We all have some kind of debt right. If you can pay your monthly instalments with ease, you feel okay but what about when you don’t have enough to pay each month? You find yourself in a stressful mode and it really matters a lot for your financial situation as well as for overall happiness in your life.

If you feel like you are in a position like this, you will need a concrete plan and goals to get out of debt.

how to get out of debt when you are broke

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Change your mindset on how to pay off debt when you are broke

First thing first, calm down and remove all the fears and apprehensions about money. Having stress will take all the happiness out of your life which will create more stress. I think you will agree with me on this one that whatever we do, we do it for happiness. What is the reason for doing all the tasks in life, if you cannot find happiness?  Having debt is one of those things which will make you stressed deep inside even if you don’t care about it. I can tell this from personal experience that having debt on yourself takes the pleasure of living out from life.

For this, you need an action plan to combat your debt. I can say this from personal experience that when you find yourself in this kind of situation, you feel all the doors are closed and you always find yourself in the debt survival mode. But this is not the way of life, I mean we all are here to live a happy life. This can be possible by reducing the debt and not getting into more debt.

Change your mindset about debt

The most important thing you can do is change your mindset about debt. Instead of thinking about being in debt and feeling bad about it, start visualising yourself debt-free. I know how hard it is to think that way but it helps. Give yourself some days and practice it for a few days.

When you stop feeling the thoughts of having debt and start feeling that your debt is gone, your mind will be free to take further steps to dig you out of the situation.

Few things which will help in shifting your mindset are 

Make a commitment to yourself to pay off debt

Make a commitment not to get into more debt

When you commit to your own self, you are answerable to none other than your own self. You will be accountable for the actions and it works because nobody else knows about the situation you are in, better than you.

Plan how you will pay off your debt

Debt eliminating needs some time,  patience, planning and a determined mind. When you have created a plan, stick to it. Take a pen and paper ( I love to write everything on paper because I love the visuals), write down each debt you have. Also, write down the interest rate you are paying for each type of debt.

There are two methods to attack debt,

  1. Debt avalanche
  2. Debt snowball

Both work well but it really depends on you which type of debt elimination method you use.

Debt Avalanche: In this method, first the debtor attacks the highest interest debt. First of all, all the minimum instalments are paid on each debt, then the remaining money is paid towards the highest interest rate debt. This saves you some money on the interest payments. When one debt is paid off, then the debt with the second-highest interest rate is tackled.

Debt snowball: In this method, the lowest debt is paid off first. Dave Ramsey recommends this method in his book, The  Total Money Makeover. This is a popular method of eliminating debt as when you have paid one type of debt, it encourages you to pay off more and keeps you motivated.

It really depends on you which method of paying you chose and both work well.

✔Stay with me, this is a long post, pin or save to read later ?

How to get out of debt when you are broke and don't know where to start

1. Assess your financial condition

The very first thing to do while coming out of debt is to assess where you are now.

  • How much debt you have.
  • How much you are paying in interest and
  • what is the principle and how much debt you are accumulating each month
  • whether it is increasing or decreasing
  • How many different debts you have

When you have a clear picture of the amount you owe to banking institutions, you will be in a better condition to resolve your debt issue. Your next step should be to make a plan to control your debts, not getting into more debt and creating a budget so that you can free some money to make your repayments.

2. Set SMART financial  goals

As with anything else in life, you need SMART financial goals for paying off your debt.  As you know SMART goals are Specific, Measurable, Achievable, Relevant and Timely.

Specific: Make your goals specific instead of giving a general statement. ” I will get out of debt ” is a very general statement, be specific about that. ” I want to get out of credit card debt ” and be more specific if you have more than one type of debt.  I will pay off  ( name the particular credit card ) first is more specific. This is a specific goal to pay off a particular credit card.

Measurable: ” What gets measured, gets managed”. Write down the particular amount you want to pay from the above credit card. That will be your measurable goal.

Achievable: For example, if you have a debt of 5000 dollars but you are left with only $100 each month, you cannot pay that amount in 2 or 3 months. Keep your goal achievable by making a certain amount of repayments each month or better, each week.

Relevant: Relevancy of goals is important and if you feel like paying off debt is not possible, generating more income could be a goal for you at this time, And then you may find that paying the debt is easy for you with increased income.

Timely: You would agree with me on this one that goals should be time-bound. Time-bound goals keep you determined because you have to accomplish the given goal in a given time. As of now, we are taking the example of eliminating the debt on this particular credit card. You cannot just write down, ” I will pay the debt on this credit card”, you will be paying a set amount of money in a set time. Say you will pay this in one year. Now this goal has a time limitation, it will be easy to figure out how much you need to pay in a single month to pay off this debt.

⭐Pro tip: Make goals and stick to them with a determined action plan

3. Create a budget

Creating an actionable budget and sticking to it can take you a long way. Budget can easily find leaks where the money is going. There are many ways to budget and it depends on your own financial goals and financial condition to see which one is good for you.

Budget the easy way and save money

There is no right or wrong way to budget, whatever system you chose,  just do it consistently. Normally as with exercise and weight loss programs, we start with enthusiasm and then stop after some time. While done consistently and deliberately, it makes you save a good amount of money in the long run.

The main goal of budgeting is to save money as well as have enough for your basic needs. It is not difficult but you need to have a plan as well as be patient and determined. There is a lovely quote and my all-time favourite :

” Money grows on the tree of persistence “

In this digital world, there are so many budgeting apps and tools but I still love to budget the old way with pen and paper.

✔ Traditional budgeting

✔ Reverse budgeting

How to pay off debt when you are broke

 ✔Balanced Money formula

Balanced money formula is a budget planning framework outlined by Elizabeth Warren and Amelia Warren Tyagi in the book ‘ All your Worth ‘.  According to this formula,

                     50 % of your income should go for your needs

                    30% for your wants and no less than

                    20 % into savings

This will urge you to keep your needs and wants under control so that you will have at least 20% of your after-tax income to save.

Which budget system is for you?

Check out this post to know more

4. Track your spending

I know it is bit difficult but believe me, if you find that you are not left with any money after budgeting, tracking your spending will definitely give you few dollars to spare for paying off your debt. When you start writing down your each and every purchase, you will definitely get an idea of how much money you are spending on your wants and needs.

While writing down your purchases, write down needs and wants in front of them. Next time, you will think before making a purchase. You can definitely save some money by not wasting it on simply the things you just want but don’t need. Just keep your spending to a minimum and reduce or totally eliminate your spending on needs. ( You can take care of your wants afterwards) As for the present, your goal is to simply eliminate your debt.

  • If you like to go for an outing: choose free places
  • If you like to drink loads of coffee: brew it at home
  • You like to eat new dishes: Start cooking at home (youtube can be your BFF)

How to track your spending for eliminating debt

5. Go for no spend week/month

Going for no spend week can definitely free up some money to pay off your debt. If I don’t go to the supermarket for a typical week, I can save almost 100 dollars a week.  know it is not easy to go skip groceries every week, but eliminating it every other week helps in saving some money. Some of the perishables like milk are necessary if you are not vegan.

I have my example here, I went for a no spend time for my own clothes. I didn’t buy anything for almost 2 years. And believe me, I had enough clothes that I really didn’t need to buy. I just kept strict with me. It saved me a lot as well as I was able to use those clothes which otherwise remain in my wardrobe.

Here I have some tips to make your No spend month a success read this and be inspired to  for a no spend month or week ( whatever suits your situation)

6. Cut your spending

Yes, my friend, cutting your spending is the real thing and most important if you already on a tight budget and want to tackle your budget. This was my first step when we were struggling with debt and on top of that, we wanted to save for our home loan ( a mammoth goal). But cutting your spending and using that money immediately to either save or paying a debt payment will save you big on debt repayment.

  • Cut your grocery spending
  • Reduce outings and eating out instead start eating home-cooked food
  • Eliminate paid entertainment totally ( there are so many free choices)
  • Get rid of any unused subscriptions( believe me, it will save you a lot )
  • Cancel any travel for this year ( You may plan a beautiful travel next year)

Or you can try some simple and actionable tips to cut your spending here

7. Create an emergency fund

I know what you would be thinking, how on the earth can I have an emergency fund when I am already broke? If you are in a situation of high debt, you definitely need a cushion to save yourself from getting into more debt. Start saving a bit each week for your emergency fund which will help you in true emergencies and you don’t have to rely on loans and more debt in those situations.

Accordingly, start with $10/week in your emergency fund. It will add up at the end of the year. In the meantime, if you see that your condition improves, you can start adding more to your emergency fund.

How to create an emergency fund on very low income

8. Negotiate better interest rates

Talk to financial institutions you are a customer with for any reduction in interest rates as this could save you some money. Do your homework and give them a call and tell them that you think that the interest rate you are paying is a lot higher than you should pay. Ask for a lower interest rate if they refuse, talk to their managers or if nothing happens, ask for the reason.

If they tell you that your credit score is not good enough, you should try to improve that and then try again. Or try after your situation improves after some time.

9. Consolidate your debt

This is also a good idea to reduce your debt. This will not totally eliminate your debt but it will really help you in paying off your debt bit ease. For example, if you have three credit cards with debts of, $7500, $5000, $10,000 and you have some debt on all of them. On top of other repayments, you have to make three minimum payments atleast. If you consolidate this debt, you have to make a single payment as well as you will have a bit lower interest rate.

We did this as we had two credit cards and then consolidated our debt. It was easy to pay back credit cards easily as it is easy to tackle one task at a time.  Fortunately, we were able to raise our income which helped in eliminating all this debt with ease. As of now, we only have a mortgage which will take some time to pay but we are not in a very stressful situation anymore.

10. Start earning more to get out of debt when you are broke

How to make money $1000/month working from home

This is the most crucial step if you are in a very tight financial position. The Internet has made it possible to earn some money as a side hustle even if you don’t want to go out to work more. Start doing surveys because it is really easy to make some money. And if you are on a tight budget, earning extra money gives you some money to make extra money. I am building my emergency fund from the extra money I get from surveys.

  • Survey Junkie:  I personally use Survey Junkie to make some money in free time. It is easy to find high paying surveys at Survey Junkie and you can make good money as a side income from the comfort of your home. You can redeem the points as money or as free gifts.


  ⭐ Best apps and survey sites that pay for referring people.


Swagbucks is good for getting gift cards for shopping. You will get $5 bonus only for signing up. You can also make money for watching videos, games, for having Swag button on your phone or PC. It is a small task site where you can accumulate points for doing many small tasks. You can redeem your points for gift cards.

⭐ You can read my full review about the ways to make money with Swagbucks here


The most important part is making up your mind and sticking to your plans if you really want to eliminate debt. Determination and perseverance make a big difference in your financial health. If you have more ideas on how to eliminate debt, I would love to hear from you.

If you really want to start something which could give you a passive income in the coming years, start a blog

How to get out of debt when you are broke as hell. With planning and smart goals about your finances, you can easily come out of debt even with tight budget.

10 simple and actionable tips to come out of debt when you are broke as hell and want to debt free.

How to enjoy life when you don’t have enough money

10 things you are wasting your money on

How to grow your wealth by tracking your spending

These are some of my best tips I used to eliminate my own debt. I hope this can help you. These tips are for informational purpose only, you may or may not benefit from these. I am not a financial adviser and if your situation feels like out of control, take some professional help.

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