Raise your hand if you have debt. Yup, me too. According to Market Watch, Americans have $12.73 trillion worth of household debt as of March 2017, topping the 2008 peak of $12.68 trillion! About $1 trillion of that is in credit cards alone. How much of that is YOUR share?

We all know that debt holds us back, but what can we actually do about it? The first thing you should do is acknowledge it. Add it up and get a total. I like to use Unbury Me to visualize how different steps will affect my payoff date. Then, when I need to make a payment, I use TransferWise to send money back to my US account.

Debt Management Abroad

Moving abroad with no debt is ideal, but for many of us it isn’t realistic. If you can pay off all of your debts before moving, you will have less required monthly expenses. However, you should not use up all of your savings in order to achieve this, as you will need a starter budget to help yourself get set up in your new location.

When moving abroad, you can’t just focus on your total debt. You need to break it down into individual loans and monthly payments. Many personal finance experts, such as Dave Ramsey and Suzy Orman will recommend that you eliminate debt by lowest debt first (Dave) or highest interest debt first (Suzy). I respect both of their opinions.

However, for people moving abroad, the most important thing is minimizing monthly expenses. When I moved to Spain, I had $262.27 in minimum monthly payments. That’s a lot when your steady income is 700 euros a month. Now I’m down to about $42 a month in required debt repayment. How did I do that? Let’s take a look:

Student Loan Debt

According to Inc, 63% of Millennials owe $10,000 or more in student debt. If you’ve got the spare cash around to kill your student loan debt before moving abroad, fantastic. For the rest of us, we’re going to need to minimize our monthly payments. If you have federal student loans, the best way to do this is with their Income Based Repayment plan (IBR).

If you qualify, IBR will adjust your payment to your income. My minimum monthly payment is $0, and it still qualifies as payments towards eventual loan forgiveness. This doesn’t mean that you can’t still make payments on this debt. Many people like to keep paying at least the interest so their balance doesn’t increase while they are living abroad. The benefit of the $0 monthly payment in this case is that you can choose which loans your payments go towards, and may be able to pay off some of your smaller loans entirely.

If you are leaving a high paying job, this may not be an available option for you the first year, but after a year as an Auxiliar de Conversacion, you would definitely qualify to use this to do a second year in the program.

This is also not an option if your loans aren’t federal. What I would do in either of these cases is call my loan provider and try to negotiate a lower monthly payment. If all else fails, you may be able to consolidate your loans so that the total monthly payment for all student loans is lower.

Car Debt

When I decided to move to Spain, I wasn’t sure if I was going to stay long term. I’ve since decided that I am. But I’ve still got a car back home, and when I got here, it carried about $3000 worth of debt. My first recommendation is that if you know you will spend more than one year abroad, sell the car. I now have a friend back home trying to sell it for me, but it would have been better to sell it before 2 years of depreciation and all of those payments.

My car payment was $182.27. That’s fantastic for a car payment, but not when you’re making 700 euros a month. Luckily that starter budget was available for me after I got my first payment from the Spanish government in November of 2015. I was able to draw from that savings to make my minimum payments until I got my tax refund. The starter budget, the tax refund, and a bit of side hustle allowed me to pay off that car in December of 2016.

I eliminated this debt first, before either of the credit cards, because, for me, cutting a $182.27 payment was worth waiting on the other two. What good is saving $30 a month when you’ve still got to pay over $200 in other expenses? You barely feel the difference. Dropping this payment took me from $262.27 required monthly debt payments down to $80.

That is precisely why I recommend selling the car. I arrived in September of 2015 and wasn’t able to pay it off for 15 months. Buy yourself the peace of mind and eliminate this debt before you come.

Credit Card Debt

Do you have more than one credit card? A lot of people do. So how should you manage the payments while living abroad? This is what I recommend:

When I first arrived in Spain I had two credit card balances: one for $2400 at 15% and one for $800 at 0%. I paid off the $800 card first. I didn’t do this because I’m a huge Dave Ramsey fan. I did it to minimize my monthly expenses.

The $2400 card had a minimum payment of $50 a month. The $800 card had a minimum payment of $30 a month. After eliminating my car debt, the quickest way to lowering my minimum payments was through that $800  card. Though Suzy Orman might be sad about all that free interest I left on the table, I was happy to lose a $30 monthly payment. Dave Ramsey would tell me to roll it into my other card, and sometimes I do. But the most important thing to me is having lower monthly expenses.

On a low income living abroad, it’s important to have a little security, and $50 in minimum payments a month is a lot easier to manage than $80. I’ve since paid down the higher card and now have a monthly minimum payment of $42.

Debt Roundup

In the past, I have talked about the importance of keeping your living expenses low. I’ve recommended that you keep your core expenses withing 50% of your regular income. This is an important part of managing your debt abroad. How? Let’s take a look.

My core living expenses are 341 euros a month.

My original required debt payments were $262.27 a month, or  231.64 euros.

Total: 572.64 euros. That leaves about 127 euros a month for everything else. It’s possible to live off of this, but leaves little room for travel or savings. Most people will look for side jobs to help increase this amount, and that’s OK. The important thing is that you don’t NEED to in order to survive. That really takes off a lot of pressure.

After eliminating most of my monthly debt payments, I’m now down to about 378 euros a month. That leaves me 322 euros a month, before even accounting for any extra income.

Killing debt improves your life, but you need to choose a plan that works best for your own circumstances.

What are some ways you’ve eliminated the pressure of debt?