The Update

How to Get Out of Debt: A Step-by-Step Guide

Getting out of debt can feel overwhelming, but with a structured plan, it’s entirely achievable. Here are eight steps to guide you on the path to financial freedom:

Assess Your Debt

Start by listing all of your debts, including the balance, interest rate, and minimum payment for each. This will give you a clear picture of where you stand financially. Pay close attention to high-interest accounts, as these will cost you the most in the long run.

Set Clear Goals

Set a realistic date by which you hope to become debt-free. Break this goal down into smaller milestones and celebrate each one to stay motivated. Whether it’s paying off a credit card or reducing your overall balance, small wins will keep you on track.

Choose a Repayment Strategy

There are two popular strategies to pay off debt:

• Snowball: Focus on paying off the smallest debt first, regardless of interest rate. Once it’s paid off, move to the next smallest.
• Avalanche: Pay off the debt with the highest interest rate first, which will save you money over time. Choose the strategy that fits your personality and financial situation.

Reduce Expenses

Cut back on unnecessary spending to free up money for debt repayment. Consider canceling unused subscriptions, reducing dining out, and cutting back on luxury items. Every little bit adds up.

Boost Income

Look for ways to increase your income. Start a side hustle, such as freelance work or selling unused items around the house. The extra cash can be used to pay down your debt faster.

Automate Payments

Set up automatic or biweekly payments to ensure you never miss a due date. You can even round up your payments to pay off debt faster. Automating payments also helps you stay disciplined with your repayment plan.

Avoid New Debt

As you work to pay off your debt, it’s crucial to avoid adding new debt. Consider using cash or debit cards for purchases and build an emergency savings fund to avoid future financial pitfalls.

Monitor Your Progress

Track your progress by checking your credit report regularly and keeping tabs on your remaining debt. This will help you stay motivated and make adjustments to your plan if needed.

By following these steps, you’ll be well on your way to becoming debt-free. Stay focused, be patient, and celebrate your progress along the way.

Free Financial Coaching with RGCU

At Rio Grande Credit Union, we believe everyone deserves access to financial guidance. That’s why we offer free financial coaching—even if you’re not a member. Our certified coaches are here to help you create a budget, plan for your future, and guide you on the path to achieving your dreams.