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How to Pay Off Debt: 5 Basic Rules

Veronica Morozova

Let’s be honest: getting into debt is easy. With credit cards, loans, and store cards being offered left, right, and centre, it doesn’t take much effort to rack up a significant level of debt. In this article we’re looking at basic rules that will help you pay off debt.

How to repay debt

The problem is that debt repayment never seems quite so easy.

The big thing to remember when you’re looking at ways to pay off debt is just not to panic. While money worries can be a source of many a sleepless night, there are basic ways that you can take control of your finances and bring that debt right back down.

If you’re having worries about debt repayment, one thing that can say with certainty is that you’re not alone. Read on and get your finances back into the black.

1. It may be boring, but get budgeting

If you want to get on top of your debt repayment, you need to know what money you really have. You can commit to assigning money to pay off debt every month, but if you don’t really know where you are, month by month, you’re highly unlikely to be able to stick to your plans.

Lay out all of your income and expenses and make them extremely clear. You have numerous ways of doing this:

  • Tap into the numerous budgeting apps that exist

  • Explore all that Excel and Google Docs have to offer

  • Get back to basics with a pen and paper — make sure you highlight all your incomings and outgoings

  • Your budget has to be easy to follow, comprehensible and a little flexible

Remember that having a budget is the keystone for your financial habits, and it’s important that you check in with it regularly.

2. Find extra income streams

If your regular job just isn’t giving you enough to pay off debt, one way to tackle it is to earn more. Okay, so there aren’t many people who can walk into their boss, demand a pay rise, and be instantly wealthier. That’s where side hustles come in.

There are numerous ways of generating an income in your spare time. This extra income should, initially, be dedicated to debt repayment. Again, this is not easy and you may not have time to work an extra shift, but it’s worth considering it.

3. Review your monthly bills

If you want to pay off debt, you may need to reallocate some of your monthly spend. Take a look at where you could cut back. It may be the likes of:

  • Netflix and Spotify

  • Magazine subscriptions

  • Switching phone and broadband suppliers

  • Reducing your TV package

  • Comparing energy suppliers

  • Going down a brand when you shop

While cutting back isn’t something that any of us want to do, it’s a great way to focus on debt repayment. It’s worth looking at things as rewards for the future. For example, perhaps you could reward yourself with subscribing back to Netflix once you’ve cleared a certain amount of debt?

4. Focus on interest

As you try and pay off debt, you’ll realise that not all debt is created equal! Some debt comes with huge rates of interest, which means that the debt just never seems to go down. If you focus your efforts on these kinds of debts, while paying less off on others, you can make real inroads when it comes to the amount that you owe.

You can keep working through your debt in this way so that you keep clearing the ones that are costing you the most.

You can however decide which debt pay off method you are going to use. There are two main approaches to repaying debt: the snowball and the avalanche approach.

  • The snowball method: With the debt snowball method, you pay off your debts from smallest balance to largest balance, regardless of interest rates. The idea here is that when you pay your debts from the smallest to largest balance you start to clear those little debts away very quickly, which can be very mentally empowering. 

  • The avalanche method: In the debt avalanche method, you pay your debts from highest interest rate to lowest interest rate, regardless of balance. Economically, this makes the most sense. You will pay less in interest if you tackle your debts in this order, which means you'll get the most bang for your buck.

5. Be kind to yourself and celebrate small wins

It’s important that you work on re-framing your mindset and don’t build up resentment as you continue to pay off your debt.

One way of improving your feelings about money and appreciating what you have is with daily gratitude. By listing a number of things you’re grateful for every day, you’ll slowly begin to appreciate that you don’t need to spend money to feel fulfilled, and that a lot of our happiness comes from the simple, little every day things that have no relation to consumerism.

There are no quick-fixes. To pay down your debt, you have to make some sacrifices. The most important thing when it comes to debt is to face it and make a mental commitment to get rid of it as soon as you possibly can.

Further resources:

#Podcast: How Am I Repaying My £27k Credit Card Debt? with Clare Seal

How to untangle money issues and mental health, with Clare Francis

If you’re struggling with debt: