Get out of debt: The 4 things we need to know (plus some other helpful tips)

Eliminate downer debt for good

So you’re ready to stop letting downer debt drag you down. That’s great! With the right know-how, we can knock out that credit card debt or payday loan once and for all.

We’ll look at the four things we need to know about getting out of debt - plus a few tips to help along the way.

1. Budget

If we’re going to take down our downer debt, we need to look at our bigger money picture so we can understand:

  • How much are we spending each month?
  • Where is that money going?
  • Am I spending money on things that add value to my life?

There’s no better way to do this than by looking at our monthly budget. That word “budget” might make some of us mumble some four-letter words, but before we start our creative exploration of expletives, consider this. The goal here isn’t to spend a weekend rummaging through old bank statements and crunching numbers. This is something that should take about 15 minutes. We’re just looking to get to ballpark numbers to see where our money is going and if we’ve got anything extra that we can use to pay off debt. Because a big key in eliminating downer debt is making more than that minimum payment every month. Even if it’s just an extra $20 or $30. Our budget worksheet is a good place to start to get an understanding of our monthly money picture.

2. Amount due

This seems pretty self-explanatory, but we need to know how much we owe on each of our debts. Ordering our debts by the amount due might be a helpful starting point for tackling what we owe. In this approach, we pay off our debts by starting with the smallest amount first. This way we build momentum by getting some quick wins. If this sounds like a plan that might work for you, check out our easy-to-use snowball debt elimination calculator.

3. Interest rates

The interest rate we pay on our debt is what we’re giving the lender in order to borrow money. And that interest plays a big role in determining how much we’ll ultimately pay on debt. Looking at our debts by interest rate can help us see the ones that cost the most - if we just keep making the minimum payment. For those looking to knock out that pesky debt quickly and pay the least amount of interest, jot down a quick list of your interest rates – starting with the highest at the top. We’ll focus on paying off the most expensive debt first and then work our way down the list. Dig into this plan for tackling debt with the avalanche debt elimination calculator.

4. Paying on time

A crucial part of paying off debts - no matter how we do it - is making our payments on time. When we don’t, there can be late fees or other penalties that put us further behind. If we do miss a payment, it’s really important to get back on track and restart the routine we’ve built.

Dominating debt starts with getting the right know-how for the road ahead. With that, we can crush that downer debt that’s dragging us down. Check out more great tips on how to dominate debt in our free ebook.

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