Here’s how to reduce your debt-to-income ratio to level up your lifestyle

For most Americans, debt is a regular part of life — 30 million Americans carry some type of credit card, student loan, mortgage, or other consumer debt.

And while debt is sometimes unavoidable, it can also hold you back financially.

Even if you make on-time payments for your debt every month, if you only pay the minimum, you might find yourself paying thousands to hundreds of thousands in interest.

Paying a little more each month can significantly improve your financial health and reduce your debt-to-income ratio (or DTI)—a proportion of your income that goes to debt payments.

Having too high of a DTI can prevent you from getting approved for loans and mortgages, or qualify you for significantly higher rates. And the higher your DTI, the harder it may be for you to pay down your debt.

If you’re struggling to unbury yourself from debt, here are five tricks to lower your debt-to-income ratio and work towards becoming debt-free.

1. Reduce your spending

It might not be the most glamorous way to solve your debt problems, but directing some of your spending toward debt payments is the quickest way to tackle a high DTI.

You’ll want to start by analyzing your spending. You can do this by reviewing your bank statement or using a budget app like You Need a Budget or Mint.

Categorize your expenses into essentials, non-essentials, savings, and debt payments, and dig through your expenses with a fine-tooth comb.

Do you really need to pay for Netflix, Hulu, and Disney+? Is there a more affordable cell phone plan you could switch to? Be realistic but firm when you look at non-essential spending.

Two lattes a day may not seem like much at the time, but if you’re dropping $15 a day, this adds up to $450 per month. How far would that amount go towards reducing your debt?

Some categories you may consider cutting down on include restaurants, travel, clothing, and entertainment.

The goal isn’t to cut back completely—we all need flex room for non-essentials—but to align your spending with your values. If travel fuels you, consider cutting back on clothing or entertainment instead.

Don’t stop saving money while paying down debt, either—especially if you’re building an emergency fund. This savings may be a lifeboat if you find yourself without a job or facing an expected expense.

2. Pay more than the minimum amount due

If you have credit card debt or a personal loan, paying more than the amount due can help you get out of debt faster and lower your debt-to-income ratio.

This is particularly important for credit card debt since credit cards charge compound interest rather than simple interest.

Compound interest means you’ll accrue interest on your full balance rather than just the principal—the amount you borrowed.

So, if you have a $5,000 balance and accrue $1,000 in interest, at the next billing cycle, you’ll start accruing interest on the new balance of $6,000.

This is why getting out of credit card debt is so expensive.

Even if you’re making regular payments, if you can’t pay down enough of the balance, the interest charges can significantly undercut your progress.

Paying down more on personal loans, auto loans, student loans, and even mortgages can also help you get out of debt faster.

An extra $100 here or there or an extra payment a year can stretch a long way. Just make sure the lender lets you pay off your debt early and doesn’t charge a prepayment fee.

3. Follow a debt repayment strategy

Need a little more guidance to knock out your debt? There are many different debt repayment strategies that can add some structure to your payment routine.

Two of the most popular ones are the debt avalanche and the debt snowball strategy. While they work differently, they’ll both help you improve your debt-to-income ratio.

The debt avalanche strategy is a method that can help you save the most in interest.

You’ll start off by making the minimum payment on all of your debts and paying more than the minimum toward the debt with the highest annual percentage rate (APR).

Once that debt is paid off, roll those funds towards the balance with the next highest APR and so on.

While the avalanche method can save you the most in the long run, it can take some time to see progress. If you need more motivation, the debt snowball method might work better for you.

Like the avalanche method, you’ll make minimum monthly payments on all your debts, but you put more money towards the debt with the smallest balance.

Once that’s paid off, move on to the next smallest credit account. This method offers small wins along the way, and may make it easier for you to stay motivated.

4. Grow your income

Just as you can decrease your income, you can also grow it—and there are many different ways to approach this.

If you work, consider your primary career. Do some research to determine average salaries in your area to find out if you’re being underpaid. If you are, consider brushing off your resume and applying for new, higher-paying opportunities.

You can also talk to your employer about advancing in your current role or consider a managerial position with more responsibility and higher pay.

Getting a raise in your primary job isn’t a guarantee, though.

If you’re up for it, a side hustle like driving for Uber or offering design services online can help you earn some extra money. Work when you can and put this additional income directly towards your debt.

Just be sure to deduct taxes from your earnings if you’re not paid as a W-2 employee.

Working isn’t the only way to boost your income. You can also sell furniture, clothing, electronics, or other items you no longer need on Facebook Marketplace, Poshmark, Etsy, and other online sites.

5. Talk to your lenders

Sometimes you can negotiate your APR or get a temporary payment reprieve from your lenders.

If you’re experiencing financial distress, lenders might pause your payments, reduce the amount due, or lower your interest rate—for a period of time.

This can help you get caught up and lower your debt-to-income ratio without incurring as much in interest charges.

While this tip doesn’t always pan out, it never hurts to ask.