always eager to learn and share his methods to save and make money.

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