If you have debt, you’re far from alone. Earlier this year, a study from the personal finance site Nerdwallet indicated that the average amount of household debt in the U.S. increased 7.65% from the year before, with credit card debt, mortgages, auto loans and student loans all on the rise.
Debt can understandably be an anxiety-provoking topic, but that shouldn’t stop you from getting serious about addressing the issue. Still, even once you’ve resolved to pay it off, a big question looms ― where to even begin?
To that end, we asked personal finance experts to share the first thing they believe people should do when they decide to tackle their debt. Read on for their answers and some general tips for the repayment process.
Take stock of exactly what you owe.
“The first step a person should take when they decide to start paying off their debt is to sit down and get a detailed picture of where their finances currently stand,” said Leslie H. Tayne, a debt relief lawyer focusing on consumer and business debt matters. “Set aside a day when you don’t have any other major commitments and can focus on this task.”
You can organize all this information on a computer or by hand in a notebook, whatever is best for you.
“The first step is to know what you owe,” said Jannese Torres, creator and host of the “Yo Quiero Dinero” personal finance podcast. “Gather your statements and create a spreadsheet or list with the following information for each debt: How much do I owe? Who do I owe it to? What’s the minimum payment required and when is it due? What is the interest rate?”
Add it all up to calculate your overall debt and the total minimum payments. If you’re working in a spreadsheet, you can also use different formatting options to sort and prioritize your debts.
“Sort it by the highest interest and then higher minimum payment first,” recommended finance coach Tatiana Tsoir. “This baseline will give you an understanding of what to do next, kind of like triage at a hospital.”
Looking at the big picture of your debt may feel overwhelming, but remember you’ll soon be tackling it in baby steps and celebrating small victories along the way.
“Adding up your total debt can cause a sense of anxiety and shame for some,” said Kevin L. Matthews, founder of the financial education firm BuildingBread. “That feeling is normal, but don’t let that discourage you. It is important for you to have an accurate picture of where you stand to create a realistic plan to pay down your debt.”
Find an accountability partner.
“If you want to set yourself up for success when repaying debt, the first thing you should do is find an accountability partner,” said Dani Pascarella, founder and CEO of OneEleven Financial Wellness. “It takes a lot of discipline to consistently put your paychecks towards debt when there are countless other ways to spend your money. An accountability partner will help you stay on track and will increase your chance of success.”
She recommended asking around to see if anyone in your inner circle would like to team up.
“Around three-quarters of Americans are in debt, so it’s likely that you already have several friends or family members that are working towards debt repayment too,” Pascarella said. “Once you’ve found an accountability partner, schedule regular check-ins with them and commit to putting a specific dollar amount from each paycheck towards debt repayment.”
Address your mental health.
“Many people that have debt don’t realize the impact it has to their overall financial confidence,” said Ande Frazier, a behavioral finance expert and author of “Fin(anci)ally Free.”
“The impact of carrying debt can have devastating effects on your mindset and can even result in feeling financial shame. While it may seem easy to separate out the economics of debt from your thoughts and feelings around it, for many it is much harder than they think.”
She recommended giving yourself time and space to understand how having debt makes you feel and really unpack those emotions. Consider seeking help from a licensed therapist as well.
“Paying off debt is a long mental and emotional journey, and it is important to have support on that alongside the tactical steps,” said Bernadette Joy Cruz-Maulion, founder of Crush Your Money Goals. “Debt can often be tied to past traumatic events like medical emergencies, layoffs or divorce. Or it can be a symptom of coping mechanisms of other mental health issues.”
Although therapy can be notoriously expensive, there are ways to find more affordable options. Cruz-Maulion believes it’s a crucial part of the debt repayment process.
“It’s important to find a therapist that you can be open with what some of the emotional ties to your debt are,” she said. “If these potential mental health challenges are not addressed, you may fall back into the same patterns that built the debt.”
Choose realistic goals and strategies.
“Decide on a strategy, and stick with it,” said Samantha Gorelick, managing financial planner at Brunch & Budget. “If you have multiple credit cards, decide whether you are going to pay off the cards with the lowest balance first, or the ones with the highest interest rate. The former is the most rewarding psychologically, the latter is more rewarding mathematically.”
She emphasized choosing an amount you can realistically afford to put toward debt payments each month. Starting small can help you stick with it in the long-term.
“Coming up with a debt repayment plan requires you to know how much you can afford to pay towards your debt each month,” said money and budgeting expert Andrea Woroch. “Be specific when setting your debt repayment goal by identifying just how much you will pay off and by when, and make sure you’re being realistic about how much you can afford to pay off by that time so you don’t get burned out and subsequently give up.”
Determine your timeline.
“Determine your timeline,” advised Julien Saunders, co-author of “Cashing Out” and co-host of the “Rich & Regular” podcast. “You should have a clear understanding of how long it will take you to pay off the debt, not just the outstanding debt balance. Once you figure out how long it will take, be sure to build in some cushion to account for periods of time where your budgeted spending may be higher, like holiday season, special events or family commitments.”
He recommended examining your previous year’s spending to see if you can identify consistent patterns and periods when you spent more than usual.
“If this is your first year tracking spending, then make your best guess of when you anticipate higher spending and set a budgeted amount for those activities or categories to prevent drastically lengthening your debt payoff timeline,” Saunders said.
Try to be consistent, but don’t put pressure on yourself to be perfect.
“Life might happen and you may need to readjust your debt pay-off date due to job loss, unplanned expenses, emergencies, etc.” said Bola Sokunbi, founder of Clever Girl Finance. “With the right mindset, you’ll be more likely to pick yourself up, dust yourself off, adjust your plans and timeline, and keep going.”
Start an emergency fund.
“Before you start attacking debt head-on, make sure you are in a position where once you pay it off you can stay out of it,” said Mamie Wheaton, a financial planner with LearnLux.
She recommended making just the minimum payments on your debt and creating a budget that allows you to build up a little bit of savings before accelerating the debt.
“If you don’t have an emergency fund, start using the surplus in your budget not to pay down the debt, but to create an emergency cushion of at least $1,000 or one month of expenses,” Wheaton said. “Saving money in an emergency fund instead of accelerating down the debt can seem counterintuitive, but it is important to have cash set aside for emergencies so you don’t need to continue to rely on a credit card or loan. It can help break the habit.”
Once you’ve built up that emergency cushion, you can start accelerating your debt, Wheaton added. Still, she advised continuing to save small amounts as you go when possible.
Macro Money Concepts founder Chuck Czajka recommended putting aside a set percentage of your paycheck.
“It’s important to pay yourself first by saving up to 15% of your income until you get six months’ worth of liquid assets,” he said. “This way, if an emergency pops up, you won’t be adding to the debt.”
Explore the big picture of why you’re in debt.
“The first thing I recommend anyone do when they want to start paying off debt has nothing to do with making debt payments,” said Kumiko Love, a financial counselor and creator of The Budget Mom. “In fact, it has nothing to do with their debt numbers. The first thing they need to do is understand why they are in debt in the first place.”
She recommended playing the role of investigator. Seek to understand the big “why” picture by asking yourself questions about your debt journey: What are all the things that led to this current debt? Was it due to spending issues? Was it a situation outside your control that you weren’t prepared for?
“A debt-free journey has nothing to do with how much debt you have or even your payments,” Love explained. “It’s about learning healthy money management skills to keep them from going back into debt in the future.”
Take a deep breath.
“Looking at how much debt you have to pay off can feel daunting and anxiety provoking,” said financial therapist Nicole Iacovoni. “Expect complicated feelings to come up as you look at the real numbers.”
Debt can be overwhelming and create a sense of panic. Don’t let that panic totally consume you and derail your goals.
“Let yourself feel the feelings, take a deep breath, and then shift your focus to creating a strategic plan for wiping out your debt,” Iacovoni said. “Your debt payoff plan will give you a sense of empowerment and control.”