Why Knowing How to Cut Expenses Isn't Enough to Get You Out of Debt

When you read financial advice online, there's a lot of emphasis on spending less. That's especially true if you need debt relief.  

Taking control of your spending isn't bad advice. It makes sense—limiting spending could help you succeed financially. 

However, cutting expenses isn’t a magic solution that can, by itself, get you out of debt and get your finances on track. Here's why it’s usually not enough to get you out of debt, and tips on what else to do.

Why Cutting Spending Isn't Always Enough

If you are paying off debt, one of the first things to do is to make a budget plan that frees up money for debt payoff. You want to pay at least the minimum due on your debt to stay in good standing. To make progress, though, you'll want to pay much more than the minimum—extra payments to the principal could reduce your balance faster and help you save on interest.

There’s a central truth in budgeting: You only have so much money to work with. You need your income not just for debt payoff, but for essential expenses like your mortgage (or rent) and food. And some of these costs can't realistically be cut, or cut much.

For example, while you could move to a cheaper apartment or house if there's not enough wiggle room for debt payments, you need somewhere to live. So you can only cut that cost by so much. The same is true for things like groceries and utilities. 

And while you can cut spending on entertainment and fun things, you also need some things to enjoy. If you try to spend $0 on anything fun for months or even years while you're paying off debt, you may find sticking to that plan is unsustainable. 

In other words, you can't budget yourself out of debt if the money simply isn't there.

What Are Your Options If You Need More Help?

So, what should you do if you've made a budget, made the spending cuts you can, and still can't make meaningful progress on your debt?

Increase your income

If your circumstances allow for increasing your income, that could be the best option. This might mean looking for a higher-paying job, working a side job, or working overtime. 

And, while there's a limit on how much you can reduce your spending, there's much less of a limit on how much you can grow your income (even though you only have so much time in the day and so many career options). 

But this approach may not be enough to fix the situation either. If that's the case, you can look into lowering the cost of your debt by refinancing or arranging a payment plan with creditors. 

Refinance your debt

Refinancing is when you get a new loan to pay off existing debt; you can also consolidate if you use the new loan to pay off multiple debts. If you qualify for a loan with a lower interest rate than you're currently paying, you could reduce your monthly payment and overall interest costs. 

It may not make sense to refinance if you can't qualify for a lower rate, or if the loan fees are larger than any interest savings. Crunch the numbers beforehand with an online calculator to see how the math works out.

Ask for hardship assistance

Some creditors may offer hardship programs or payment plans that could help you get back on track. This might include a temporary payment pause (interest still accrues) or reduction in your interest rate. These programs are temporary and most likely to be offered if you're facing serious financial hardship like job loss or death of a spouse.

Consider debt relief

When you feel like paying off debt is truly impossible, you may want to look into your options for debt relief. For example, debt settlement could allow you to get rid of your debt for less than you owe if you can't afford to repay the full balance due to financial hardship.

Debt relief programs aren't a get out of debt free card; missed payments may hurt your credit, and you'll typically pay fees for a professional debt relief company. But they could help when your debt is too much to reasonably repay.

Whether a debt relief program makes sense for you depends on how much you owe and other factors. Look at who Freedom Debt Relief helps to see if you might be a good candidate. In general, if you have $10,000 or more in unsecured debt and you struggle to make minimum payments, debt relief may be an answer.

The key to taking action on debt is to take a realistic look at your situation—what you're spending, what you owe, how much you can cut your spending, and how long it would take to get debt-free with payments you can afford. Understanding these factors are often the first step in getting out of debt for good.