We understand that debt can feel overwhelming. Here’s your action plan to tackle it and get back to saving money.

As we approach 2025, the average credit card debt is $5,313. If you’re only making minimum payments because financial challenges have impacted your budget, you’re not alone. Many relief measures from previous years are likely to change or expire, so it’s crucial to have a plan to eliminate your debt.

“The most common concern from our clients is feeling like debt freedom is out of reach when they first begin,” explains a representative from a nonprofit credit counseling agency. “However, with a solid plan and dedication, success is achievable.”

While managing debt can seem daunting, taking action is the best way forward. Here’s how to create your personalized debt payoff strategy.

1. Assess Your Debts

Start by cataloging all your debts in one location. Use a spreadsheet to detail your credit cards, student loans, auto loans, personal loans, mortgages, and any other obligations. For each debt, include:

  • Current balance
  • Monthly due date
  • Interest rate
  • Minimum payment amount
  • Lender contact details
  • Introductory rates or deferment periods and their end dates
  • Your preferred payment method, like auto-pay

2. Select a Payoff Method

Next, decide how you’ll prioritize your debt payments. You might consider one of these strategies:

  • Focus on smaller debts first. This is the “snowball method,” where you start with the smallest balance and gradually build momentum as you pay off each debt.
  • Target high-interest debts first. Known as the “debt avalanche” method, this approach involves paying off the debt with the highest interest rate first, then moving to the next highest.

“I prefer the debt avalanche method because it reduces total interest costs,” shares a financial advisor. “But the snowball method can provide motivation if you need quick wins.”

3. Review Your Budget

It’s time to evaluate your budget and determine three key figures:

Your total monthly bills: In the same spreadsheet, list all your monthly expenses, including minimum debt payments, utilities, internet, cable, phone, food, and transportation. Let’s assume your total is $2,000 each month.

Your monthly income: Check your pay stubs from the last three months to find your average monthly earnings. For this example, let’s say you take home $3,000 after taxes.

The surplus you can allocate toward debt: Subtract your bills from your income: $3,000 – $2,000 = $1,000.

4. Set a Concrete Goal

Goals can drive you. Simply saying “I’ll pay off my debt” isn’t enough. Instead, formulate a “SMART” goal—specific, measurable, achievable, relevant, and time-bound. For instance:

“I aim to reduce my debt by $10,000 (specific) by allocating $1,000 monthly (measurable and relevant). I will manage my minimum payments and apply any remaining funds to the debt (achievable). I plan to do this over three months and will reassess in April. By the end of 2025, my debt will be cleared (time-bound).”

5. Take Action

Direct that extra $1,000 to your first debt while maintaining minimum payments on others. This accelerates your payoff process since more funds go toward the principal rather than interest. Spreading the money across several debts diminishes its impact.

As you reduce debts, it’s vital to live within your means. Monitor your spending habits by reviewing your recent credit card statements. Identify where discretionary spending occurs and consider cutting back. Perhaps dine out less, skip costly beauty treatments, or reduce streaming service subscriptions.

6. Enhance Your Strategy

As you chip away at your debts—without accruing new debt—your credit utilization ratio should improve, which can boost your credit score.

Now’s the time to seek lower interest rates on existing debts. This allows more of your payments to reduce principal, shortening your payoff timeline. Here are a few methods to secure lower rates:

  • Credit cards: Contact your issuer and request a lower APR. If you’re a reliable customer, many will oblige.
  • For multiple debts: If you qualify, consider a balance transfer or debt consolidation loan.
  • Mortgages: With rates at historic lows, refinancing could be beneficial if you can secure a lower rate and afford closing costs.
  • Student loans: Depending on your loan type, explore income-based repayment options or refinancing.

7. Explore Additional Income Opportunities

If your current income barely covers your expenses, seek ways to generate extra income for debt repayment.

“Extra income” doesn’t strictly mean taking on a side job or longer hours—though those can help. Consider renting your space, selling unused items, or trying other creative income strategies. If you receive unexpected funds—like stimulus payments or tax refunds—use them to chip away at your debt.

However, avoid tapping into retirement savings for extra income, as it can lead to tax consequences and long-term financial setbacks.

8. Prepare for Setbacks

Understand that challenges will arise during your debt payoff journey. Unexpected costs might force you to use credit cards again. To handle this, establish a small emergency fund to cover at least one month’s expenses, protecting you from surprise expenses while you pay down debt.

Accountability can also be beneficial. “Stay motivated by connecting with a community of others pursuing similar goals,” suggests the expert. “Many clients find that tracking apps or spreadsheets keep them organized and driven.”

9. When to Seek Professional Help

If you’re struggling to keep up with payments, consider reaching out for professional assistance.

Contact creditors about hardship plans or extensions if you’re already signed up. You might also consult a certified credit counselor from a reputable organization who can help you assess your situation and suggest a debt management plan.

Taking action on your debt is crucial—ignoring it won’t solve anything. “If you create a plan and execute it well, you’ll see progress,” the advisor adds. “But if setbacks occur, focus on making informed choices with the resources you have now. That’s the best place to start.”