How to Pay Off Any Kind of Debt in 12 Steps

Updated 09/07/17
how to pay off debt
Christopher Patey for MyDomaine

From student debt to credit card debt, every manner of debt is zero fun. You don’t know how it happened (or maybe you do), but suddenly it feels like you’re drowning in it. Don’t get discouraged, and don’t write it off as a hopeless affair. Paying off your debt is absolutely within reach if you follow a few basic steps and get started now.

Take a deep breath, muster up an attitude of gratitude, and learn to love your starting point. Budgeting doesn’t have to hurt. By getting a handle on the everyday things we spend too much money on, you’ll already be saving big. The most important thing is establishing a healthy savings routine and mastering the art of consistency. Think of this as a workout plan for your bank account.

To get the wheels of change in motion and put you well on your way to financial stability, read on—you’ve totally got this.

First and foremost, find out how much you owe. Do this by calling your bank, sorting through mail slips, going online, and parsing through the numbers. Once you know the damage, set your plan of action in motion.

An undeniable reality of debt is that it will not go away—it will only get worse over time. But because debt can feel abstract, it might be tempting to ignore it and put it off for a time when you feel more “ready” to turn it around. There is no better time than right now to start paying off your debt, and that’s the truth.

Establishing (and sticking to!) a budget is key to Personal Finance 101. First, take stock of your income—and output. Look closely at and keep track of what you are spending and where (there are a ton of great mobile apps for that). From this, calculate how much money you can and should be set aside for paying off your debts.

Interest on debt accumulates over time, so if possible, pay off loans and credit cards with the highest interest rates first so that your debt doesn’t snowball. If you feel intimidated by this task, try an alternate tactic of paying off your debts in ascending order (i.e., the smallest ones first), using the positive momentum of accomplishment to propel you toward paying off larger, more intimidating bills.

When planning your course of action, allot money for your minimum payments. However, paying only the minimum required each month will not help you pay off debt in a timely fashion (and it also plays into the hands of banks’ interests). The longer it takes you to pay off your debt, the more interest it will accrue and the more you will be paying in the long run. Pay as much as you can possibly manage each and every month. Double your minimum payment whenever possible.

After you’ve determined how much you can pay each month, automate your payments. Almost all banks offer this service. This will ensure you never forget and also make saying goodbye to your cash a little easier.

It may sound old-school, but going cash-only is the most dependable, concrete way to track your spending. There is something dangerously effortless—and abstract—about paying for things with a credit card, and it’s a reality that leaves many of us spending even when we shouldn’t be. To get on the cash-only track, leave your credit cards out of your wallet and consider deleting any stored credit card information from websites you frequent.

Expecting a holiday bonus, tax return, or birthday gift? Any sum of unexpected cash should go straight toward your debt. Resist the temptation to spend it on something frivolous. We promise it’ll be worth it when your debt is all paid off.

It’s an inarguable truth that many people get into debt by living outside of their means. To get on the right path, consider living not just at but below what you the numbers tell you you can afford. Take a hard look at your monthly expenditures. Assess where you might be able to cut back. Is anything a luxury rather than a necessity? For example, do you need that expensive cable package, or can you scale back a bit? Can you bring a lunch to work rather than order takeout every day? Can you move into a more affordable apartment or get a roommate?

Can you trade in your car? Paying off your debt doesn’t mean you need to live a miserable antisocial life, but if you feel you can survive without something, it might be worth giving up if it aids your financial health in the long run.

If you can swing it, take on a side hustle or two. (Anything that allows for tips and flexible hours is great here. Babysitting or nanny positions, for example, can be very lucrative in major cities and often accommodate a full-time job.) Rent out your apartment on Airbnb and crash with a generous friend for a week. Look around your apartment for any items you neither use nor need. Are there things you can sell? If so, to Craigslist or eBay with them! Every bit helps.

Let the hardship departments at your credit card companies in on your situation. It’s possible you’ll be able to renegotiate the terms of your repayment schedule, lower your interest rate, get fees waived—all in the interest of keeping you from declaring bankruptcy. Also, credit counseling will put you in touch with a professional, should you need some serious insider advice.

Paying off debt is hard work, there’s no doubt about it. Giving up things you enjoy can be depressing. As you chip away at your debt and reach your goals, allow yourself some within-reason rewards. A dinner out with friends is worth it if it gives you the energy to keep going.

Scroll to get a look at two affordable basics that will make paying off your debt a little more enjoyable.

Do you have any tips for paying off debt? Share with us in the comments below.

Dave Ramsey The Total Money Makeover $25 $15
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Simeon Lindstrom The Minimalist Budget $19
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This practical guide to budgeting offers easy hacks to staying on track.

Tony Robbins Money: Master the Game $18 $14
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Download Tony Robbins's seven steps to financial freedom, and take your budget tips on the go with you.

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This post was originally published on June 12, 2015, and has since been updated.

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