Debt can feel heavy.
Sometimes it comes from choices we wish we had made differently. But sometimes it comes from simply living life—a car repair, medical expenses, education, a period without enough income, a necessary purchase or an emergency we weren't financially prepared for.
Whatever brought you here, looking at a large balance and thinking about how long it might take to pay it off can be overwhelming.
And this is where people sometimes make another mistake.
They decide that until the debt is gone, everything else has to stop.
No restaurants. No vacations. No entertainment. No unnecessary purchases. Every available dollar must go toward debt.
For some people, an aggressive plan may work.
For many others, it isn't realistic.
You still need groceries. You still need transportation. You still have housing expenses. Birthdays still happen. Your children still need things. Your car still needs maintenance.
And occasionally, you need to enjoy your life.
Paying off debt is important, but depending on how much you owe, it could take years. Creating a plan that makes you miserable for years may not be a plan you can realistically maintain.
The goal should be to reduce debt while continuing to build a financially healthier life.
Debt can feel even more stressful when you don't know the complete picture.
It may be tempting to avoid looking at balances, especially when money is already causing anxiety. But knowing the numbers gives you something extremely important:
A starting point.
Make a list of every debt you have.
For each one, write down:
- Total balance
- Interest rate
- Minimum monthly payment
- Payment due date
Include credit cards, personal loans, auto loans, student loans and any other money you owe.
Then calculate the total.
You may not like the number.
That's okay.
The number already existed before you wrote it down. Seeing it didn't make your financial situation worse.
Now you know where you're starting, and you can begin deciding what to do next.
Not all debt costs the same amount.
A balance with a high interest rate can become especially expensive because interest continues adding to what you owe.
That's why knowing only your balances isn't enough.
Look at the interest rates too.
When comparing debts and making the same total payments, prioritizing higher-interest debt generally reduces the amount of interest you pay over time.
Seeing the balance, interest rate and minimum payment together gives you a much clearer picture of which debts are costing you the most.
Before deciding where to put extra money, make sure the required payments on your debts are included in your monthly budget.
Missing payments can create additional problems, including late fees and potential damage to your credit.
Your first goal should be keeping your accounts current whenever possible.
Then, if your budget gives you additional money for debt, you can decide where that extra payment should go.
There are different ways to prioritize debt, and there isn't one approach that motivates everyone.
One strategy is to focus extra payments on the debt with the highest interest rate while continuing to make minimum payments on everything else.
This generally reduces the amount of interest you pay over time.
Another strategy is to focus on the smallest balance first.
Paying off one smaller debt can give you an early victory. Once that debt is gone, you can take the money you were paying toward it and apply it to the next one.
The highest-interest approach may save more money.
The smallest-balance approach may provide motivation by allowing you to see an entire debt disappear sooner.
There is value in both.
The best strategy may be the one you can actually continue.
This may sound strange in an article about paying off debt, but there is a reason.
Imagine putting every extra dollar toward your credit card.
Then your car needs a $500 repair.
You have no savings because everything went toward the credit card.
So how do you pay for the repair?
You put $500 back on the credit card.
Now you're paying off the same debt again.
This is why debt reduction and emergency savings often need to work together.
You don't necessarily need a huge emergency fund before you begin paying debt more aggressively. But having some money available for unexpected expenses can help prevent every emergency from becoming new debt.
Paying down debt is progress.
Creating some protection against going back into debt is progress too.
Paying off debt shouldn't mean skipping necessary groceries to make an extra credit-card payment.
Your household still needs:
- Housing
- Food
- Utilities
- Transportation
- Insurance
- Healthcare
- Other essential expenses
Those expenses belong in your budget.
Debt repayment has to exist alongside them.
If paying extra toward debt means you can't consistently cover your basic needs, the plan isn't sustainable.
The goal isn't to create another financial problem while trying to solve the first one.
This is an important part of creating a realistic financial plan.
If paying off your debt will take three years, does that mean you're not allowed to enjoy anything for three years?
For most people, that isn't realistic.
You can work toward becoming debt-free and still occasionally go to dinner.
You can celebrate a birthday.
You can buy something you enjoy.
You can take your children somewhere fun.
You can have hobbies.
The difference is that these things become intentional expenses instead of uncontrolled spending.
Maybe your budget allows $100 each month for entertainment.
Once it's spent, it's spent.
You enjoyed yourself, stayed within the amount you planned and continued making progress on your debt.
Financial responsibility shouldn't require putting your entire life on hold.
You are trying to build a healthier financial life—not wait for your life to begin after the debt is gone.
Paying $300 toward a credit card while adding another $250 in purchases doesn't create much progress.
As you begin paying down debt, look at what caused the balances to grow in the first place.
If the debt came from an unexpected emergency, building savings may help prevent that from happening again.
If it came from regularly spending beyond your income, your monthly budget may need adjusting.
If your income isn't enough to cover your essential expenses, the problem may be larger than spending habits alone.
Understanding why the debt exists can be just as important as paying it off.
Otherwise, you may reduce the balance only to watch it grow again.
And understanding why the debt exists isn't about blaming yourself.
It's about figuring out what needs to change so that the progress you're making can last.
Not every month will look the same.
Sometimes you may receive:
- A tax refund
- A bonus
- Overtime
- A gift
- Money from selling something
- An extra paycheck in a particular month
You don't necessarily have to put every dollar toward debt.
You might decide to divide it.
Maybe part goes toward debt.
Part goes into emergency savings.
And perhaps a small portion goes toward something you want.
You're still making progress.
The difference is that you're making a conscious decision about what you want that extra money to accomplish.
When the total amount of debt is large, focusing only on the final number can make it feel like nothing is changing.
So pay attention to the smaller victories too.
Maybe your credit-card balance went from $8,000 to $7,500.
That's $500 of progress.
Maybe you completely paid off one small account.
That's progress.
Maybe this is the first month you didn't add anything new to your credit cards.
That's progress too.
Consider recording your balances once a month so you can actually see them moving downward.
You don't need to check them every day.
Debt usually disappears slowly.
Give yourself the opportunity to see how far you've come instead of only looking at how far you still have to go.
Your first debt-payoff strategy doesn't have to be your final one.
Life changes.
Income changes.
Expenses change.
Emergencies happen.
If you planned to pay an extra $400 every month but discover that $400 leaves your budget constantly short, change it.
Maybe $250 is sustainable.
Paying $250 consistently is better than paying $400 for two months, becoming overwhelmed and abandoning the plan entirely.
Changing the plan doesn't mean you're giving up on the goal.
It means you're trying to create a plan that works in your actual life.
A realistic plan you can follow is more valuable than a perfect plan you cannot maintain.
Of course, watching a debt balance finally reach zero is a wonderful accomplishment.
But something else has been happening along the way.
You've learned where your money goes.
You've learned how to budget.
You've started preparing for emergencies.
You've learned how interest affects your finances.
You've become more intentional about spending.
And you've proven that financial progress doesn't require changing everything overnight.
Those habits don't disappear when the last balance reaches zero.
They're part of what helps you decide what happens with your money next.
Debt may have been part of your financial story.
It doesn't have to be the rest of it.
If you're ready to begin, start by writing down every debt you have, including the balance, interest rate and minimum payment.
Then look at your monthly budget and decide what you can realistically afford to put toward debt without neglecting your essential expenses, abandoning emergency savings or making your life impossible to enjoy.
You can use the free Chapter & Changes debt-payoff tools to organize your balances, compare repayment approaches and see how additional payments may affect your progress.
If you haven't created a monthly budget yet, start with our free Chapter & Changes Budget Planner. Understanding what is coming in and going out will help you determine how much you can realistically put toward debt each month.
And if you'd rather have help organizing everything, Chapter & Changes also offers customized budget creation through Help Me Create It.
You provide information about your income, regular expenses, debts and financial priorities, and we can help organize that information into a personalized budget that considers your everyday expenses, savings goals and debt payments.
The free tools are there if you want to build the plan yourself.
The customized option is there if you'd like help organizing it.
Either way, you don't have to fix everything today.
And you don't have to stop living until the debt disappears.
You just need to know where you're starting, decide where you want to go and keep moving in that direction.
Chapter & Changes provides budgeting, savings and debt-organization tools and assistance for educational and informational purposes. Customized budgets are intended to help organize the financial information you provide and are not individualized financial, investment, tax or legal advice.