Updated date:

Digging Yourself Out of Debt: A 7-Step Strategy


You’re reading this because you’re carrying more debt than you can handle. Don’t worry; you’re not alone. The causes for financial troubles are as varied as the people who carry the debt – from those experiencing medical emergencies to those who took out education loans, all the way down to the lot that got lured to the traps of credit cards.

Sure, digging yourself out of debt is nowhere near being easy; however, in a few steps, we’re going to start getting rid of it.


Step 1: Work it out.

We all know it: the first step to solving any problem is recognizing there is one. In saying that, having a decent idea of how much is owed makes a perfect first move. Grab that pen and paper, turn on your laptop, and visit the website of every financial institution you owe money to. It pays to know the minimum payments for every account, so carefully take note of all balances – along with their interest rates.

Quick Question!

Step 2: Set your goals.

You’ve got a list – now let it sink in. It’s going to be a bit tough from here, sure, but by setting goals, you’re allowing yourself to break the hard stuff down to manageable chunks, which you can feel good about upon completion. Start by evaluating how much money you can put in to your monthly debt repayment. Then do a rough estimate of how long it will take you to get out of debt: divide your debt by monthly repayment, and you’re going to have a better understanding of how much longer you have to bear this burden.

From there, pay off balances. Start with the highest interest rate, and then work your way down. See to it that you make the minimum payment possible for every account – aside from the one that you’re trying to get rid of first, of course.

Step 3: Get snowballing.

So let’s say you’ve successfully paid off a debt. What’s happened, really, is you’ve freed up some money, which you can now use along with the minimum payment that’s being made on the next debt down your list. And once that debt is paid off, you just keep snowballing.


Step 4: Trade-in/ sell what you don’t need.

See that new-ish car of yours? You can totally reduce your total debt by trading that in for something less expensive. Get $20,000 for a trade-in, find a $10,000 car, and you end up with $10,000 on your hand – enough to help you pay off debt. And from there, you can opt to sell other items you know you don’t need.

The easiest way to do that is to assess what you need: grab a notebook and list every item that use over the week. It’s not going to be easy. Then again, all the crap that added to the debt problem has to go. Now isn’t the right time to have toys – have them when you’re debt-free.

Step 5: Work harder.

There’s nothing a bit more effort can’t fix. Work overtime, get a second job -- babysit, perhaps? Why? Simple: because more money means more debt repayment.

Step 6: Reward yourself.

Achieving goals, regardless of how big or small they are, is always a reason to celebrate – and don’t take this to mean that you should celebrate paying off $100 of your debt by spending hundreds of dollars on hosting a house party. Why don't you go buy yourself a good cup of coffee, instead?

Step 7: Dance away!

You’ve made it! You’ve managed to pay off all your debt by staying extra organized and extremely disciplined. And with that said, you earn the right to do the happy dance!

A debt's impact on your financial future is way bigger than you might realize. They can and, for sure, will continue to haunt you for years, especially if you don't get a handle on it now. Your best bet? Recognize the problem right upfront, set your ultimate goal, and take the necessary steps to get there.


Devika Primić from Dubrovnik, Croatia on January 30, 2014:

Awesome ways to get one out of debt. These tips are most helpful and well thought of.

Related Articles