Wouldn't it be nice if life came with step-by-step instructions? Now it does! We break down how to master pretty much any money-related task right here in our "How to Do Everything" series. Whatever the goal, we'll cover the steps to take and things to know to reach your next financial milestone, all in one place.
If you have debt, join the club — and then make a plan to get rid of it so you can move onto bigger and better financial goals.
 
Debt is the four-letter word that nearly everyone has to deal with: About 80% of Americans currently carry debt of some kind, regardless of age.
If you’re one of the lucky ones with a $0 balance, give yourself a huge pat on the back. But for the rest of us, debt can feel like a burden that keeps you from being able to accomplish other goals, like building a bigger emergency fund or saving for a home.
The good news: We’ve got a game plan to help you get started paying down your debt, one step at a time.

1. Take Stock of All Your Debt

You can’t tackle debt without knowing what you owe, right? So first things first: Look at all the pieces of your debt puzzle in one place. That means knowing the details on all your loans and lines of credit.
This includes gathering paperwork for stuff like your credit cards, student loans, car loans, outstanding medical bills, personal loans, payday loans — basically any outstanding debt you have.
Next, write down the following information for each one:
  • The name of your lender or creditor, and the type of debt it is (student loan, credit card, etc.)
  • The outstanding balance
  • The interest rate you pay
  • How much the minimum amount due is
Next, grab your calculator. Add up all your required monthly minimum payments. That total represents the bare minimum you must pay every month to avoid late fees. While you’ve got your calculator handy, add the outstanding balances you have. That number signifies your total debt.
While seeing the numbers like that may make you cringe, think of it this way: Now you know exactly where you stand, and that’s a good thing. It allows you to explore your options knowledgeably and make informed decisions about your debt.

2. See If There Are Ways to Lower Your Rate

If you haven’t ever asked any of your credit card providers to lower your annual percentage rate (APR), get in touch with them and see if they’d be willing to do it. It doesn’t hurt to ask, and you can improve your chances of getting your rate lowered if you’ve been a long-time customer with a good payment track record.
If you have offers from other credit card companies that offer a low or 0% APR to transfer your balances, consider taking advantage of them. Just make sure to note how long that introductory period will last and what your APR will shoot up to once it’s over. If you don’t think you’ll be able to pay off the transferred balances before the promotion is over and the new APR will be much higher than the one you have now, it may not be worth it to transfer those balances.
If you are able to get a lower APR on any of your debt, update the information you gathered in the first step.

3. Get Your Financial Ducks in a Row

Before you decide how much you can put toward your debt, it’s important to look at other parts of your financial life so you can properly assess how well you’ve got the basics covered. You don’t want to get in a cycle where you’re throwing so much money at your debt that you find yourself coming up short at the end of the month, or not able to work toward any other goals. So ask yourself these questions:
  • Do you have an emergency fund in place? If not, consider building up a month’s worth of living expenses in a savings account before you start paying more than the minimum on any of your debts. Why? Because emergency savings can help cover those big-ticket surprise bills that can wreck a budget and send you into more debt. One month is the minimum to strive for, although eventually you’ll want about six months’ worth of expenses saved.
  • Are you saving anything for retirement? If not, consider  saving any amount you can into a retirement account like a 401(k), if your company offers one, or an IRA. If your company matches 401(k) contributions, try to contribute at least enough to be eligible for a match.
If you feel confident you’ve got these bases covered, take a deeper look at your budget and see how much extra you think you can put toward debt. If you’d like this number to be bigger, take a look at where your money goes. Are there places where you can trim costs and free up dollars that can go toward debt? Or do you have a side hustle you can devote a few more hours to so you can put more cash toward your debt? Every little bit can help.

4. Decide on a Pay-Down Method

How you ultimately decide to pay down your debt is up to you, but the two most popular methods are the debt avalanche and the debt snowball.  
The debt avalanche method is the less expensive way to pay off your debt. Here’s how it works:
  • Sort your list of debts by interest rate from highest to lowest.
  • Whatever extra money you have for debt payments, put it toward the debt with the highest interest rate first (this will typically be high-interest consumer debt, like credit card balances). Continue to pay the minimums due on your other debts.
  • Once you’re done paying off the highest interest rate debt, keep moving down the line. Use the money you were putting toward the finished debt toward the next one on your list, and so on.
The debt snowball method is when you put your extra money toward paying off the smallest debts first before moving onto the next smallest, and so on. Although this will cost you more in interest in the long run, some people may find this method more motivating because it can help you achieve quicker wins that encourage you to keep plugging away.
Curious to see how each payment method would work on your debt? Consider trying a debt payment calculator  that lets you toggle between the avalanche and snowball methods so you can see how long it might take to pay off your debt in whole.

5. Don’t Forget to Treat Yourself

Getting rid of debt takes discipline and courage, so all debt slayers should take some time to celebrate their victories. Bake in rewards whenever you reach a major milestone (provided, of course, they don’t drive up your balances again). Get rid of a credit card bill? Celebrate with a happy hour among friends. Finally sent in the last payment on your student loans? Host an “I Got Out of Debt” dinner party. Treating yourself doesn’t have to be pricey, but it can go a long way toward keeping you motivated.