Being in debt is stressful, but it is also a problem with a clear solution. With the right approach, even significant debt can be eliminated systematically. Here is a straightforward plan that works.
- Step one — face the numbers
- Step two — stop adding to the debt
- Step three — choose a repayment strategy
- Step four — find extra money
- Step five — get free help if you need it
- Step six — rebuild once clear
Step one — face the numbers
The first step is the hardest emotionally but the most important practically: write down every single debt you have, the outstanding balance, the interest rate, and the minimum monthly payment. Many people avoid doing this but knowing exactly what you owe is essential before you can make a plan.
Step two — stop adding to the debt
Before focusing on paying off existing debt, make sure you are not continuing to add to it. This usually means stopping using credit cards for spending you cannot immediately repay, and making sure your monthly spending does not exceed your monthly income.
Step three — choose a repayment strategy
There are two main approaches. The avalanche method prioritises paying off the highest interest rate debt first, which minimises the total interest you pay. The snowball method prioritises paying off the smallest balance first, which provides psychological wins and momentum.
Both work — choose whichever you think you will stick to. The best debt repayment plan is the one you actually follow.
Step four — find extra money
Review your monthly spending for anything that can be cut. Cancel unused subscriptions, switch energy providers, check your insurance renewals. Even finding an extra £100 to £200 per month can dramatically accelerate your debt repayment.
Step five — get free help if you need it
If your debt feels overwhelming, free debt advice is available from organisations including StepChange, Citizens Advice, and the National Debtline. These services can help you understand your options including debt management plans, individual voluntary arrangements, or in extreme cases bankruptcy.
Step six — rebuild once clear
Once your debt is cleared, redirect the money you were using for debt repayments into savings. Build an emergency fund of three to six months' expenses to protect yourself from future debt.
Bottom line
Getting out of debt requires a clear plan, consistent action, and patience. The interest rates on most consumer debt — credit cards, overdrafts, personal loans — are high enough that eliminating debt is the best investment most people can make.