How To Get Out Of Debt

Four Essential Steps to a Debt Paydown Plan that Works


If you’re wondering how to get out of debt, we’re pretty sure we don’t need to make a case for the value or importance of that endeavor.

And we totally agreedebt is the worst. It holds you back. It messes with your mind. It stresses you out in ways that you are conscious of, and some that you are not. It hinders your ability to take chances on good opportunities. Ugh. Debt.

Now, debt. What are you going to do about it? Pay it off!

You can pay off your debt. This is kind of our thing. This is what we do.

We have a completely free video course to teach you exactly what you need to do to get out of debt (and stay out!). Watch it on your own time, at your own pace, and in your own comfy chair. There are 14 lessons full of hilarity, wit, and wisdom and it might be the most beneficial hour-long binge watch of your year.

See the full course here.

Prefer to read the summary? Just keep going!

Step 1: Pay Your Immediate Obligations

Being debt-free doesn’t matter much if we’re also hungry and homeless. That means (whether you like it or not) before we can charge in on your debt balance, you’ve got to have money for all those monthly bills that need to get paid. These are things like:

  • Rent/mortgage
  • Utilities
  • Groceries
  • Minimum debt payments

So once we get those immediate obligations out of the way, we can just throw the rest at debt, right?

Not quite. And that’s where so many people get tripped up in their debt paydown plan: an emergency comes up and there’s no money left after the aggressive debt payments!

That brings us to step two…

Step 2: Budget for Non-Monthly Expenses

These are larger, less frequent expenses, that if you don’t put money aside for every month when they do come up (and you know they will!), you will a) feel stressed, b) feel frustrated that these things always sneak up on you, and c) probably reach for a credit card.

Some non-monthly expenses happen like clockwork, others strike every once and awhile.

  • Car repair
  • Car insurance
  • Holidays
  • Medical expenses
  • Annual fees

See a list of more non-monthly expenses.

They don’t happen monthly, but they do…happen. And when they happen, they feel just as real as that monthly rent payment. If this money isn’t saved up, the first thing we do is reach for that credit card, and back into debt we go.

While stashing away that money isn’t exactly exciting, you know what is exciting? Getting a massive car repair bill, checking your budget, seeing the money already sitting there for “car repair” and paying for it right then and there. You didn’t even have to reach for the credit card, and paying the balance in full doesn’t even phase you.

If you’ve tried and failed to get out of debt in the past, this is the secret you were probably missing. Account for these non-monthly expenses and you’ll get out of debt (and stay out) for good.

Wondering about the logistics of how to save money for bills that aren’t due for another six months? We make it easy to neatly organize your money and save smaller monthly chunks for those big bills. Try YNAB free for 34 days (no credit card required!)

Hear stories from real people with real debt.

Step 3: How Much Money is Left Over?

After you set money aside for monthly bills and non-monthly expenses, what’s left?

If Nothing is Left…

That’s a very real answer for some of us. Sometimes the minimum payment is the best we can do. If that’s where you’re at right now, give yourself a little credit for the progress you’ve made.

  • Are you starting to put money toward non-monthly expenses? Great!
  • Are you checking spending decisions against a budget? Awesome!

You may not be paying off debt as much as you want right now, but you’re building the foundation to start that paydown plan soon.

This is also the time to start getting creative. When you get down to it, are you challenging all your assumptions about your spending habits? Are there any areas where you can trim your spending habits and pare down your expenses?

At the end of the day, if you want to send more to your debt, you either need to make more, or spend less.

If You Have Money Left…

Let’s say you’ve got something, anything left over in your budget. That’s where we can start charging at our debt paydown plan.

Step 4: Create A Debt Paydown Plan

There are a few different approaches to debt paydown, but a good place to start is to focus on your smallest debt first.

Make a list of all your debts from smallest to largest. Start with the smallest debt and use this extra money to put toward this debt.

Set up a debt pay-down goal to keep you honest, motivated, and on track. Choose a payoff date—one that is maybe even a little bit of a stretch—and dwell on the end in sight! That first success (even if it is small), will feel great and will free up cash to put toward your next debt target.

For all other debts, budget for the minimum payment. You need this information front of mind. You’ve probably avoided thinking about your debt in the past, but this is the new debt-crushing you. You aren’t afraid to look at the balances, and you know the minimums by heart. You will not get behind. You will not avoid the reality of it. You are focused and making progress. (And I for one, am very proud of you!)

Attack the next smallest debt with fervor. Now you’ll be paying minimum payment plus all the money that was going to the last debt—and maybe even more if you’re really getting the hang of this budgeting thing! Repeat this process and you will pay off your debt. You will never regret it.

You Can Do This!

Commit to budgeting, get organized and get ready to change your life! Get pumped up to pay down your debt!

Pay down your debt faster with YNAB. We’ll help you easily keep track of money saved for those non-monthly expenses so you can free up more mental space and accelerate your debt paydown.