The Often-Skipped Step When Getting Out of Debt

by Andrea Norris-McKnight

To succeed in paying off your debt, you’ll need to take a few key steps, such as creating a pay-off plan and a budget that prioritizes debt repayment. However, before you begin, there’s a crucial step you must take to avoid derailing your efforts to overcome debt or stay debt-free.

Common Ways People End Up in Debt

The first step to getting out of debt is to understand why and how you got into it so you can avoid repeating the same situation.

Most people end up in debt for a few common reasons. Sometimes, it’s unexpected and unavoidable, like when an illness or injury keeps you out of work for a long time and leaves you with big medical bills.

For others, their debt problem could have been avoided. Here are three common debt traps:

Not Enough Emergency Savings

Some people fall into debt because they don’t have enough money set aside for unexpected expenses or a short-term loss of income, so they rely on credit cards. Can you relate?

Fidelity reports that 57% of U.S. adults don’t have enough savings to cover a $1,000 emergency. The past few years have been tough, and inflation has caused many people to use up their emergency funds just to cover daily living expenses.

Building or rebuilding your emergency fund should be part of your debt repayment plan. This way, you’ll be prepared for any unexpected expenses or job losses.

If you’re having trouble building an emergency fund, these tips can help:

Overspending

Another reason you may be in debt is that you have a spending problem. If overspending has caused your debt, you’ll likely end up in debt again or never get out of debt unless you address it. You need to figure out what makes you spend too much and how to keep it in check.

The following articles can help you determine why you spend:

• 8 Emotional Triggers That Cause People To Spend
• Discover the Real Problem Behind Your Overspending
• The High Cost of Retail Therapy
• Top 10 Reasons People Overspend

Understanding why you overspend may not instantly change your habits. But it can help you spend less over time if you commit to changing your spending habits. You can also use the tips and tricks from these articles to take even more control of your spending:

• 13 Tricks That Can Help Control Discretionary Spending
• Getting Addictive Spending Behaviors Under Control
• 10 Tricks to Prevent Impulse Buys (That Work Both In-Store and Online)

Lack of a Budget

Without a budget, you can easily lose track of your spending. You might think you’re living within your means, but without a clear plan, you could be spending more than you think. Over time, these extra expenses can add up and lead to debt.

A budget gives you a clear view of your finances. It helps you prioritize essential expenses, plan for the future, and set limits on non-essential spending. Without a budget, it’s like navigating without a map – you might reach your destination, but you’re more likely to take an expensive detour.

Creating a budget isn’t complicated. Start by listing your income and expenses. Then, set realistic spending limits and adjust them as needed. Sticking to your budget and reviewing it regularly to stay on track is key.

What Landed You in Debt?

If you ended up in debt last year, you’re in good company – many others did too. But to get out and stay out, you need to closely examine why it happened.

Was it because you didn’t have enough savings to fall back on, so you had to use credit cards to pay your bills? Or do you tend to overspend? Maybe you just didn’t keep track of your spending because you didn’t have a budget.

Whatever the reason, recognizing the problem and taking the right steps to fix it can help you avoid falling into debt again.

Reviewed January 2025

About the Author

Andrea Norris-McKnight took over as the editor of The Dollar Stretcher and After 50 Finances after working under the site founder and previous editor for almost 15 years. She has also written for Money.com, GOBankingRates.com, HavenLife.com and The Sacramento Bee.