How to Get Out of Debt: A 7-Step Plan for Beginners

Michael Chen

Michael Chen writes about personal finance fundamentals. Bay Area-based · finance enthusiast for 15 years.

Visual representation of the voice · not a photographic portrait

Quick answer: List every debt, stop adding new charges, and pay the minimum on all of them. Put every extra dollar toward one debt until it is paid, then roll that payment into the next. Use the avalanche (highest rate first) or snowball (smallest balance first) method.↗ Share on X

To get out of debt, list every debt you owe, stop adding new charges, pay the minimum on everything, and put every extra dollar toward one debt at a time until it is gone. Then roll that payment into the next debt. That is the whole method. The hard part is not the math. It is building a plan you can stick with for months, even when money is tight.

This step-by-step plan is written for beginners. No finance background needed.

Important: this is general education, not personal financial advice. If you cannot cover your minimum payments, are being sued, or are thinking about bankruptcy, talk to a nonprofit credit counselor or a licensed attorney before you make big decisions.

Step 1: Write down every debt you owe

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You cannot fix what you cannot see. Grab a sheet of paper or open a notes app and make a list with these columns:

*These numbers are only an example. Use your own.*

Where to find the numbers:

1. Log in to each account or check your latest statement.

2. Look for "APR" (annual percentage rate). That is the yearly interest cost.

3. Get your free credit reports at AnnualCreditReport.com, the official site for free reports from the three credit bureaus. They show debts you may have forgotten.

Add up the balances. The total may feel scary. That is normal. Now you have a starting line.

Step 2: Stop the debt from growing

Paying down debt while still adding new charges is like bailing water from a boat with a hole in it.

• Take credit cards out of your wallet. Remove saved cards from shopping apps and websites.
• Pause "buy now, pay later" plans. They are easy to stack and easy to lose track of.
• Use a debit card or cash for daily spending for the next few months.

You do not have to close your cards. Closing old accounts can sometimes lower your credit score. Just stop using them.

Step 3: Build a small emergency cushion first

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This sounds backward, but it matters. Without any savings, the next car repair goes right back on a credit card, and you lose ground.

Aim for a starter fund of about $500 to $1,000. Keep it in a separate savings account. Only use it for real emergencies: urgent car repairs, a medical copay, a broken fridge.

If that feels impossible right now, start with $20 a week. Once you hit your goal, move to the next step.

Step 4: Make a bare-bones budget

You need to know how much extra money you can throw at debt each month.

1. Write your monthly take-home pay (after taxes).

2. List your needs: rent, utilities, groceries, transportation, insurance, minimum debt payments.

3. List everything else: eating out, streaming, shopping, hobbies.

4. Subtract needs from income. What is left is your room to work with.

5. Cut or pause wants for a set time, like 6 months.

Quick places to find money:

• Cancel subscriptions you have not used this past month.
• Shop for cheaper car insurance and phone plans.
• Plan meals and cook more at home.
• Sell items you no longer use.
• Pick up extra hours or a side job for a few months, if you can.

Every extra dollar you find goes to Step 5.

Step 5: Pick your payoff method

There are two popular ways to choose which debt to attack first. Both work. The best one is the one you will follow.

Using the example table above:

• Avalanche order: store card (26%), Visa (22%), car loan (7%), medical bill (0%).
• Snowball order: medical bill ($600), store card ($850), Visa ($4,200), car loan ($9,600).

How it works in practice:

1. Pay the minimum on every debt, every month, on time.

2. Send all your extra money to the first debt on your list.

3. When that debt hits $0, take its full payment (minimum plus extra) and add it to the next debt's minimum.

4. Repeat until everything is paid.

The payment keeps growing as each debt disappears. That growing payment is what speeds up the process.

Step 6: Lower your interest rates where you can

High interest makes debt harder to pay down. A lower rate means more of each payment goes to the balance.

Options to look into:

1. Call your card company. Ask, "Can you lower my APR?" If you have a history of paying on time, some companies will say yes. It costs nothing to ask.

2. Balance transfer card. Some cards offer a low or 0% intro rate for a set period. Watch out for the transfer fee, and have a plan to pay the balance before the intro period ends, or the rate jumps.

3. Debt consolidation loan. A personal loan pays off several cards, leaving one monthly payment. This only helps if the new rate is lower and you do not run the cards back up.

4. Hardship programs. If you lost income or had a medical problem, ask your lenders about temporary lower payments or rates.

Read every term carefully before signing. If an offer sounds too good to be true, it probably is.

Step 7: Protect your progress

Getting out of debt usually takes months or years. These habits keep you on track:

• Turn on autopay for all minimum payments so you never pay a late fee.
• Track your total balance once a month. Write it down and watch it drop.
• Celebrate small wins in cheap ways: a walk in the park, a movie night at home.
• Review your budget every 3 months. Raises, new bills, or a new baby change the numbers.
• Once a debt is gone, do not reuse the freed-up money for spending. Send it to the next debt.

How long will it take to get out of debt?

It depends on how much you owe, your interest rates, and how much extra you can pay each month. Nobody can promise a date without your real numbers.

To get an estimate:

1. Search for a free debt payoff calculator from a reputable source, such as a nonprofit or a government consumer site.

2. Enter your balances, rates, and monthly payment.

3. Try different extra payment amounts to see how the date changes.

Seeing how even $50 more a month shortens your timeline can be a strong motivator.

Which debt relief offers should you avoid?

Be careful with companies that:

• Charge large fees before they settle or reduce any of your debt.
• Tell you to stop talking to your creditors.
• Tell you to stop paying your bills without explaining the risks, which can include late fees, damaged credit, and lawsuits.
• Promise to make your debt vanish or to remove accurate negative items from your credit report.

The Federal Trade Commission (FTC) warns consumers about debt relief scams. Check any company carefully before you share personal information.

When should you get professional help?

Reach out for help if:

• You cannot pay the minimums on your debts.
• Debt collectors are calling or you have received court papers.
• Your wages are being garnished.
• You are thinking about bankruptcy.

Where to go:

• Nonprofit credit counseling: Look for agencies affiliated with the National Foundation for Credit Counseling (NFCC). A counselor can review your budget and may offer a debt management plan.
• Legal aid or a bankruptcy attorney: if you are being sued or considering bankruptcy.

Your next step: make your debt list today

Set a 20-minute timer and fill out the table from Step 1 with your real numbers. Then pick your method, avalanche or snowball, and circle the first debt you will attack. Before your next payday, set up autopay for every minimum payment. Starting with that list is the most important move you will make this month.

FAQ

Which is better, debt avalanche or debt snowball?

The avalanche method usually costs less in interest because you pay the highest rate first. The snowball method gives faster wins by paying the smallest balance first. The better one is the method you will stick with.

Should I save money while paying off debt?

Many people build a small emergency fund of about $500 to $1,000 first, so a surprise expense does not go back on a credit card.

Is a debt consolidation loan a good idea?

It can help if the new interest rate is lower than your current rates and you stop using the paid-off cards. Read all fees and terms before signing.

Where can I get free or low-cost debt help?

Nonprofit credit counseling agencies, such as those affiliated with the NFCC, can review your budget. For lawsuits or bankruptcy questions, contact legal aid or a licensed attorney.

Educational content, not personalized financial advice. Sources cited where applicable.