How to Get Out of Debt and Regain Your Financial Freedom

Professional Reviewer: Adam Olson, CFP®, LUTCF, FSCP, RICP
Wealth and Retirement Strategist

Summary: With the cost of living and financial pressures continuing to rise, more people are finding themselves struggling with mounting debt. Efforts to get out of debt seem more daunting than ever before. This article explains six practical steps that can help you get out of debt and put you on the path to financial freedom.

The fear of debt and its repercussions is affecting families in significant ways. One recent study shows that parents in debt are twice as likely to neglect both their physical and mental well-being compared to those not in debt.¹

It’s important to seek financial help and debt support when your debt load becomes too heavy. Don’t wait until the situation becomes completely unmanageable. Below are six practical steps that can help you get out of debt and begin working toward a more secure financial future.

1. Face the numbers

The first step toward financial freedom requires complete honesty about your current situation. Start by gathering all your financial information and taking these three actions to assess where you stand:

List your debts

Start by listing all your debts, including credit cards, auto loans, student loans, personal loans and any past due amounts. Next to each item, note the total balance, minimum monthly payment and interest rate. You can do this on paper or digitally. Alternatively, use a spreadsheet or a financial management platform or an app to track your progress more efficiently.

Get your credit report

Obtain a free copy of your credit report. Many online financial platforms offer this service. Ensure that your list of debts is consistent with what’s reported by the major credit reporting agencies.

Understand your credit score

A credit score is a numeric representation of your individual creditworthiness. The FICO score, the most commonly used credit score, ranges from 300 to 850.² Improving your credit score is essential as it affects your loan eligibility, housing options, employment opportunities and insurance premiums.

Regularly check your credit report for accuracy. If you find any discrepancies, you can initiate disputes directly with the credit bureaus or through the Consumer Financial Protection Bureau’s dispute portal.

Here’s what affects your credit score:

• On-time payments
• Credit utilization – below 30% is good, but below 15% is better
• The number of new accounts created – less is better (unless you’re refinancing or consolidating)
• Credit history length – the longer you’ve had accounts open (even if not using) the better

Certified Financial Planner Adam Olson says that a healthy credit score starts with smart spending habits rooted in understanding the difference between wants and needs. He elaborates:

“You might need a reliable car, but not a brand-new luxury SUV, and daily drive-thru coffee is a want, not a necessity. Set clear boundaries on your spending and avoid financing non-essential purchases, even with tempting 0% interest offers. Whenever possible, pay cash for discretionary items to keep your credit use focused on true needs.”

2. Develop a budget

A budget can help you spend purposefully by allowing you to choose how to allocate funds based on your established priorities. If you’re married, create your budget together with your spouse. If you’re single, consider finding an accountability partner to help you stay on track.

Here’s how to create a budget:

1. Review spending history: Look at your spending over the past 3-6 months.
2. Categorize transactions: Identify your expenses as fixed (e.g., rent, insurance) or variable (e.g., groceries, entertainment).
3. Calculate discretionary income and spending: Determine the amount left after covering necessities and minimum payments.
4. Allocate funds: Use a framework like the 50/30/20 rule, where you allocate 50% to needs, 30% to wants and 20% to savings and debt repayment, adjusting as needed to prioritize debt.³
5. Use digital tools: Enhance transparency and gain real-time insights into your spending behavior with digital apps and tools.

3. Choose a repayment strategy

The next step to getting out of debt is to choose a repayment method.

• Avalanche method (interest-optimized): Focus extra budget/income on paying off the debt with the highest interest rate, while continuing to make minimum payments on all others. Once a debt is paid off, roll that amount to the next-highest rate. This method minimizes total interest paid and can shorten the repayment time period.
• Snowball method (momentum-focused): Start with the smallest debt balance, regardless of rate. After paying that off, roll the payment into the next-smallest balance. This method produces faster psychological wins, which can boost motivation for individuals who benefit from visible progress.

A combination of these two methods can work well, too. For example, pay off the smaller debt balances first, using the snowball method. Then, switch to the avalanche method for maximum efficiency and a shorter repayment period for larger balances.

4. Look for ways to reduce costs

Reducing your interest costs can speed up your journey out of debt. Here are several strategies to consider:

• Negotiate a lower APR: Contact your credit card issuer and request a lower interest rate. Having a positive payment history and a stable income can bolster your case.
• Balance transfer credit card: Explore options that offer low introductory rates for the first 12–18 months.
• Refinance student loans: For private student loans with higher rates, consider refinancing with a reputable lender to potentially lower your APR and/or monthly payment.
• Consolidation loan: A fixed-rate personal loan can help consolidate debt into one predictable payment, sometimes with a lower interest rate.

5. Create an emergency fund

Having an emergency fund is like having a financial safety net. Start by saving $500 to $1,000 in a savings account. This money is there to help you cover unexpected costs, like a car repair or a medical bill, without having to borrow money or use your credit cards.

Over time, try to build this fund to cover 3 to 6 months of your necessary living expenses. This way, if something big happens, like losing your job, you have some time to get back on your feet.

Consider using online banks or credit unions that might offer better interest rates, so your savings can grow faster. The key is to add a little to your funds regularly.

6. Look for ways to increase income

Looking for ways to increase your income could be a way to speed up your debt repayment.

Here are some ways to increase your income:

• Freelancing: Marketable skills like writing, graphic design, and coding can be monetized on various platforms.
• Online tutoring or course creation: If you have any academic and specialized knowledge, you can tutor others online.
• E-commerce: Sell unused or niche items on vendor websites.
• Remote gigs: Seek part-time, flexible work remotely or even in the evenings or on the weekend.

Stay engaged in the process

Stay engaged in the process of getting out of debt with these six simple steps. Once you get yourself on the right path, track your progress along the way.

Don’t forget to set clear goals for yourself, like paying off a specific credit card by a certain date and time, reducing your total debt by a certain percentage, or making a specific number of monthly payments on time. Every time you hit one of these goals, take a moment to celebrate the win, whether big or small.

Budgeting works best when it becomes a lifestyle, not a quick fix, much like a sustainable diet. Crash diets rarely last, and the same goes for extreme budgeting. The key is building habits you can stick with, like limiting eating out, avoiding impulse buys, saving and giving first, and removing temptations such as shopping apps. These small boundaries create long-term financial health.

There is no single cure-all that gets a person with heavy debt to a debt-free life. Every situation is unique. Should you need support along the way, the financial professionals at Mutual of Omaha can help with a customized financial plan tailored for your specific situation.

Frequently Asked Questions (FAQs)

I have extra money after paying my debts this month. Should I use it to reduce my debt further or save it?

If you have 3-6 months of emergency savings, it’s usually a good idea to use extra money to pay off existing debt. Paying down debt can save you money on interest over time and reduce financial stress. However, ensure you have enough emergency funds built up to cover unexpected expenses.

Should I think about getting a debt consolidation loan?

Maybe, but be careful. Debt consolidation loans can come with higher costs because of fees and interest rates. While they might lower your monthly payments and interest rates, making payments easier and saving money, it’s crucial to compare the terms with your current debts. There are other potential downsides, including upfront fees, lengthening the debt payoff period and the risk of falling deeper into debt if spending habits aren’t adjusted.

Where can I find more information about getting out of debt and credit counseling?

The National Foundation for Credit Counseling (NFCC) offers help with managing credit card debt, student loans and bankruptcy. The organization provides resources and advice to help you create a plan to get back on track financially, which includes budgeting tools, debt management plans and access to certified credit counselors.

Professionally Reviewed by: Adam Olson, CFP®, LUTCF, FSCP, RICP

Wealth and Retirement Strategist

Adam is a Certified Financial Planner, author and podcast host with a deep passion for helping clients navigate all aspects of personal finance, from financial planning and investment management to life and health insurance. His goal is to empower individuals and families with the knowledge and tools they need to make confident financial decisions. He resides in Norfolk, Nebraska with his wife, Katie, where they are raising their four boys.

Footnotes:

1. Scripps News, Six in 10 parents in debt just to support their kids, survey finds, Aug 31, 2025
2. gov, Credit Scores, February 4, 2025
3. Investopedia, The 50/30/20 Budget Rule Explained With Examples, August 22, 2024

Disclosures:

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc.  Mutual of Omaha Advisors is a division of Mutual of Omaha Insurance Company.

All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.

Mutual of Omaha and its representatives do not provide tax and/or legal advice, and the information provided herein is general in nature and should not be considered tax and/or legal advice.

Not all Mutual of Omaha agents are registered representatives or financial advisors.

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