How To Start To Pay Off Debt

One of the most difficult things to deal with is debt. It can be very scary, overwhelming and seem impossible to deal with. But, there are so many things you can do to help you to pay off debt. Apart from things like starting to meal plan, making money on the side and starting some passive income streams, there are things you can do to start to pay off debt.

 

Before starting to come up with a plan to pay off debt, you need to make sure you have a budget in place. A budget doesn’t have to be set in stone but it gives you a starting point. Knowing what income is coming in and what you think is going out is a good point. If, when you do a budget, your outgoings are much more than your income, then it gives you a start point.

Firstly, you need to stop all borrowing. This might seem like the first scary thing but it’s the most important. If you are serious about paying off your debt and becoming debt free, then the borrowing has to stop in the first place. If you are working hard to clear debt but continue to use a credit card then you will end up going round in circles! Going cold turkey with the overspending might be a shock but it will be worth it. It will help you make a plan to pay off debt.

 

Secondly, you need to add up all of your debts. Preferably with the APR (% interest rates) included. If you don’t know these, then have a look at any statements or online documents you might have. It is important to know these, as this can make a real difference to the amount of money you will actually pay back. Once you have a list of all of your debts – and be honest – then you have a complete picture of your financial habits and the first stepping stone to start to pay off debt. My budget planner has a page to track all debts and repayments, which might be a good place to start.

 

The next step is to pick a debt repayment strategy. There are two to pick from really; either the snowball method or the avalanche method.

The snowball method of paying off debt is where you pay minim payments on all of your debts and then any spare money goes on paying the smallest debt off first. Once the smallest debt is paid off, you then move onto the next one, using the money spare plus the extra that has come from paying off one of the debts. This continues until you are left with the biggest last. This is because you aim to pay off the smallest first, going to the largest so the snowball gets bigger over time; your debt repayments will be bigger at the end as you are only paying one debt off, as apposed to multiple.

 

The debt avalanche method is where you pay the minimum payments on all of them and then any spare money goes on paying the debt with the biggest interest rate off first. Using the debt avalanche method means that you will pay less in interest overall, but the progress might seem to take longer. But, if you pay off the biggest one first, then you have more money to throw at the next biggest. This can be good but it is the slower method. The snowball method is much quicker to begin with, so might be better in terms of motivation.

 

The final part so that you can start to pay off debt is to not give up. And this is perhaps the most important point! Often, the journey can be overwhelming and stressful but the best tip is to take it a day at a time. Lots of the debt free community over on Instagram call this gazelle intense. Which means that you focus on this and nothing else! In fact, the debt free community over on instagram can be very inspiring and motivating, so if you’re not over there then I suggest you join up ASAP : )

 

So there you go. Four stages on how to start to pay off debt. If you ever want to email for some support, or get in touch over social media, then please do. I am more than happy to help and give support 🙂

 

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