Many American adults are dealing with debt. According to a February 2025 Federal Reserve Bank of New York report, credit card balances increased by $45 billion from the previous quarter, reaching $1.21 trillion at the end of December 2024. Auto loans, mortgage balances, retail card debt, consumer loans and student loan balances also grew.
As an individual, how much is too much to owe?
A wise rule of thumb is never to let your debt-to-income ratio exceed 30%, says Peter Casciotta, owner of Asset Management & Advisory Services of Lee County in Cape Coral, Florida.
Therefore, if you take home $4,000 a month, no more than $1,200 should go toward debt — or you may not have enough cash left over for living expenses and savings.
Here are 16 expert-backed suggestions to manage your money and get out of debt when you are broke.
1. Analyze Your Situation
Whether you’re deep in debt or just struggling, this is the first logical move. Take a hard look at what you owe and to whom.
This is especially important if you have a family with multiple spenders in the household, says Larry Hendrickson, founder and managing partner of G&H Financial Group, a financial planning and wealth preservation firm in North Canton, Ohio.
“How does a family chisel away the debt to become debt free? The first recommendation I have is for a family to sit down to discuss the monthly budget. Without knowing how much is being spent monthly, it is a hard to determine what can be allocated towards the family debt,” Hendrickson says.
“Debt is a difficult subject for many families, especially young families just out of school. With inflation at an all-time high since the early 1980s, and increased gas prices, we all are potentially racking up some additional debt,” he adds.
[Read: How to Create and Maintain a Family Budget.]
2. Consider Bankruptcy
Bankruptcy can be a powerful option for people when there’s just no feasible way to pay their creditors. Yes, your credit score will be in tatters, and it may be a while before you can get the best or decent offers from credit cards and lenders. But if you’re truly deep in debt, that’s probably already the case. And it can give you a fresh start.
You certainly wouldn’t be alone. According to data collected by the Administrative Office of the U.S. Courts, there were 517,308 bankruptcy filings in 2024, representing a 14% increase compared to the previous year.
3. Consider Going to a Credit Counseling Service
A credit counseling service can be useful if you have enough money to make your debt payments. Nonprofit credit counseling agencies have arrangements with many creditors who are willing to reduce interest rates for people who pay through them. The United States Department of Justice has a helpful list of approved credit counseling agencies.
Payment arrangements offered by these agencies are appropriate for people who have some money left over to send to their creditors after meeting their basic expenses.
Budget and debt counseling is free, and if a debt management plan appears to be a good option for you, the person you meet with will suggest it. If you accept, you will make one payment to the agency, which will then disperse the funds to your creditors.
4. Prioritize the Debt You Need to Pay
Suppose you’re really struggling and can’t pay off each debt every month. In that case, it’s important to prioritize what entities you’re paying, says Andrea Williams, a Northwestern Mutual wealth management advisor based in Chicago.
“Prioritize debts secured by a house or car, necessities like utilities and debts that can’t be discharged, including student loans and unpaid federal taxes. Then focus on unsecured debt, like credit cards,” Williams says.
The credit card companies may not love hearing that, but if you have to choose between making payments, your home and car should come before your credit card debt.
5. Talk to Your Credit Card Issuers
You don’t have to work with a nonprofit to help you negotiate with credit card issuers. A candid phone call that you make to your credit issuer could pay off.
Many credit card companies offer short-term hardship programs that will temporarily lower your interest rate to allow more of your monthly payment to go toward the principal. This will help you make progress quickly and motivate you to keep going.
Be aware, though, that hardship programs can have unintended consequences. If your credit card company knows you are having financial difficulties, it may reduce your credit line.
6. Pay Off Debt With the Highest Interest First
If you’re not working with an attorney to discharge credit card debts or a credit card counselor to get them paid off, you may want to adopt the avalanche debt elimination strategy to prioritize the highest-rate debt.
Let’s say you have three credit card accounts, all of them with a lot of revolving debt. With the avalanche strategy, you would make the monthly minimum payments on two credit card accounts and pay the most to the third card with the highest interest rate.
Once that card is paid off, you apply its payment to the next card with the highest interest rate. Add all the money to the last card on your list when that account is at zero.
7. Or, Pay Off Smaller Debts First
The avalanche method makes more sense mathematically, but seeing results can take a while. Because of that, many financial experts instead recommend another strategy where you focus on the credit card with the smallest amount of revolving debt while still making minimum payments on the rest of your credit cards.
Once the card with the smallest balance has been paid off, then you focus on the credit card with the next smallest amount.
“There is some evidence that the snowball method, where you prioritize by smallest balance first, helps some people because it creates the potential for quick wins that help maintain momentum,” says Sophie Raseman, an advisor to Brightside, an employer-sponsored financial care benefit for employees.
“It matters less which method you pick than that you pick something and stick to it,” she adds.
8. Transfer Your Credit Card Balance
To attract new customers, many credit cards offer 0% interest on balance transfer deals for periods of at least 12 months. These deals are most often available to people with good to excellent credit scores.
With a balance transfer card, you won’t pay any interest on a debt during the time-sensitive introductory period. The fee is typically between 3% to 5% of the amount you shift over, which will be added to the amount you owe. So if you transfer $5,000 to a new card with a 4% fee, your new balance will be $5,200. By making payments of $434, you will be debt-free in one year.
9. Refinance Debt
Refinancing existing, high-interest debt with a lower-interest loan can be a formidable strategy to reduce your debt. “While it can take time to receive approval, refinancing can help lower your monthly payments long term,” Williams says.
“Any extra money you save from refinancing can be put toward repaying high-priority debts — i.e., house or car payments, student loans,” she adds.
Keep in mind, however, that with some types of refinancing, you might be looking at extra costs or extending a loan, which can make the debt more expensive in the long run.
10. Accelerate Payments
Ron Tallou, founder and owner of Tallou Financial Services in Troy, Michigan, says accelerating payments by paying more than required can work to bring down debt quickly.
It can make sense if you have extra money that doesn’t need to go to bills, food or an emergency fund. There is no rule that says you only have to make just one loan or credit card payment per month.
“Try to pay at least twice a month,” Tallou says. “That way more is going toward the principal.”
11. Stop Creating New Debt
You can’t dig out of debt if you continue to borrow more money. Try committing to a cash-only lifestyle while you are in debt-repayment mode. You may consider locking up your credit cards and taking account information off mobile wallets and e-commerce sites.
This strategy may require dramatic changes, but it is important. Once you’re in the black, you can pick up the cards again, but with the personal promise that you will pay your bills in full every month.
12. Create an Emergency Fund
Unexpected events, like your car breaking down, can destroy your finances. If you don’t have cash in the bank, you may have to turn to credit cards or expensive short-term loans.
For this reason, Raseman strongly suggests saving for emergencies, even when you’re buried in debt.”This habit is key because it’s what you’ll build on to prevent yourself from getting into more debt in the future,” she says.
Even a small amount set aside on a regular basis can help you build an emergency account that you can dip into when needed.
[Related:10 Good Reasons to Spend Money from Your Emergency Fund]
13. Set up an Automatic Savings Account
If you never seem to have money for purchases that you know are coming, like holiday gifts, birthday presents and one-offs like paying for your kid’s school photos, you’ll probably find yourself relying on your credit cards. This will put you further in the hole as you’re trying to climb out.
Make setting cash aside for future purchases easy by setting up automatic savings with your bank. The moment a direct deposit hits your checking account, a portion will be diverted to a savings account. Soon, you’ll have a fund that you can use instead of charging a purchase, and the money you spend will be replenished in upcoming months.
14. Use Cash as Much as Possible
Paying in cash isn’t practical for a lot of expenditures. But with some purchases, using cash can be a practical and smart way to manage your money, says Scarlett McCarthy, the founder of LiterallyBroke.com, a personal finance platform dedicated to artists and creatives.
“My No. 1 tip for people paying off a lot of high-interest debt is to adopt a cash budget for groceries and fun money,” McCarthy says. “Using cash forced me to realize how seemingly small purchases add up. I had to become more intentional with my spending and plan for things like birthdays and events.”
[Related:Why You Should Use Cash for Everyday Purchases]
15. Pay Your Bills on Time
When you’re deep in debt and struggling to get out, it’s so easy to fall into a habit of making payments when you can rather than when they are due.
It’s better late than never, but late fees — such as those for credit cards, mortgages, cars, and personal loans — can do a lot of damage. Instead of paying down debt, the money goes toward penalties that do nothing more than increase the balances.
Don’t make life more difficult for yourself. From this point forward, pay all of your bills on time.
16. Create a Bare-Bones Budget
Living without pleasurable extras may sound dreary, but it does enable you to save the most money on your financial obligations.
Review your budget and identify areas where you can trim on a temporary basis. For example, you may eliminate dining out, sporting events and vacations until you are debt-free. See how far you can cut your spending for as long as possible. Focus on the basics, such as housing, food, utilities, transportation and insurance so you don’t put yourself or your family in any danger.
The good news? When the last bill is repaid, all the money you sent to your creditors will be back in your budget. At that stage, you can celebrate with something special that you have slashed from your budget.
Don’t Panic — Take Control
Owing a large amount of debt can be scary and depressing, but know there are options. Even better, you don’t have to do this alone. Many of these suggestions can be explored in depth by going to a credit counseling agency. Appointments are free so you have nothing to lose.
And try not to panic. Unlike other problems, debt is fixable as long as you face it head-on. Identify the strategies that make the most sense for you and your situation, then take action. The sooner you do, the more in control you will feel.
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16 Things to Do When You’re Deep in Debt originally appeared on usnews.com
Update 03/28/25: This story was published at an earlier date and has been updated with new information.
