You’ve decided to pay down debt and you are committed to getting it done. Good for you! That’s awesome. Now, the next step is creating your plan.
A debt payoff plan will keep you focused as well as motivated to achieve your goal.
Pay down debt with these 5 steps
1. Make a list of your debts
The first step is making a comprehensive list of all your debts. Be sure to write this down on paper or enter it into a spreadsheet or document. Include the balance, interest rate, and minimum monthly payment.
It will be much easier to create a plan once see your list of debts.
2. Put your debts in order
Put your debts in order of how you want to pay them off. The order is ultimately up to you. Some people choose to pay off the lowest debt first in order to build momentum. Others choose to pay off higher interest-rate debts first.
Either way is okay as long as you stick to paying one off at a time and only paying the minimum payment on the others. This will make the process faster.
3. Determine how much money you have available to pay down debt
Next, you want to determine how much extra you can pay toward your debts. To do this, you need to do a complete budget review and include debt paydown as one of your budget categories.
If you don’t know how to create a budget, check out this post for help.
4. Pay down debt one debt at a time
Pay down your debts one by one. If you try paying them all down at the same time it will actually take you longer. Once the first debt is paid, all of that expense can be allocated toward the next, and so on.
5. Monitor your progress
Keep checking in with how you are doing. If you like visuals, chart your progress to show your debt reduction. Whatever motivates you to keep going, do it.
There are also apps that can be used to help monitor your progress. I found this article that rates a few different apps for paying down debt.
Summary
That is pretty much it for creating a plan to pay down debt. It is not rocket science but it does take some thought and dedication. One motivator I found that helped me was to know that once all the debt was paid off, I would have much more money available each month to allocate elsewhere.
Thanks for reading!
Stay balanced,
Jill