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Is 2014 Your Last Chance to Get Out of Debt?

Submitted by on January 13, 2014 – 5:25 am 71 Comments


Happy Monday, friends!  Or, maybe not, depending on what your debt situation is.  Last week Yahoo Finance ran an article called Why 2014 is The Year to Get Out of Debt.  I’m reading pretty much everything I can these days that might provide new insight on how to get out of debt, so this article piqued my interest.  In it, the author talks about a few things that might change the game for borrowers in 2015: 

1.  A rising prime rate.  Experts are saying that our relatively stable prime rate of 3.25% has a good chance of going higher in 2015 and/or subsequent years.  This would mean rising interest rates on variable loans, such as credit cards, which could make it even more difficult to get those cards paid off, especially if you’ve got lots of card debt.

2.  The end of the QE gravy train.  The rumor is that QE is definitely coming to an end soon, which will again result in rising interest rates for consumers.  5% on a 30-year mortgage is nothing to sneeze at, but it’s much, much higher than the 3.50% we enjoyed for so long, and will definitely affect consumers’ decisions when it comes to buying a house.  It will also, like the incident of the rising prime rate, affect current and future borrowers’ interest loan rates, especially if they’re not fixed rates.

3. The trickle-down effect.  If rates do rise, people will obviously be spending less as they realize that collectively and individually, there’s just not as much money to be had.  This could lead to less spending, job layoffs, serious financial woes, and all of the other fun stuff we dealt with in 2008.

So, if the predictions are true, what does that mean for those of us still carrying a heavy consumer debt load or variable mortgage interest rate?  It means we’d better step it up a notch or twelve and get our debt gone or else transferred into something more fixed, ASAP.  What can you do now to get out of debt if “this is us”?

Funnel More Cash Toward the Debt

Increase your income by working overtime, taking on some side hustles, asking for a raise or searching for a higher paying job.  You could also sell all of that stuff laying around the house that you haven’t used in a hundred years.

Decrease your spending by paring down your budget and getting rid of most, or all, unnecessary expenses.

Transfer or Consolidate

Get rid of variable loans by refinancing that mortgage you won’t be able to pay off for another 5-10 years.  Get a fixed rate on your credit card and variable loan balances by consolidating them at your bank and/or lending club.

Save, Save, Save

Start squirreling away at least something for an emergency fund.  Have extra cash on hand to cover any potential situations that could be created if 2015 does turn out to cause major financial trouble. Yes, you need to work harder to get out of debt, but at the same time, save at least a little for emergencies that may come up in the future.

2015 may or may not bring an economic apocalypse to the country/world, but I for one don’t want to be caught in a bind if it does.

What do you think: Are we headed for financial trouble in 2015? 



  • moneystepper says:

    2014 is absolutely the year to get out of debt. However, the primary factor isn’t the economy (although rising interest rates will change things). The key factor is that 2014 is NOW! Get out of debt NOW!! 🙂

  • As a person who loves to watch Doomsday Preppers, anything that sounds even a little bit apocalyptic makes sense 🙂 Anything is possible and the economy is clearly not as stable as it was a decade ago… so yeah, it would be a good idea to put all that money and pay all the debt. If it’s not 2015 when rates go up, it might be 2016 and every year that you win in extra payments is a year well spent.

  • I’ll believe it when I see it when it comes to the QE gravy train. Let’s just say i’m skeptical and I think trouble is on the horizon – as I detail in my post today.

  • Matt Becker says:

    I don’t really know where we’re heading in 2015 or any other year, but I kind of disagree with the premise that the world around us should dictate our actions. To some extent, yes, such as refinancing when rates are low. But in a larger sense it’s much more about your personal situation and what YOU need to do, regardless of what’s going on in the economy. It needs to be a long-term commitment to a lifestyle rather than a short-term reaction to what you think the markets are going to do.

    • Laurie says:

      Great point, Matt. The fact of the matter is, whether the rates are good or bad, debt is not fun and should be dumped ASAP. It’s never good!

  • I think we’ve been headed for financial trouble for a while now. The interest rate going up isn’t necessarily a bad thing, especially if it’s lower than it should be (which I think most people would agree with). I think there will always be volatility as long as the Federal Reserve is able to manipulate the interest rate and ‘print money’ to manipulate the money supply.

  • I read that same article, Laurie…which made me REALLY glad that we made the decision to refinance our mortgage. Interest rates can SUCK IT, because we’re LOCKED IN! 🙂

  • 2014 is a good year to get out of debt! I continue to go about my business of cleaning up my financial situation each day. I never react to outside factors because you can never really predict where they will end up.

  • I’m sort of with Matt on this one, as I would argue that it really shouldn’t matter what could go on with external factors and how that would dictate our actions. Yes, if it makes sense, then go for it. That said, your points about working to get lower rates and more in savings are right on during any period I think. 🙂 As for the QE gravy train coming to an end, I’ll believe it when I see it. 😉

  • It’s always good to keep an ear out for predictions and hope for the best while planning for the worse. I’m definitely working on paying off my credit card debt this year!

  • I would say that any year is the year to get out of debt, but this one in particular. For most of the reasons you mention is why my wife and I are trying to buy a house now. We want to get a still low interest rate because any small rise will cost us thousands in interest.

  • I am a big believer in the E-fund. It just makes me feel better knowing we have that just in case. I think its just the security of having it that helps.

    • Laurie says:

      It’s definitely a huge stress reliever in my mind, too. It’s good to know at least there’s somewhat of a cushion there, just in case, isn’t it?

  • Dianne says:

    I can’t emphasize the necessity of a SUBSTANTIAL emergency fund! I was following Dave Ramsey’s plan, with keeping $1,000 for emergencies, and paying off my credit card. Doing very well, the balance on my debt was really going down fast.

    But, then, I discovered massive plumbing problems, and the repairs/replacements came to $9,500. So, I had to put it on the card, cause my emergency fund was 1/10th of that. At least, though, I used the checks they give you, and have zero interest until May of 2015.

    Regardless, if I had a REAL emergency fund, I could have used that and kept on paying off my card. So, now, I’m not paying the card as diligently, rather I’ve split the money in half and put equal amounts in my emergency fund and towards my debt.

    • Laurie says:

      Wow, Dianne! Thanks for sharing an important story. There’s all kinds of schools on how big the e-fund should be, but your story makes a strong case for building a big one right away.

  • I wish I knew where 2015 was heading but, selfishly, I would not hate a bit of a downturn in the stock market. As we’re still in the accumulation phase of E.R., buying some stocks on sale would be nice! But I have to be careful what we wish for: too big of a dip, and I might be looking for work.

    • Laurie says:

      Funny, we’re planning on investing big (well, big for us, anyway 🙂 ) if the markets tank too. I’m just hoping we’ll get that CC debt gone before the tank. 🙂

  • I think 2014 is a great year to get out of debt (but just about any year is), the sooner the better in my opinion. I’m hoping that the interest rates on houses don’t go up, but even if they do there’s really nothing I can do to stop that. Eric and I have talked about getting a rental property or moving and renting out our condo. I’m not sure this year is the year, but the low interest rates (and the threat of them rising) are definitely on my mind.

    • Laurie says:

      Yeah, it’s hard not to want to take advantage of those rates at a time like this, isn’t it? It’ll be interesting to see what you guys end up doing this year….

  • Brit says:

    You should be saving regardless of what is coming. I don’t let outside forces influence the reason why I save money. But if people are going to react and start saving good for them. Great post.

    • Laurie says:

      Thanks for sharing your thoughts, Brit. I agree that people shouldn’t let outside forces influence them, except for maybe to give them (and us ) extra motivation to work harder and faster at obtaining their goals. 🙂

  • I think any year is a good year to get out of debt, but interest rates are definitely going to go up, and this will impact your finance charges. I also tell clients, though, that interest rates going up will help you if you have money because your money in savings will earn more. So use higher interest rates as a reason to pay down debt and save more. It’s a win/win!

  • I agree with Brit that we should be saving regardless of what is coming…especially since no one has a crystal ball. But there are some indicators that point to rising interest rates, I mean it has no where to go but up. My wife and I are looking into buying a place, so we’re hoping the mortgage rates don’t jump. As for debt…my co-workers have a variable rate on their student loans which have been low for a while, but I’m sure with rates going up, it will be tougher. So it’s a good time to really make some headway on that debt.

  • Liz says:

    I have no idea what 2015 will be like- let alone 2014. As long as I have my family and my health I think I can get through another recession. Not that I want to go through that again, but I think we can get through it.

    • Laurie says:

      That’s awesome, Liz. We would definitely feel better about it if the consumer debt is gone. Hopefully this is the year that we kick it to the curb.

  • Knowing what I know now (and how many years I waited before tackling my debt), I would urge anyone to get their debt paid off as soon as possible, no matter what the economy is doing around us. It’s tricky to predict exactly what will happen in any climate so making sure we’re in the best position possible will be a huge help in any case.

  • Kathy says:

    While the low interest rates are great for borrowers, as someone with no mortgage and no other kind of debt (hooray!) it is really tough to find savings vehicles that pay decent interest. This makes it really tough on retirees who rely on fixed income instruments to supplement their pension or social security. Plus, as people who are getting out of debt, we should be less concerned about the interest rate.

    • Laurie says:

      I so agree about the terrible rates being tough on retirees. As one who is getting out of debt but not there yet, I’ll be much less concerned about the rate once our CCs are gone. 🙂

  • Now is always the best time to get out of debt, regardless of whether 2014 is a banner year or a horrible one. Being nimble on your feet financially makes it much easier to weather storms and take advantage of opportunities in great years. It’s sadly ironic that so many people got into debt because they wanted the freedom to do whatever they wanted, not realizing they were actually giving away their freedom.

    • Laurie says:

      So true, Shannon! Love that. People absolutely do not realize what bondage debt is, often until they’re in too deep. It’s well worth it to sacrifice your wants for the short term in favor of that long-term freedom.

  • Very interesting!!! Glad we are locked in at 3.5% and paying down that debt!! 🙂

  • anna says:

    An increase in interest rates (and most likely an increase in housing prices) are what’s motivating us for sure to squirrel away as much money as possible to get our ‘forever’ house. That was a really interesting article, thanks for sharing Laurie!

  • Hey Laurie.

    Wow…I’m glad I don’t have any money ’cause all those fancy terms, QE, Trickle Down, Prime Rate, makes my head hurt!! 🙂

    That being said, this was an insightful post Laurie and one that I’m sure will benefit your readers!

    Take care and my best to all.


  • Looks like it’s time to work extra hard to get out of debt pronto! I actually think that if banks increased interest rates on loans and credit cards, fewer people would borrow. Banks in Russia will charge you anywhere between 30-50% interest on a credit card balance so people there don’t own a credit card, it costs a fortune to own one! Happy debt repayment journey in 2014, Laurie!! We can do it!! xo

  • E.M. says:

    I really hope things aren’t heading downward for 2015 already, but it is a timely kick in the butt for those of us still paying down balances. I am always glad I have an emergency fund just in case, and that we are planning on moving to a lower-cost-of-living area soon. Owning a home isn’t on our radar just yet, but hopefully interest rates will go back down when it is!

    • Laurie says:

      So true, E.M. So happy for you guys that you are still planning on moving, and that you’ve got a good e-fund in place. That will definitely help. Thanks for sharing your thoughts. 🙂

  • Debt BLAG says:

    Oh my. I hope that prevailing monetary policy doesn’t have this big an effect on my decisions to pay off debt or not 🙂

    As rates are positively correlated with production, using unemployment as a proxy, I think their increase is something to be happy about — it means I’m more likely to have a job… and I’d be much less able to pay off my debt without a job than with a slowing economy 🙂

  • If interest rates are rising on loans, I hope they start rising on my savings account!

  • As many of the other comments said, now is always the time to pay off debt. If you don’t have any, you are not held captive to whatever the government or credit card companies decide to do. Like the new design!

    • Laurie says:

      I agree, and I hope the predicted rising rates convince those that haven’t started their journey yet to start it today. Glad you like the design change, Kim. 🙂

  • While I don’t have debt now, I am seriously considering grad school which means I’ll be getting some in the future. Because I have a little more than a year before I’d go to grad school, it gives me some time to really up my savings so I have a nice little buffer to and can reduce the amount of money I have to take out. Plus, looking for all the fellowships and employment opps I can!

    • Laurie says:

      That’s awesome, Erin!! Smart move on ramping up your savings and minimizing your loans too – best of luck on your big decision!

  • Jim says:

    Happy 2014 Laurie, I totally dig the new look, great job!!

  • Hey Laurie, like the new blog design! My last chance to get out of debt was when I did the work to actually get out of debt. I’ll keep managing my personally economy in 2014 the best I can and hope that 2014-2015 are years of good fiscal change in our country.

  • Yay new design! That’s why I couldn’t get to your site yesterday. I like it! I think ANY year is the year to get out of debt! 🙂 I don’t know too much about the predictions of interest rates going up, but my goal is to never have to ever worry about that again. Fingers crossed!

    • Laurie says:

      Glad you like it! Yeah, we had to take things down for a bit to get it tweaked and up and running. You are lucky (i.e., because you did the hard work) that debt isn’t an issue for you any more. That will make any economy swings a lot less stressful.

  • Great post Laurie. I think that it’s a good idea to always approach a new year thinking that it is the year in which you need to get out of debt. Not to put on any pressure or anything 🙂

    • Laurie says:

      LOL, no problem, we’re placing so much pressure on ourselves (in a good way) that no one else’s pressure on us seems to matter much. 🙂 Actually, it kind of even motivates us more, so, thanks! 🙂

  • Nice new design Laurie! 2014 should be the year people get out of debt, when will they get so tired of it and finish it off.

  • celeste says:

    Wow! I hope 2014 isn’t the last year to get out of debt, I still have a long way to go!

    I found that once I got rid of cable life got less stressful because there are so many naysayers out there. It’s never to late but there’s not time like the present to get our acts together. Sadly, thre are a lot of folks still lovin’ their stuff and lovin’ buying stuff. And my hope for them is that they wake up and smell the cash…but it takes some people a little longer to face it than others, I know that just from living in my own home.

    Predicting the future is not something that makes me happy. How many times has the world supposed to have ended? Ugh…take it one day at a time and don’t worry about what the forecasters say….cause they’ve been wrong before.