The 9 Crucial Steps Needed To Pay off your Debt

Everyone agrees with the need to pay off your debt. But it's a multi-step process, and success or failure will be determined by the process itself, and not just the desire or intention. Here are nine crucial steps needed to pay off your debt. Everyone agrees with the need to pay off your debt. But it’s a multi-step process, and success or failure will be determined by the process itself, and not just the desire or intention.

Here are nine crucial steps needed to pay off your debt. Be sure to implement each in order to achieve the best results.

1. Pray for Guidance

“The Lord himself goes before you and will be with you; he will never leave you nor forsake you. Do not be afraid; do not be discouraged.” – Deuteronomy 31:8

The effort to pay off debt will be very much like going into battle. And before you ever go into any battle, you should start with deep prayer. Your prayers should continue throughout the process.

Here’s why…

If you are deep in debt, it’s certain that circumstances, personal choices, and bad habits have all played a role. Getting out of debt is largely about overcoming your situation and yourself. You will not be able to do any of that without help from above.

You will also find it impossible to sustain the effort on your own will. It will truly take a large helping of divine intervention to make it happen. You don’t have to go it alone, and you shouldn’t even try to.

2. Stop Creating New Debt – Immediately

This is your “stop the bleeding” strategy, and it needs to happen immediately. You must implement a strict policy that if you can’t afford to buy something without going into debt, then you can’t afford it at all.

You can’t afford to play the debt shell game either – which is a process of moving debt from one pile to another, while convincing yourself that you’re making forward progress. You’re not.

If you’re paying down some debts, while building up new ones, you will defeat the whole purpose. You have to think of the debt payoff process as an elevator that only goes up. That means that your progress in paying your debts down must be steady and thorough. You can’t afford to add new debt while you are busy paying off the old debt.

3. Create a Workable Debt Payoff Plan

There’s a lot of debate about what is the best method for paying off debt. Some say that you should tackle the debt with the highest interest rates. Some say should go for the debt with the highest payment.

I’m personally fond of Dave Ramsey’s debt snowball method. That plan has you paying off your debts in reverse order, from smallest to largest. It’s based on the idea that paying off the smallest debt is the easiest to do. And once you have that paid off, it will make it easier for you to take on the next smallest debt. As you move up the line, from lowest to highest, you’ll put yourself in a better position to pay off the larger debts.

Use whatever method you’re comfortable with, but come up with a plan. And whatever plan you settle on, be relentless. Stay with the plan, and don’t quit until you are completely out of debt.

4. Clear Out Extra Space in Your Budget

The defining factor in how quickly you will pay off your debt will be in direct relation to how much money you have in your budget to make additional payments. The more space you can create in your budget, the faster you will get out of debt.

Eliminate any expenses that are not absolutely necessary. Reduce any expenses where you can. And if you have a loan secured by some toy that you only sort of need, sell it and use the proceeds to pay off that debt.

Every expense you can reduce or eliminate will make the job of getting out of debt a little bit easier.

5. Develop Additional Income Sources

Sometimes your budget is stretched way too much. In fact, this is one of the primary reasons people get into debt in the first place. If that describes your situation, you will have to develop additional income sources.

It will work even better if you can develop extra income sources while also reducing expenses in your budget. That will give you extra cash flow from two directions – budget savings and extra income – that you can throw at your debt.

Consider a part-time job, develop a side business, sell anything you have around the house that you no longer need, work available overtime, or work to qualify for bonuses, such as customer- or employee-referrals.

6. Use Cash Windfalls to Fast-forward the Debt Payoff Process

You can fast-forward the debt payoff process by using any windfalls that you receive to payoff your debt. This can include gifts, bonuses, commission checks, or proceeds from the sale of personal assets.

And don’t forget about your income tax refund. According to the IRS, the average income tax refund is $3,120. If you are close to that range, apply the refund toward debt payoff until your debts are completely gone. That could be close to $10,000 over three years.

7. Set Up a Savings Account

One of the reasons why people get into debt in the first place is because of a lack of liquidity. They have no savings available, so they use credit as a savings substitute. That’s a practice that must come to an end in your life. If it doesn’t, it will be just a question of time before you will be back in debt.

Allocate some of the money that you free up from cutting spending and earning extra income toward funding a savings account. That money can be available for emergencies or contingencies, so that you will not be tempted to use credit to fill the void.

You should also take advantage of this opportunity to become a committed saver. Savings needs to become an ongoing part of your life, so that you will become a saver and not a debtor.

8. Dig In for the Long Haul

Getting out of debt can take years to accomplish. You’ll have to be mentally, emotionally, and financially prepared to keep the effort going for as long as it takes. That could be three years, five years, or 10 years – it all depends upon how much you owe, and what resources you have available to become debt-free.

That means you will have to commit yourself to a reasonable timeframe. You can’t imagine that you’re going to get off easy. If you abandon the effort too soon, you’ll fall back into familiar habits, and even convince yourself that being in debt is part of your fate.

9. Once You’re Out of Debt, Vow to NEVER Get Back In Again

Once you succeed in getting out of debt, you must commit yourself to never getting back in. Think of yourself as something like a recovering alcoholic – the potential for a relapse is always there unless you are prepared to resist it.

But I suspect that once you come through the challenges of getting out of debt, you will have the conviction of a convert, with plenty of motivation to not backslide.

The unfortunate reality is that getting into debt is much easier and more pleasant than getting out of it. Think about that long and hard the next time you’re tempted to swipe credit card to pay for something that you can’t afford. That should cure you of ever wanting to get back into debt again.

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  1. Joanne Mahoney

    Good article. I especially liked your analogy of a recovering alcoholic. “You can relapse.” Amazing how our society has learned that we can gratify our present needs with the use of a credit card.
    My parents did not believe in the use of “plastic.” When my parents wanted or needed something extra, my Mother (she was a stay at home Mom), would take a temporary part time job. When they had the necessary funds to purchase the item, she would terminate her employment. Or if available, my father would pick up extra shifts at work (for overtime).

    • Lauren (SeedTime Editor)

      Those are great approaches to paying for something extra or unexpected, Joanne!

  2. Donna

    Love all of these! Printing the 9 steps out to put in my 2017 workbook to see everyday. Thank you!

  3. Donnie Gardner

    I love the pray for guidance! I think this is a step often overlooked. Getting into debt is not a numbers thing it’s emotional. By praying for guidance you can help clear your mind of the negative thoughts and unwise decisions that led you into debt. I know this helped me when my wife and I paid off our mortgage in 19 months when we got serious! Thanks for the tips!

  4. Barnaby

    I love how praying for guidance is #1. That’s a great foundation and always should come first! Everything else flows from that.

  5. It is important to tackle your debt head on. This means that you admit to yourself that what you are doing is already hurting you and you resolve to stop creating new debt and to start solving your problem. Even if you do it a little at a time. It’s all good.