So You’re Stuck in a Cycle of Debt … Now What?

In order to stop running on a hamster wheel of debt, you’ll need to split your focus between two major financial priorities: Paying down debt and building up your savings.

Imagine how difficult it must be to ride a unicycle across a tightrope, high above the circus crowd. Maybe you have one of those poles you can use to keep your balance or maybe you don’t. Seems pretty difficult, doesn’t it? Even terrifying?

Now imagine that cycle was made of debt. Did that somehow make it even more terrifying? Or do you have no idea what we’re talking about? Because, honestly, we’ve kind of lost track of the metaphor here a little bit.

Regardless, getting stuck in a debt cycle can keep you from getting a proper financial foothold and accomplishing your goals. A massive debt load will drain your savings and tank your credit score, possibly forcing you to rely on predatory no credit check loans like payday loans, title loans, and cash advances when you have an unforeseen expense.

And if you find yourself stuck in one, you’ll have put in some hard work to pull yourself out. So slide your feet into the pedals and let’s get going!

What is the debt cycle?

The debt cycle is more or less what it sounds like. It’s a cycle of personal loans, credit cards, and other financial products that leads you further and further into debt. In other words, if you have to spend more than you’re taking in, you aren’t going to be able to pay off your debt and it’ll keep accumulating.

“The debt cycle is the continuous process of borrowing that increases debt and can eventually lead to default,” warned Leslie H. Tayne Esq. (@LeslieHTayneEsq), Founder and Head Attorney at Tayne Law Group (@taynelawgroup).

“When you spend beyond your means, your debt becomes unmanageable, and your interest begins to build up at a rate you can no longer keep up with. You may then consider taking out a personal loan to pay off debt, which is essentially going into debt to pay off your debt.”

And trying to pay off your debt without a proper plan can sometimes make the debt cycle even worse.

“Rushing to get out of debt is a major cause of the debt cycle,” cautioned Brie Sodano, founder of From Sheep to Shark (@sheeptoshark). “The common financial ‘wisdom’ says to save $1,000 and put all the extra cash toward debt repayment. This plan fails when an unexpected expense happens, and there is no savings to pay for it. Then the debtor perpetuates the cycle by using debt to pay for the emergency.”

“The way the debt cycle was explained to me was best summed up in this analogy,” explained Josh Hastings, founder of Money Life Wax (@moneylifewax). “Your car’s speedometer says it can go 150. And sure, it might be able to top out at 150, but revving the engine and constantly going from point A to point B at max speed will hurt the shelf life of that car.

“The same can be said for the economy, your personal banking habits, and the ‘debt cycle.’ Leveraging credit over and over again can become burdensome, stressful, and eventually more problematic. Just like the car going 150, leveraging credit and being in debt can be mentally draining or worrisome.”

Okay, so if you currently find yourself spinning away on that great hamster wheel of debt, what can you do get out of it?

You’ll need to build your savings.

We recently wrote about how you should choose between prioritizing saving or paying off your debt. Check it out and then get back to us.

Welcome back! As you’ll realize if you read that post … or have had to manage your finances in general, it’s tough to both build up your savings and pay down your debt. But if you want to break out of the debt cycle, it’ll be a big help to have some sort of savings so an unexpected expense doesn’t undo all of your progress.

“In order to break the cycle of debt, you have to start saving,” urged Adrienne Ross, Chartered Financial Consultant and Accredited Financial Counselor. “Even if you are only able to save $5.00 a week, you must start saving. Building up a cash reserve is a crucial part of your journey to debt freedom. Without a cash reserve, every unexpected life event will land you right back in debt.

“This has been proven true time and time again, but one story stands out in my mind. I was working with a single mother who was struggling to manage her money and get out of debt. Saving even $5.00 a week was a challenge, so we started with just having her save her coins.

“She would use cash to buy her groceries and gas. At the end of each week, she would take all of her change and put it in a jar. Every time she earned extra money, it went into the jar. All along, she kept making payments on her debts and working to stick to her budget. The jar was there as her ‘just in case’ money.

“After one year, she took the jar to the bank and discovered she had saved over $500. That $500 was just the beginning and provided the financial stability she needed to break free from the debt that was stifling her life.”

Now, it’s time to make a plan.

Make a budget and a debt repayment plan.

When it comes to actually paying off your debt, you’re going to want a plan—and a budget—that you can stick to.

“A great way to get out of it is to first do a budget,” suggested certified financial planner Luis F. Rosa (@luis_f_rosa). “Sit down and take a look at the last three months’ bank statements so that you can get a good idea of how much money you actually spend. Then write down all of your debts, their minimum payments, APRs, and balances. Once you have that you can use a few different methods to tackle that debt.”

And what are some of those methods?

“One option is debt consolidation,” offered Rosa. “Another can be the snowball method, where you pay the minimum to all creditors except for one, sending the excess amount that you can afford beyond the minimum payments to the account with the lower balance. The avalanche method is similar, but instead, you pay the account with the highest APR first. You can use free websites like to see which method works for you.”

And here are a couple more suggestion from Tayne:

“Put your credit cards away. Another important step in breaking the debt cycle is to stop using your credit cards. Using them will only compound the issue. With your adjusted budget, you should be working to pay all your monthly expenses without taking your credit cards out of your wallet.

“Frequently, getting into debt is the result of a cash flow problem. If you’re worried about making ends meet, you may want to consider taking on a side job to bring in some more income. However, be aware of how you’re spending the extra money you’re bringing in. Getting out of debt should be a top priority.”

Much like riding a bike, we hope you won’t forget these tips to get out of your debt cycle. Ride on! To learn more about leaving bad credit loans behind and building yourself a better financial future, check out these related posts and articles from OppLoans:

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Josh Hastings is a former High School Athletic Director at the secondary level who shifted his focus in 2016 to focus more effort on his entrepreneur endeavors. In 2017 he founded Money Life Wax (@moneylifewax), a personal finance site dedicated to helping millennials with student loans. With an emphasis on money and finance behavior, Josh started Money Life Wax to help millennials realize there are other ways to make money and be happy in the 21st century.
Luis F. Rosa (@luis_f_rosa) focuses on working with young up and coming professionals who are looking to better position themselves for a successful financial future. Luis is a Certified Financial Planner™ and is enrolled to practice before the IRS. This diverse industry knowledge allows him to best serve his clients by understanding how one financial decision affects the other, allowing him to better guide them toward achieving their goals.
Adrienne Ross is a Personal Financial Counselor who specializes in helping families in transition organize and manage their financial lives. Over the last 10 years, Adrienne has put her expertise in personal finance to work helping individuals and families eliminate debt and build the life of their dreams. Currently, Adrienne holds multiple certifications including CFP®, AFC®, and ChFC®.
Brie Sodano is the Founder of From Sheep to Shark (@sheeptoshark). Her goal is to help one million women improve their money situation and to give 100 million dollars away in the process.
Leslie H. Tayne, Esq. (@LeslieHTayneEsq) has nearly 20 years’ experience in the practice area of consumer and business financial debt-related services. Leslie is the founder and head attorney at Tayne Law Group (@taynelawgroup), which specializes in debt relief.


The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.