How to Set up a Realistic Payment Plan to Pay off a Debt
Living with debt feels like an overwhelming burden that holds you back. There is stress as if you’re on the brink of financial chaos. It’s a paralyzing reality many experiences, and it can often seem like there’s no way out.
There is a way out… and it begins with a deb payment plan.
1. Know What You Owe
Start by creating a debt worksheet that includes:
- Account
- Total owed
- Monthly payments
- Interest rates
- Due dates
The list should include everything that you’re paying (or not) month-to-month. Now’s not the time to hide from your financial demons! The transparency is what makes moving forward with eliminating debt a real possibility.
Set up the worksheet with one of the following after gathering data:
Do this exercise with your partner if the two of you share finances, too, since you’re both in on this together. It can feel difficult having your partner work through a credit card payoff template… but it’s a must if you’re serious about living debt-free.
2. Figure Out Your Attack Plan
Your next step is figuring out which debt payment plans make sense to you and your finances.
There are a few to consider:
- Do it yourself
- Debt consolidation
- Credit counseling
- Installment agreements
- Debt settlement
- Bankruptcy
You’ll want to note the debt type as one of the things to include in a budget. Why? Because your options heavily depend on which debt types you’re carrying.
Don’t know these debt strategies? Take the time to learn about a consolidation loan, counseling, settlement, and others. Seriously, it takes 10 or 15 minutes and could offer the largest, positive impact on your life.
3. Determine Your Payment Plan Priorities
There are a few modes of thinking when it comes to dealing with debt:
- Tackle the biggest loan since it (usually) has the highest monthly payment
- Focus on the debts with the highest interest rate so you’re spending less in the long run
- Knock out the smallest accounts to get a sense that you’re making a real difference
Go back to the loan/credit card budget and prioritize which debts are your main priority. The debt attack plan plays a role in determining which of these gets prioritized, too. Awesome, you now have your sights set on debt freedom.
4. Allocate Funds to Debt Repayment
There’s no secret to debt repayment, you repay as much as you can without sacrificing too much. You don’t want to push it so far that you get discouraged and give up on debt repayment. Remember: there’s more to life than money!
Try approaching the repayment like this:
- Aggressively cut out any spending you don’t need and funnel that toward debts
- Take on gig work or a part-time job to get more income that goes right to the debts
- Sell things you no longer want or need for quick boosts + use windfall money to reduce debts
Automating the debt repayment has helped many because it’s out of sight and out of mind. Do whatever’s most comfortable with, and whichever makes sense to your attack plan.
Create the Lifestyle You Want to Live
It takes a bit of sacrifice and lifestyle adjustment but becoming debt-free is worth it. The lifestyle options granted after successfully completing a payment plan is liberating. Like you’ve seen in this post… it’s very possible!
Create the lifestyle you want to live by getting active in its influences and design.
Check out some of the other lifestyle guides and insights here on the site. These lifestyle pieces are bound to spark the inspiration many of you need to do something great!
