Debt of any kind can seem like a weight tied to your ankle.

When you try and move forward, it slows you down. Sometimes you’re too tired from carrying it around to move at all—at least, that’s how people without a debt plan can feel. 

Debt is a burden on our emotional and financial lives.

We feel stressed about carrying debt year-to-year, and we also watch those debt payments and interest payments get deducted from our account every single month. How do you get out of debt, and how do you keep debt from getting in the way of your other financial goals?

Taking Control of Your Finances

You’re not a bad person, or bad with money, for having debt. It might take time and perseverance to free yourself from debt, but sometimes debt is a means to an end. 

Few of us have $300,000 in our bank accounts to buy a house outright, so we might take on a mortgage as a path to homeownership. 

Since new investors may have substantial loan debt (be it student loans, credit cards, or a mortgage), it’s easy to be daunted by the thought of paying off debt AND investing AND building your cash emergency fund. But debt doesn’t have to be a barrier to financial security. 

Strategizing How to Pay Off Your Debt 

Does having debt mean you can’t invest? Is it better to save or to pay off debt? Where does the money to pay off debt come from?

Luckily, a little financial organization goes a long way toward answering these questions. Here’s how to get out of debt:

Break out a spreadsheet and list all of your debts.

Include total balances, interest rates, and what kind of debt it is (credit cards vs. student loans).

It might be stressful to look at all your numbers in one place if you have a lot of debt, but knowing your starting point allows you to create a path forward.

This spreadsheet is your road map for how to pay off your debt.

Make at least the minimum payments for all your debts on time.

Making on-time minimum payments keeps your credit score high and keeps you in good standing with all your lenders.

You should try not to default on any of your debts, and making at least the minimum payments keeps that from happening.

Free up money to make bigger payments by examining your spending.

Putting more money toward debt means earning more money, or redirecting some of your spending.

Here’s where your budget comes in handy—you can see what spending areas you can pull back in to send more cash toward debt. You can also monitor your spending, so that you don’t accidentally go further into debt by overspending.

Focus on one debt at a time by using a strategy.

Concentrating all your extra payments on one loan at a time is a good way to speed up the debt payoff process.

Rather than diffuse your extra cash across several loans, concentrating it all on one can mean more progress in less time. 

Focusing on your highest interest debt first is called the avalanche method. Mathematically, you’ll save the most money by using this method, because you’ll pay less in interest over time. 

Focusing on your lowest balance debt is called the snowball method. This is often described as a motivating path, since you can have a few wins right away.

It’s easier to pay off a $2,000 student loan than a $10,000 credit card bill. However, you could pay more in interest over time with this method.

Build your cash emergency fund as you go.

Watching your debt go down month after month, and finding new ways to manage your finances so you can make bigger payments can be kind of addicting!

You just want to make sure that you build a cash emergency fund for yourself as well. If your car breaks down on the highway, you don’t want to have to put the tow truck on the credit card you’re trying to pay off.

Aim for a starting buffer of $1,000 in your emergency fund, and then build to one month’s living expenses.

Say you have an extra $150 a month in cash to fuel your debt payoff. You can put $100 toward debt, and $50 toward your emergency fund until you hit $1,000.

From there you can re-evaluate your budget and where your current debt totals stand.

Surround yourself with motivation.

Using a debt payoff calculator like this one can help you understand your timeline.

Having a debt payoff date can help you stay consistent with your payments.

You can also set goals for what you’ll do with all your money when it’s not going to debt. A trip to Costa Rica? A new couch? Having something tangible to look forward to can keep you motivated. 

Debt is not a prison sentence. With a clear plan and consistent effort, you’ll begin to learn how to get out of debt and build financial stability.

Put your money to work.

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