Too Much Debt? 5 Steps To Pay Off Your Debt

I still remember the first day of class at college.

The professor walks into the classroom and hands you a piece of paper called a syllabus.  In that paper is all of the work you will complete over a four month period.  However, you automatically begin to feel overwhelmed.  How, you ask yourself, am I going to finish all of this?

In my case, I would total up all of the number of pages that needed to be read in a semester. I would then take that number and divide it by the number of days in the semester.  Suddenly, reading 15 pages per day seems a lot more manageable than reading four books.

We can learn an important lesson for debt reduction from those early school days. Looking ahead to everything that needs to be accomplished over the next four months is overwhelming.  However, if you could break down your work into small manageable tasks, then suddenly everything seems less overwhelming.

The same is true of debt.

A person with credit card debt problems just sees a huge insurmountable pile of debt.  Opening the mail and reviewing statements only makes them want to crawl up into a tighter and tighter ball.  Your natural reaction will be to freeze up; to be paralyzed by inertia.  But, in order to get out of debt, you must take action.  Don’t try and tackle everything in one day, but break everything down into small manageable tasks.

5 Steps to Paying Off Debts

Money_TrapStep #1: Make a list of all of your debts.

This will be an overwhelming, and likely depressing, activity.  You will look the ugly monster straight in the face.  However, the work of doing something about your debt is much more rewarding than the paralyzing feeling of doing nothing.

Step #2: Categorize your debts.

At this point, you need to start to put your debts into different groups.  Though the groups may change, you could put each debt in one of the following categories: current debts, delinquent debts, and high interest debts.

Step #3: Prioritize your debts.

If you had $500 in your pocket, which debt would you pay off?  That debt would be your first priority.  When you make your list, ignore all your delinquent debts and try to keep current on debts that are already current.  You need to find one debt that will receive extra attention.

The three most common ways to prioritize your list include:

  1. Make your number one priority the debt that has the lowest balance.  Focus on getting small wins and then snowballing your money towards the next payment.  This is typically called the debt snowball method.  If you like the debt snowball method, you should set up your own debt snowball spreadsheet to give some structure to your plan.
  2. Set your priority list based on the interest rate.  Start paying on debts with the highest interest rates.
  3. Put the debt you hate the most at the top of your list.  In this way, as you pay off the debt, you get a maximum emotional return.  That emotion then becomes fuel to finish off the remaining debts.

Step #4: Assess your situation.

Now that you have one debt to focus on, you can look at the big picture.  With your current income, is paying off this debt in this way feasible?  If you could make a budget would you be able to find some money to apply towards the debt?  If the answer is yes, then you now have a game plan.  However, if the numbers still don’t work, you might need to consider getting a second job or possibly you may even consider debt counseling.

Step #5: Look ahead.

In The 7 Habits of Highly Effective People, Steven Covey encourages people to begin with the end in mind.  Once you’ve taken a step back and put together some small manageable tasks, you can now have a light at the end of the tunnel.  Take your current plan for paying off the debt and ask yourself, what if I did this over 12 months – what would that do to my debt? You should now be able to project how many months it will be until you pay off your debts.  While that number may seem overwhelming, the truth is you will probably pay it off faster.  Also, with a fixed date in the future, you can muster up the strength to keep moving forward on a daily basis.

What tips do you have for people who are trying to pay off large sums of debt?

This guest post is by Craig Ford.  Craig, a freelance writer and missionary blogs at Money Help For Christians.
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Published or updated March 16, 2013.


  1. I love the tip – “Begin with the end in mind”

    The military does this to but they call it “backwards planning”. If you have an event or goal such as getting out of debt in 12 months, backwards plan the steps you need to take to get to that end goal. It’s a great tool.

  2. Try working on the debts with the highest interest rates. Once you have a plan you can attack it.

  3. If you’re in debt because of your spending habits, then work on developing better money management skills.

    A few tips I’d add for paying off the debt are to track your progress and celebrate your successes along the way.

    • Yes, accurate tracking is important to make sure your overall progress is happening (rather than fixing one area and making another worse).

  4. The best way to cope with debt is to stay calm and spend some time thinking about how you are going to make the situation better. It takes a long time to get out of debt and you should spend a good amount of time realizing what your situation is and thinking about the best plan of action to take.
    Stay Well Stay Happy

  5. It is so important to prioritize your debts so you can stay focused on your goals. I also like the idea of working backwards and making projections!

  6. Mr L Lambert says:

    You have no idea how hard it is to actually run an initiative to help people become debt free, because everybody out there seems to like falling for the same traps over and over again.

    I have developed a grant scheme which allows people across the globe to apply for a none-repayable lump sum to pay off their creditors. Rather than asking the applicant, who is struggling with their debt, to pay their debts with their own money (which they don’t have). I pay the agreed amount to their creditors from privately sourced funds. As the applicant will have to respond to marketing correspondence before the funds are issued, this service can be provided cost free to the applicant. The money to provide this service is raised from private sector companies, who are more than happy to hand over money to market their products and services.

    However, people insist on applying for high interest loans and paying application fees for a service which they will never receive. OR entering in to debt management agreements were they will pay fees on top of what they already need to pay. People are so hard to help, but our governments don’t help matters either. Read my blog on my website and your will see how government funded organisation actually go against their own policies.

What Do You Think?