How to Get Out of the Debt Trap & Give Yourself Peace of Mind

You will need an action plan to get out of the debt trap.

You will need an action plan to get out of the debt trap.

If you are in the habit of using credit cards and other forms of debt to finance your lifestyle, but you are unable to pay off your balances at the end of the month, it's only a matter of time before you'll face financial failure. It may not be this month or even this year. But sooner or later you'll hit a brick wall you may not even see coming, such as a job loss, a medical emergency or divorce. Debt itself can even rob you of your peace of mind, especially if you're dealing with persistent bill collectors. The good news is you can be free of financial worries and rest at night knowing your bills are paid, but it will take frugality, discipline and a strong desire to get free of the debt trap.

Stop accumulating new debt. Billionaire investor Warren Buffet has said that if you find yourself in a hole the best thing you can do is stop digging. Lock your credit cards in a drawer or cut them up if you are confident you won't need them to cover a real emergency, and make a personal vow to live on cash. Budget your monthly expenses so you can make as many purchases as possible with cash; when you've used up the cash, stop spending.

Make a list of all your creditors. By putting this information on paper you will get a true picture of where you stand. List your debt from smallest to largest and compare the interest rates you are paying on each account. Pay off the smallest debts first or the debts that are costing you the most in interest.

Make the minimum monthly payment on all your debt. But use all your extra disposable income to make more than the monthly payment on one debt that you will target for elimination. Once the debt you have targeted is paid off, use the money you had been devoting to that debt and snowball your payments to another account. Repeat this process until you are down to one debt. Then take all the money you had been using to make minimum monthly payments and concentrate on eliminating your last debt.


  • You should save up an emergency fund with at least $1,000 cash before starting your debt payoff to avoid going deeper into debt if you have an emergency.
  • Tell the members of your household about your goal of getting out of the debt trap. You will need likely their support and cooperation.


  • Avoid the temptation of withdrawing money from your retirement savings to pay off debt.
  • If you suspect your job may be eliminated in the near future, you are better off saving cash than trying to eliminate debt.

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About the Author

Tim Grant has been a journalist since 1989 and has worked for several daily newspapers, including the Charleston "Post & Courier," the "Savannah News-Press," the "Spartanburg Herald-Journal," the "St. Petersburg Times" and the "Pittsburgh Post-Gazette." He has covered a variety of subjects and beats, including crime, government, education, religion and business. He graduated from The Citadel with a Bachelor of Science in business administration.

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