Trying to pay off debt when you're on a shoestring budget can feel like an impossible goal. Aside from the basics like rent, groceries and gas, there are always unexpected expenses (think medical bill or car repair cost) that threaten to set you further back. Adding debt on top of a paycheck-to-paycheck lifestyle, and it can all truly feel insurmountable leaving many to feel it's impossible to get out of debt with no money, and better to declare bankruptcy. According to The Huffington Post, people in debt are three times more likely to experience health problems. If collection agencies are blowing up your phone, you might feel a bit helpless about your debt.  Let’s look at some debt solutions you can try ASAP.

This is not the right answer and I'm going to show you why.

Ready to explore other debt options? Have 640 credit score and above? Click here to explore The Payoff Loan® for credit cards.  For those with lower credit, I recommend Upstart as they factor in work history and school record to give you the best rate possible.

Debt Obstacles? Meet Your No-Nonsense Debt Solutions

Problem #1 – “I don't know how I got here.”

Assessing how you got into this situation, (not to mention finding extra cash to pay down debt with) begins with understanding where your money is actually going every month. It's not something you should try to estimate in your head. Take a Look back at your last three months of spending, and you may be surprised at what you find. Perhaps you spent $150 on clothes or close to $200 eating out at restaurants. It can be surprising to see how quickly little purchases add up.

Considering signing up to use a budgeting software like Mint.com to help you understand your spending habits and create goals for the future.

After all, the first step to getting out of debt when you have no money is to make sure the money you do have is being spent wisely.

Problem #2 – “I won't be able to do it.” (the defeatist attitude)

Are you depressed about your debt?  Depending on how bad the situation is, this is only normal. While it might not seem like a debt solution, you’ve got to change that attitude first.  Getting out of debt is hard work, and while it’s natural to have a wide range of feelings about debt, those emotions aren’t the most helpful guides. 

These next steps take some guts.  So remind yourself of your fantastic qualities.  

Start by considering what life without debt looks like (a vision board is a great exercise for this!).  It doesn’t have to mean an elaborate vacation.  It can be as simple as getting the mail without that sinking feeling that it’s full of bills.

Problem #3 – “I'm starting to get calls from collection agencies.”

Meanwhile, are collection agencies calling you day and night?  Then hang tight to that positive attitude.  These people receive training to use words that manipulate you.   According to the Federal Trade Commission, collection agencies must abide by these laws.   

Collections Callers May Not:

• Call before 8:00 a.m. or after 9 p.m.
• Call your place of employment once asked to stop (Send a certified letter.)
• Harass you or lie to collect the debt

Don't Avoid them – Take the Driver’s Seat

Don't avoid creditors – this only makes things worse and compounds your anxiety. Ask creditors to mail a “validation notice” with all the information about what you owe.  Once you have that information, take control of the situation.  

 

Problem #4 – “I don't even know where to begin or how to make a debt plan.”

The easiest place is to start by making a list of all your debts including credit cards and loans along with the current balance and interest rate for each account. Easy, right? (A little bit of wine makes this a much easier process, I promise.)

Step #2 is to look at your budget, and make a plan stating what you can pay and how often.   

Here are a few other things to keep in mind.

• If you're dealing with collection agencies, call them and share your plan with them.
• Get the company to agree to your terms and put it into writing.  
• You may need to negotiate, but never agree to send more than you can afford.  
• Ask for a copy of the agreement. Without that agreement in place, companies can still sue you.  (Yes, even if you are sending regular payments.)  So do your best to negotiate with them.
• If this makes you nervous, you can work with a debt management company to negotiate with creditors on your behalf.

Tallying up all the debt you owe may seem overwhelming.  But it’s important to know what you’re up against.

In debt and over your head? Consider engaging with a company like Accredited Debt Relief who will work with creditors on your behalf. Click here to learn more.

Problem #5 – “I'm too hung up on which debt to pay off first! I can't decide!”

Once you have your list of debts, choose one to focus on first.  

• Some say to start with the smallest debt for a quick win.
•  Others say to knock out the one with the highest interest rate.

But I suggest choosing the one with the biggest motivation factor for you.  If you owe money to family and wish you could enjoy Thanksgiving pie in peace again, start there.  If one credit card is such a nuisance that you’ve nicknamed it “the Soul Sucking Scumbag”, you’ll want to put that first.

Focus on one debt while you tread water with the others, and your brain is more likely to accept this new habit.

Problem #6 – “I hate living on a budget.”

Uhm, yeah…me too. It sucks.

Remember: if you want a big result, you’ve got to make a big change.  Can you take on a part-time job for a while?  Consider downsizing your home or car.  Do you have big items you can sell? I know how much you love those things, but do you love them more than the peace of debt freedom?  Only you can decide that.  Remember, you can replace things.  And buying a new one will feel sweeter with cash.

Here's five easy things to cut when paying off debt, and a post about decluttering your home and selling the items for cash.

While it's easy to complain about a tight budget, the truth is most of us have something we could cut which is why I always recommend a bill audit. Start by canceling any services you don't need such as a music subscription service or online storage platform (think Dropbox).

Next review your fixed expenses. (Here's our tutorial on how to do this.) Contact multiple car insurance companies to see if you can lower your bill. Compare cell phone plans of different competitors to see if you can get a cheaper plan. Call your internet provider to see if they have any promotions that could save you money…etc.

If you're able to reduce your monthly expenses even a little, make sure to use the extra money to pay off debt. Set up an automatic transfer to your credit card or loan account to avoid the temptation to spend extra cash.

Problem #7 – “How do I get out of debt with no money?”

If you've reviewed your budget in depth and find you aren’t able to lower your monthly spending enough, consider increasing your income. They’re many different ways to earn extra money outside of your 9 to 5 job. (See our Pinterest board or Side Hustle category for more ideas on how to do this!)

Below are also 41 ways to make extra money I literally just listed off the top of my head. Money is a renewable resource, you can make more of it…you just might have to get creative and sacrifice some free time.

• You could babysit using a website like Care.com
• become a tutor using Tutor.com
• 10 side hustles for even the busiest people
•  create your own blog   
• become a virtual assistant using a website such as Freelancer.com.
• take surveys (these are our favorite survey sites)
• 12 ways to make money in your sleep
• 9 apps that EARN money for users
• 5 ways to make more money at your 9-5 job

 

Problem #8 – “I feel like I can't talk to anyone about my debt problems.”

Finally, few of us can handle getting out of debt on our own.

Kick off your debt plan by finding people whose money management style you admire.  Read books, listen to podcasts, and subscribe to blogs that inspire you to pay down debt.  Changing the way you think about money doesn’t happen overnight.  But catching an “aha” moment from someone who’s been there might be just the inspiration you need. (Read my debt story on how I paid off $8,000 in 90 Days here.)

Problem #9 – “I don't know how to stay out of debt in the future.”

Once you’ve got a handle on your current debt, you need to commit to not taking on new debt in order to break the cycle. This is definitely easier said than done. Consider removing your credit cards from your wallet so they aren’t accessible. Stop impulse purchases by making yourself wait 24 hours before buying something that is outside of your budget.

Also if you have no money in savings, any unexpected expense can send you scrambling for your credit card. Consider building a small cash cushion of $500 to $1,000 to cover emergencies. Any extra money (including a bonus, tax refund, or extra income from a side gig) can be split – half toward your debt and the other part toward building a cash cushion or emergency fund. 

Becoming debt free isn’t easy, and it’s even harder to stay that way. So while the question of how to get out of debt with no money may seem impossible, the truth is that with a little determination and creativity you can become debt free and a step closer to living your financial best life!