D is for Debt - 9 things you should do before you pay off your debt

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You decided to get out of debt! YAY!!! Getting out of debt was the greatest thing I have ever done, and I cannot encourage you enough. You will NOT regret it. And if you do, it’s easy enough to dive back in again, right? Just kidding – you will NOT regret it! However, if you are just getting started, I want you to press pause on throwing as much extra money as you can at the problem, and do these nine things before you pay off your debt.

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1. Figure out your why.

Are you tired of fighting about money? Or paying interest every month on the balance you carry on your credit cards? Do you want to be able to travel or renovate or buy a new car, WITHOUT the stress that comes with owing thousands and thousands of dollars? Or, do you want to set yourself up for early retirement, and model strong financial skills for your children, so they don’t make the same mistakes you did? For us, the KEY to getting out of debt was figuring out WHY we needed to do it. And our why was all of the above. I never want my son to be drowning in debt the way I was. I never want him to worry about how he is going to pay his bills or feel scared of the PILE of debt staring him down. And I want to live a joy-filled life. I DESERVE to live a joy-filled life. And so do you. So keep reading and let’s kick your debt to the curb!

2. Get organized – know your totals.

Once you know WHY you are getting out of debt, you need to know exactly what you are up against. You wouldn’t set out to run a marathon without knowing exactly how far you have to be able to run. It’s time to figure out your debt-total, so you know how much you need to pay off.

This. Is. Scary.

I avoided this for a very long time because I didn’t want to admit how bad we had let it get. But trust me when I say, you can’t start climbing the mountain if you don’t even know where the base camp is.

It might take a little bit of digging, but make a list, and include every debt.

credit cards
car loans
student loans
personal loans (to family or friends)
lines of credit

Take all of those totals and add them up. Now you know where you are heading! Great job!

3. Start a budget.

Your budget is your number one tool to get you out of debt. And a budget is NOT about limiting everything and living with nothing. It is about KNOWING what you are spending your money on, to make sure you are spending it to achieve your goals.

Read B is for Better Budgets and How to Start a Budget that Will Change Your Life now to get started!

4. Pick a plan – snowball vs. avalanche.

In this post full of mixed-metaphors …(are we running a marathon? Climbing a mountain? We might be running a marathon UP a mountain, if we are really honest!) Either way, you now know your starting point – that’s your debt total. And you know your destination – that’s your why. Now it’s time to figure out how you are going to get from point A to point B. The directions.

For me, I paid my debts off from smallest to largest. This is called the debt-snowball – you start small, but before long, you have so much momentum that you are knocking out your biggest debt. It’s the best way I’ve found to say good-bye to debt.

With that said, it’s not the ONLY way. You might be a math nerd and saying to me, “But it will cost me less money to pay off the higher interest debts first!” True story. But if this were about Math, you wouldn’t owe this money in the first place, right? The debt-snowball gets you some quick wins, which help you build a HABIT, to keep the momentum going through the bigger debts.

But if the sight of that higher interest rate makes your stomach churn, then, by all means, attack that one first. Paying off the debts in order of interest rate is referred to as a debt-avalanche.

Read more about debt snowball versus debt avalanche to decide which strategy is right for you!

Whichever way inspires you, I’m here for it! As long as you have a plan!

5. Stop using your credit cards.

For years I was ‘getting better with my money’ and ‘paying off my cards,’ which meant if we got a few hundred bucks extra in a month, I’d throw it on whatever card I felt like and move on with my month. That money was gone in a hot minute because I for sure was not using a budget and I didn’t have a plan.

All of the work that you do to pay off your cards is wasted if you are going to keep on using them. Commitment to yourself that you will not use them. Cut them up. Bury them in the backyard. Do whatever you have to do to quit the habit.

Check out C is for Credit Cards for more information on intentional finance and credit cards!

6. Save $1000 in an emergency fund.

What? We are supposed to be paying off debt, and now this crazy woman is telling us to save a thousand bucks??

That’s right!

You need a buffer between you and your debts. A thousand dollars isn’t very much money, in the grand scheme of things. If you are reading this, I would guess that your debt-total is quite a lot MORE than one thousand. Am I right?

The reason you need this is to keep you from using your cards. Things WILL come up. A flat tire on your car. A broken furnace. An unexpected vet visit. If you have $1000 tucked away, in case of EMERGENCY, it will keep you from turning back to the credit cards you are trying to say good-bye to.

So, before you pay off your debts, save one thousand dollars.

Why you need an Emergency Fund
15 ways to save $1000 fast

7. Get current on all your bills.

This is crucial to your success. You can’t start putting extra money on your credit cards if you haven’t paid your power bill or you are two months behind on your cell phone. If you are behind on ANY of your bills, get current. Get them paid up so that when you budget, there IS money left over to put onto your debts.

8. Cut back your spending.

Once you have your emergency fund tucked away, and your bills are all current, you are ready to start chunking money onto your debt. But where does that money come from?

It’s time to tighten the budget!

Take a look to see where you are spending money on things that you WANT more than you NEED. Maybe you’re eating out three nights a week? Or paying for a gym membership but haven’t hit the treadmill in over a year?

Make some cutbacks to free up more money to pay down the debts as fast as you can. This is not forever. And I’m NOT saying to cut back on everything. But the more you go without NOW, the faster you’ll pay off your debt. That means you’ll be able to start ENJOYING your money sooner!

Grocery store budget hacks
Spend less, save more

9. Increase your income.

Another way to pay down debt faster is to increase your income. I say that like it is so easy, but I know it’s not. But none of this is EASY, and we were made to do hard things.

Here are some suggestions for increasing your income:

ask for a raise
work overtime
get a second job
reduce your retirement contributions (temporarily)
do online surveys
use rebate apps

You can also check out this post to add more money in your month.

Final Thoughts

If you are here and reading this, I am so proud of you! Getting out of debt is the greatest thing I ever did for my family and myself, and I am excited that you want to, too. Doing these nine things before you get out of debt will set you up for success. This is your route for the easiest way up that mountain-marathon! And I 100% believe that you can do it!!!

If you have any questions about budgeting, drop them below – we’d be happy to chat!

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