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Five Extreme Ways to Get Out of Debt

[Aug 23, 2009.]


With financial growth and a positive stock market peeking out from the recession’s storm clouds, it’s a perfect time to think about using our newfound frugality to get out of debt. As Americans earn merit increases and bonuses near the end of the year, it’s time to consider plowing some “found money” toward the credit card debt we racked up while times were bad. Most of us would consider the act of shopping for debt consolidation loans an extreme enough act on its own. However, five compelling stories show us how you can always take your debt relief quest a step farther:

#1: Get Out of Debt with Lemonade Stands and Bake Sales

Hazzard writes the personal finance blog Everybody Loves Your Money, where he describes his six-year old daughter’s idea to help pay some bills by running a lemonade stand. Her hour on the curb grossed $14, but some Americans are finding even more sources of debt relief by selling food. Angela Logan intended to sell two homemade cakes per day to get out of debt and avoid foreclosure. Interest swelled when friends and family spread the word. As a result, Angela licensed her recipe to a professional mail order bakery, paid off her debt, and even landed an appearance on Oprah.

#2: Reduce Credit Card Debt by Tracking Every Penny

If money flows through your hands like water every week, this debt relief tip will sound pretty extreme. For some Americans, though, it’s an opportunity to get obsessive about cash in a productive way. Personal finance experts note that many Americans flush cash away with too much discretionary spending. Therefore, tracking every cent you spend in a week or month can help you get conscious about money you could be using to get out of debt. Dave Ramsey and other financial gurus like the simple envelope method, splitting up your weekly or monthly budget into stacks that can run out if you’re not careful. Technology-minded savers user services like Mint.com to analyze bank statements automatically.

#3: Get Out of Debt by Giving Up Your Car

When Donna Friedman’s daughter needed a car for her move to Phoenix, the recent Seattle transplant examined her own transportation budget. In a recent blog post, the writer revealed her discovery that moving from California made her less dependent on her car. In fact, giving her car to her daughter and taking public transportation instead means that Donna can focus more of her budget on debt relief and savings instead of paying for gas, insurance, and maintenance. Residents of many cities can now rely on inexpensive car-share services like Zipcar to take up the transportation slack on days when only a car will do.

#4: Go Freegan to Get Out of Debt

Could you make it through a month without paying for your own food, if it meant you could get out of debt? More Americans than ever explore this option, from a variety of starting points. While “freegans” often cite their philosophy of dumpster diving for groceries as a political stance against overconsumption, hunting down expired or unwanted food can certainly curb your grocery spending. It’s more acceptable practice for professionals to “never eat alone,” allowing colleagues and acquaintances to pick up the tab for lunch or dinner in exchange for career insight. If your family’s need for debt relief has hit crisis proportions, a variety of non-profit organizations offer free or cheap food.

#5: Reverse Credit Card Debt When You Stop Buying Things

The Adbusters Media Foundation encourages Americans to celebrate “Buy Nothing Day” on the day following Thanksgiving. The so-called retail holiday was designed to help contemplate global consumption by avoiding even the smallest purchases. Gourmet Magazine writer W. Hodding Carter announced plans to get out of debt by practicing “extreme frugality” and spending no money over the course of a month. Plowing every cent of income into credit card bills can certainly help you get out of debt, but critics wonder if such an extreme cash detox won’t have some side effects.

Debt relief doesn’t always require such radical steps. For many Americans, a debt consolidation loan or a restructuring of existing credit card debt can reduce interest payments enough to get a household budget back on track.


About Author:

Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.

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