How to get out of debt in 5 steps



Debt is accumulating faster than many of us think. For example, if you have a lot of high-interest credit card debt, you may feel like you will never be successful. Fortunately, you can pay off your debts faster if you do it right. Plus, you can save a significant amount of money while doing this. Here are five debt repayment strategies.

Key findings

  • Paying off your debt may seem like a daunting task, but it doesn’t have to be if you have a plan.
  • Knowing where your money is currently going is the first step. Then you can start cutting down on unnecessary expenses and using the free money to pay off your debt.
  • You will save money and pay off your debt faster if you start with high interest debt.
  • A debt consolidation loan can help lower the interest rate you pay on your debt.

1. Create a budget

If you don’t have a budget, you may not know if you are spending more than you earn. Budgeting, as boring as it sounds, can be a useful tool for managing your money and planning your future. You can use the software and budget applications like Mint, You Need a Budget, or PocketGuard to budget, but you can also create an effective budget with a notepad and pen.

First, write down how much money you get each month. Include income from your job and any other sources.

Then mark all of your ongoing fixed costs. Include rent or mortgage, utility bills, insurance premiums, minimum credit card payments, and groceries. See how much you usually spend on non-essential items like dinner at a restaurant or entertainment.

If you spend more than you earn, or if your budget doesn’t have enough breathing room, look for areas where you can cut your spending. For example:

  • Carbulka: If you are driving to work, see if there is a co-worker near you who would like to go for a swim in the car. Or create a profile on to find a carpool partner. By splitting your trip, you can save on gas and car maintenance.
  • Shop with shopping list: Cooking and eating at home is a great way to save money, but it’s wise to shop with a list – and stick to it – to avoid unnecessary purchases.
  • Reduce streaming services: If you pay for multiple streaming services, select one or two favorites and deselect the rest.
  • Switch to the new mobile phone tariff plan: If you have an expensive mobile phone plan, see if you can upgrade to a less expensive version from your current provider. Or check with different providers for a cheaper plan.

2. Increase your income

When it comes to freeing up money, you can cut corners. After creating a budget and eliminating some expenses, your next goal should be to increase your income. If a promotion or promotion in your full-time job is unlikely, look for ways in which your skills can earn you extra money on the side.

Also, consider changing your tax lien at work. If you receive your tax refund year after year, you may be holding on to too much money, which in the meantime may pay off your debts. Ask your employer about a new Form W-4 which you can fill to reduce retention and increase your hand-held salary. Otherwise, when you end up with your tax refund, reserve it for debt repayment.

3. Use a debt avalanche strategy

Once you’ve found extra money to pay off your debts, you need to decide how best to use it. The most effective tool for many is sometimes called debt avalanche strategy

Using the debt avalanche method, you list all of your existing debts, ordering them from one with the highest interest rate to the other with the lowest. By continuing to make the minimum payments on each account, you are putting extra money into the account with the highest interest rate.

When your debt with the highest interest rate is paid off, switch to the account with the next highest interest rate. Continue this process until all your debts are behind.

By deciding on the debt with the highest interest rate first, you will pay off your debts faster and save more money in interest over time.

4. Consider debt consolidation.

If you have high interest debt, debt consolidation can help speed up the payout. In debt consolidation, you take out a personal loan from a bank or other reputable lender and use it to pay off other debts. You will now only have one loan to manage and one monthly payment in the future.

Plus, if you have a good reputation – or a family member or friend with a good reputation who is willing sign for you – you could qualify for a debt consolidation loan with a lower interest rate than you paid on your previous debts. This will help you pay off debt faster and save money in the long run.

Investopedia publishes regularly updated listings best loans for debt consolidation


Paying off your debt not only saves you money on interest, but it can make it easier and cheaper to borrow money when you need it in the future, such as for a mortgage or car loan. This is because it lowers your loan utilization ratewhich is a key factor in calculating your credit rating.

5. Track your progress

Getting rid of debt doesn’t happen overnight, and it’s easy to lose motivation along the way. To stay focused, track your progress regularly, such as weekly or monthly. Keeping a spreadsheet or visual chart of your progress will remind you of what you have achieved and the goals you still want to achieve.


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