How Can I Get Ahead on Paying Down My Debt?

Step 1: Assess your debt

Before tackling your debt, you need a clear picture of what you owe.

• List all debts. Include balances, interest rates and the minimum monthly payments for each account.
• Identify high-interest debt. Credit cards and payday loans typically have higher interest rates, which means they cost you more over time.
• Calculate your debt-to-income ratio. Divide your monthly debt payments by your monthly income. This gives you an idea of how much of your income is tied up in debt.

Step 2: Set clear goals

It’s easier to stay motivated when you have a target. Decide when you want to be debt-free and calculate how much you need to pay each month to meet that goal. Be sure to celebrate along your journey by breaking your debt into smaller chunks and rewarding yourself when you hit milestones, such as paying off a specific loan or reducing your balance by a certain percentage.

Step 3: Choose a debt-repayment strategy

Choose from one of these popular debt-repayment strategies:

1. The debt snowball method:

• Pay off your smallest debt first while making minimum payments on others.
• Once the smallest debt is paid, roll that payment into the next smallest debt.

This method builds momentum and motivation as you see quick wins.

2. The debt avalanche method:

• Focus on paying off the debt that has the highest interest rate first.
• Once that’s paid, move to the next highest.

This method saves more money on interest over time.

3. Balance transfers or consolidation: 

• Consider transferring high-interest credit card debt to a card that features a 0% introductory rate, or consolidating multiple debts into one loan with a lower interest rate.
• Be mindful of fees and ensure you can pay off the balance before the promotional period ends.

Step 4: Reduce expenses

Every extra dollar saved can go toward paying down debt. Trim your budget by looking for ways to cut back on your expenses. You can cancel subscriptions you don’t use, eat out less often and shop smarter by using coupons and shopping sales.

For a more drastic change, you can temporarily downsize. Consider moving to a smaller home, selling a second car or cutting back on luxury expenses until your debt is under control.

Apps like YNAB can help you track spending and find areas to save.

Step 5: Boost your income

Bring in extra cash to help you meet your debt-kicking goals with a side gig, like freelancing, ride-share driving or selling handmade goods. You can also sell unused items that you have lying around the house online or at a garage sale for extra cash. Finally, if you’re due for a raise, this can be the perfect time to negotiate with your employer for one.

Step 6: Automate and stay consistent

Make sure you never forget to meet your monthly debt payment goals. To ensure this doesn’t happen, set up automatic monthly payments, which will help you avoid late fees and additional interest. You can also set up biweekly payments so that, instead of one monthly payment, you’ll pay every two weeks. This means you’ll be making one extra payment each year, helping you pay off debt a bit quicker. Another great trick is to round up your payments. If your monthly payment is $275, round it up to $300. Those small amounts add up over time.

Step 7: Avoid new debt

As you work toward paying down your debt, be sure to avoid taking on new debts. Stick to cash or debit, and be sure you have a robust emergency fund you can rely on in case of unexpected expenses. Finally, if the temptation is too strong, consider freezing your credit cards or locking them in a safe place until you’re debt-free.

Step 8: Monitor your progress

Don’t forget to keep track of your debt-payment progress. You can use a debt-tracking app or a simple spreadsheet to see how much you’ve paid off and how much remains. It’s also a good idea to regularly review your credit report for accuracy and signs of fraud.

Paying down debt takes time, effort and discipline, but the rewards are worth it. Use the tips here to get ahead on paying down your debt.