Overwhelmed by Debt? Here’s How to Start

overwhelmed by debtToday I’m delighted to bring you an excellent post from Laurie over at The Frugal Farmer. If you are in the throes of debt and completely overwhelmed at the prospect of ever digging out, Laurie will show you, it’s not only feasible, it is achievable. As an aside, Laurie is featuring my story of debt freedom on The Frugal Farmer today, so be sure to check it out if you’re interested. But right now, I hope Laurie’s post inspires you to get started and keep moving forward on your debt, no matter what.

Overwhelmed by Debt? Here’s How to Start

Are you feeling like you have much too much debt to even bother trying to pay it off? I get it. We were there too. At one point, we had so much debt that our budget revealed a $1,000 -$1200 deficit each and every month. If it weren’t for overtime and side hustles, we wouldn’t have been able to pay the bills.

To give you an even clearer picture of how dire our situation was, our consumer debt was equal to my husband’s pay at the time. Our debt-to-income ratio (DTI is calculated by dividing your monthly debt payments by your monthly gross income) was 65%.

Banks generally won’t give you a mortgage if your DTI is over 45%, and we all know that mortgage companies are much more generous than they probably should be. That gives you an idea of how seemingly hopeless our situation was.

To be honest, there were many times during the beginning years of our debt payoff journey where we thought it would just be smarter/easier/better to file bankruptcy.We were overwhelmed by the slow journey and the pittance of monthly progress we were making as we worked to pay off our debt.

But as we progressed toward certain debt freedom, we’ve found that the work is worth it. And today I want to share some tips for those feeling as if their debt load is too big to conquer. These seven tips helped us, and I’m certain they’ll help you as well.

Face the Numbers

I remember the day I sat down and tallied our debt numbers. Up until then, we’d pretty much be just rolling along living in denial. But one day it occurred to me that we were living a little tight and I sat down and figured out the numbers. It was NOT pretty.

I shared the numbers with my husband and together we sat in shock, wondering how we created this mess and how we’d ever get out of it.

We went through months of being angry at ourselves and at the situation. *Note: don’t bother with this step – it’s a major waste of time and energy. Just accept the fact that this is the situation and move forward.

Facing the numbers can be really difficult, but it is key to owning up to the reality that will help change your financial situation.

Start Budgeting and Tracking Your Spending

After I figured out our debt totals, I went back through the prior year’s expenditures by analyzing our debit and credit card statements in an effort to figure out how we had made such a mess of our money. What I found was astonishing.

We hadn’t been budgeting and spend tracking up until that point, but I had ballpark numbers of what we wanted to spend in each budget area and what I thought we were spending in each area. Turns out that I was off in every area – by 30%-50%!

I thought we were spending $600 a month on groceries, but we were spending $900 a month. I thought we were spending around $150 a month on dining out, but we were spending $275 a month.

Each budget area I analyzed revealed the same story, and suddenly the reason why we were in so much debt became crystal clear.

Starting that very month I created our first budget and a spend-tracking spreadsheet using Excel. At the beginning of each month I list all of the upcoming month’s expenditures and give every incoming dollar a job. This is called zero-sum budgeting. If every dollar has a place to go before the money comes in, your chances of blowing your cash on stuff that doesn’t matter to you becomes limited.

We also use the spend-tracking sheet. Every time we spend money, I record it on the sheet, along with a total of the monthly expenditures and yearly expenditures.

This has been a huge blessing in our journey because it helps ensure that we stay on budget in each spending area. You could also use the cash envelop to be sure you stay on budget, but spend tracking gives you a full picture view of every month and the yearly total of your spending so you can reign in costs where need be. The more money you save each month by reigning in spending, the more you have to put toward debt payoff.

Create Your Plan

Now that you’ve got a monthly budget written out, you can begin your plan for paying off debt. The easiest way to do this is to simply take any surplus at month’s end and put it toward your debts. I like the debt snowball (starting by paying off the smallest debt and moving upward) as you gain payoff wins faster, which can be incredibly motivating. But whatever method you choose will work as long as you work the plan.

Focus on the Right Things

It’s easy to lose heart and get overwhelmed by the amount of debt you’re in if you keep focusing on the amount you have left to pay off. Instead, focus on how far you’ve come, even if it doesn’t seem like it’s very far. Congratulate yourself for the fact that you have $50, $100 or $200 less in debt this month than you had last month.

Keep in mind the long-term picture, knowing that the picture you see now will be very, very different in five years if you stick with the plan.

Be Willing to Make Sacrifices

If you want to get out of debt, you’re going to have to give up some things. Don’t allow yourself to fall into self-pity; instead remember what you’re gaining from the things you are giving up. Peace of mind. Financial security. A healthier marriage. The ability to help others one day. When you start to think big picture, you’ll find that your “sacrifices” aren’t really sacrifices at all, because you’ll learn that you deserve financial security more than you deserve a daily latte’ or that new whatever-it-is.

Don’t Let Hindrances Stop You

When you’re dealing with a boat load of debt, there may be months where you go backwards in your debt payoff journey. If money is super tight and a big unexpected expense comes up you might have to put it on the credit card (starting by building a $1,000 emergency fund before you begin debt payoff will help to avoid this).

If that happens, pick yourself up and move forward. Don’t dwell on it, just get moving again. There’s no sense in crying over spilled milk, just get back on your path to debt freedom.

Keep the End Game in Mind

And when you feel like giving up, keep in mind what it will feel like when you no longer no anyone a dime. When no credit card company or mortgage lender can dictate where your money goes. When you have a monthly surplus that’s big enough to allow for vacations or big expenditures that are paid for in cash.

Let those visions of a financially secure future push you to move forward even when it seems as if you’ll never reach your goal of debt freedom, because the truth is that you will cross that finish line if you keep moving forward.

Along with our monthly and yearly expenditures, the Excel spreadsheet we use contains our monthly individual debt numbers and total debt numbers. This big picture view helps us to see our progress from a yearly standpoint and keeps us motivated to keep going.

As for us, we aren’t fully out of debt yet, but we are getting there. Today, we have breathing room in our budget and we no longer have that month-to-month worry about whether or not we’ll have enough cash to cover our expenses. Soon enough we’ll be debt free. Won’t you join us?

What questions do you have about paying off debt when it seems as if there is too much debt to pay off?

Laurie is a wife, mother to 4, and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer . Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom, and to a simpler, more peaceful life.

Try You Need A Budget (YNAB) free! I have teamed up with YNAB to offer three months of YNAB FREE to readers of Centsibly Rich. Check out my review here.

Want to painlessly save more each month (without even lifting a finger!)? Try out Digit. I really thought I was saving all I possibly could. Digit proved me wrong. See my review and updates on how much I’ve saved here.

Personal Capital tracks your expenses for you for free! Have all your accounts in one place and utilize their free expense tracking tool! I use their free net worth and expense tracking tools. Sign up for a FREE Personal Capital account.

This post contains affiliate links, which means that if you click on one of the product links, at no additional cost to you, I’ll receive a commission if you buy products through these links. See the full disclosure here.

28 thoughts on “Overwhelmed by Debt? Here’s How to Start

  1. We still have some debt hanging out as well but should have it taken care of in about 2 years.

    Great job taking control of the situation, it always amazes me how big of a part just understanding the situation you are in plays in turning it around. Like you a lot of people’s all park guesses aren’t wrong and compounding in the wrong direction

    1. Thanks so much, AE! Facing up to the facts about our money situation was extremely difficult given the mess we were in, but it was instrumental in forcing us to make changes and improve our finances.

  2. Great blueprint Laurie! So important to just get your numbers down on paper. This will force you to get your head out of the sand. We are often stuck in ruts and routines that we don’t have a clue where are money is going. It does take hard work, but it is so worth it. Looking forward to you and the family crossing the debt free finish line!

    1. It’s so easy to live in denial, isn’t it?? For years we had to “we can make the minimum payments so we’re just fine” attitude, with no thought of saving for the future. SO glad we’re out of that rut.

  3. I really relate to the importance of tracking income/expenses. If not for records of my own, I’d have no idea that my situation is dramatically, quickly improving. By any typical measure – net worth, DTI ratio, etc. – I am in an intense emergency situation beyond repair. But there is a distinct upward trend that you see only when you look at my monthly income/expenses. It’s inspiring to see that me and Mrs. Vigilante are bringing in so much more than we’re losing each month, despite the abysmal DTI ratio. Without seeing that, I’d go crazy.

    Nice post – certainly worthy of the coveted spot on my Pinterest board 🙂

    1. That is AWESOME news, Vigilante!! I know you guys can kick tail if you keep doing what you’re doing.

  4. Really great advice! I keep telling others that budgeting and facing your debt isn’t a difficult or complex process, but it does take time. Writing down all your debt and creating a budget is a huge first step!

  5. I remember even when I bought my home how much I hated taking out a mortgage. As time went on I grew to disdain the mortgage and I wanted nothing more than to get rid of it as quickly as possible.

    For me having a singular focus and creating a financial bridge on how I would arrive at my end goal was key to gaining financial independence from my mortgage.

    It took 7.5 years but it’s finally gone and I couldn’t be happier!!!

    1. MSM, your attitude toward your mortgage is SO key. You really do need to hate debt if you’re going to be successful at dumping it. So happy for you that you guys stuck with the plan and are now mortgage free. Great work!

  6. Great story! The thing about making sacrifices to pay off debt can be almost ironic. Someone is letting that future someone to pay for choices made today. That’s voodoo economics!

    I’m fortunate to not have taken on debt and hopefully that doesn’t change anytime soon (barring some mortgages that I have to pay) but it can easily be a slipper slope.

    1. I think you’ve read enough stories of others’ struggles with debt that you’ll remain debt free, FS. It can indeed be a slippery slope. I remember the times we were debt free and began taking on “just a little” bit of debt at a time. That “little bit” then evolved into a whole lot.

  7. One of the reasons why I’m so grateful for my blog-reading habit is that it offers me reminders that I need. When I got to “Every time we spend money, I record it on the sheet” I realized I hadn’t recorded something on my discretionary money tracking sheet (which is literally a paper on the fridge), and I got up to do it. You are a master of “sticking-to-the-stuff”, Laurie! You will be debt-free, and Lord willing, you’ll continue to motivate others to find it within themselves to get there too.

    1. Thanks, my friend. Yes, the day is so near and I cannot wait!!! We’ve spent too many years being servant to the lender!

  8. I’ve been there, as far has having no idea what we were spending. Once my husband and I looked at the numbers, we realized we were spending over $1500 a month on groceries and household items! Understanding where your money is going and being able to really envision where you need to cut back is truly the first step. We have knocked our grocery budget alone down by hundreds of dollars a month. and the really crazy thing was that, it was not that hard. The power of putting your attention and intention in the right place cannot be underestimated.

    1. Love your last line, Linda!!! You just have to “get the vision” and keep moving forward. It’s worth all of the sacrifices and struggles. We knocked our grocery bill down from $900 a month to $450 a month, and we’re perfectly happy with it!

  9. Always a great lesson. Medical school debt is so huge these days that it’s become pretty unsurmountable in the minds of most. I routinely meet residents in training that have over $400,000 in debt at Govt. sponsored 7-8% interest rates. That’s a mortgage! I came out at a little different time when interest rates were so low, so I’m not in a hurry to pay it off. However, I can see how when it reaches a certain point it almost doesn’t seem real making it harder to dedicate time/effort to figuring out how to pay it off quickly. This was a great post and I’ll recommend it to all my trainees 🙂

    1. Thanks so much!! 7-8%, that is horrible! I can’t stand seeing the interest payments on our mortgage and it’s 3.5%. You’re doing life-changing work over there at your blog. Keep at it!

    1. Thanks, Daniel. My hope and prayer is that everyone knows that they can dump their debt if they’re committed to the process.

  10. Great story!

    Sometimes when I think I’ve overspent for a month, I’m reluctant to look over my expenses haha. However, I force myself to look over the budget variances because it’s important to see where the money is going!

    I think the short-term sacrifices of getting out of debt is totally worth it. Congratulations on not filing for bankruptcy and almost clearing out your debt!

    1. Yeah, I’m so glad we chose to fight it instead. The stats said we’d never make it, but we chose to fight anyway and it’s been well worth the fight!

  11. You are so right about the initial ‘whaaaat?’ when you first start tracking expenses. Gut feel is just plain wrong about expenses more often than not.

    I’ll be one more internet stranger cheering you on to freedom from debt.

    1. Thank you so much, Mrs. BITA. I appreciate the encouragement – it has been vital in helping us stay motivated.

  12. I love hearing from debt slayers! Thank you, Laurie. Budgeting is the key. Once you know your true spending, it’s easier to see what areas of your life need trimming. When Mrs. Groovy and I started to budget, way back in 2003, we were shocked to learn our monthly grocery bill was over $600. But once we saw where the leakage was, so to speak, were able to get that bill down to $400 in short order. Knowledge is power. It’s a corny adage, but it’s true. Thanks again, Laurie, for the great story and the great advice. I’m sure it will inspire others to “cry havoc and let loose the dogs of war” against their vile debt.

    1. A corny but awesome adage. 🙂 LOVE your last line about “cry havoc and let loose the dogs of war” against debt. I’m going to post that somewhere. 🙂

  13. Great advice.

    Becoming debt free is not difficult, it just takes a plan (budget) and the will to persevere.

    The problem is that most people make a plan to pay off debt and when one small thing goes sideways they give up.

    1. I think it can be extremely difficult, especially when you’re in a crazy debt situation like we were. But through all of the difficulties it’s well worth the effort when you come out on the other side having won the battle against payments and interest. 🙂 And you’re right about perseverance; it’s key to winning at debt and every other goal too. Thanks, Divi Cents!

Comments are closed.