7 Things You Can Do Today if You're Deep in Debt

If you find yourself deeply in debt, you have plenty of company. By the end of 2022, the average household carried $101,915 in debt. And according to the Federal Reserve Bank of New York, total household debt increased by $394 billion in the fourth quarter of 2022.

We Americans, for the most part, accept debt as a normal part of everyday life. However, debt can weigh on you, causing stress and sleepless nights. If you're in too deep and rarely have enough left in your checking account each month, here are some key steps you can take -- beginning today.

1. Know where you stand each month

According to Credit.com, 27% of Americans don't believe they need a budget. If you're one of them, it may help to know that a monthly budget can be simple, and there are budget apps designed to get you started.

You won't be able to anticipate everything, but you can get close. For example, you may not know when you'll need to pay a medical copay, but you can bet it will happen sometime in the future. That's something you can plan for.

2. Trim the fat

Once you have a list of your monthly expenses, ensure you have everything. For example, if you have a streaming TV or satellite music subscription, make sure it's on the list. Now look over each item in your budget to determine if there's anything you can live without. It may be a gym membership you're not using because you're exercising outdoors this summer or a wine of the month club you can put on pause.

Also, look at goods and services that cost you money each month. For example, if you're paying for a high-end hair salon, determine whether a less expensive salon will be sufficient until you're back on solid financial footing. If you're paying to have your lawn mowed, consider whether it's a task you can take over.

Most people can find something in their budget they can cut without feeling a loss.

3. Speak with your creditors

If debt has caused you to miss or make partial payments, contact the creditor(s). Explain your situation and ask about options. Perhaps a creditor will forgive late fees, or if you've been a loyal customer, a creditor might reduce the interest rate you pay. If a creditor offers a break, ask them to put it in writing and mail you a copy.

4. Stop creating new debt

This may sound obvious, but when you're in debt, you're more likely to pull out a credit card to make a purchase. Make it a rule that you can only buy something if you can afford to pay cash. There's no reason to dig the debt hole any deeper.

5. Consider a debt transfer

If your credit score remains in good shape, consider applying for a credit card with a 0% transfer promotion. Here's how such a promotion works:

• If approved, you transfer the high-interest debt from another card to the new card.
• Typically, the 0% promotional period lasts between 12 months and 18 months. That means you have that long to get the debt paid off before the interest rate jumps.

Let's say you owe $5,000 and transfer it to a card with an 18-month promotional period. At 0% interest, you can have it paid off in 18 months by making a monthly payment of $278.

As long as you refrain from taking on new debt, transferring debt to a card with a 0% promotional rate can whittle down debt rapidly.

6. Carve out enough for an emergency fund

The rule of thumb is to put away enough money to cover your essential bills for three to six months. It may be the last thing you believe you can do when you're in debt. However, even putting a little into an emergency fund can help. For example, if the most you can spare monthly is $50, that's an extra $600 tucked away after 12 months. That's enough to buy a couple of new tires, replace a broken window, or cover an emergency visit to the veterinarian.

The goal of an emergency fund is to prevent you from needing credit to pay for the small emergencies in life.

7. Seek help from a nonprofit credit counseling service

A nonprofit organization like the National Foundation for Credit Counseling (NFCC) are experts at working with people in your predicament. Nothing will shock them. A certified counselor can help you create a plan to tackle your debt. There are no loans, no fees, and no fear of getting deeper in debt.

The weight of debt can feel overwhelming, but don't lose hope. Many of us have been in the same situation and come out the other side.