3 Critical Tools for Paying Off Debt

by Gary Foreman

Before you come up with a strategy for reducing your debt, take a look at these three critical tools for paying off debt. They can help make your debt-reduction endeavors a success.

This is the time of year when many people look at their debt situation and shudder. They dream of what it would be like to be out of debt. And, if they’re brave, they begin to plan a strategy to reduce the amount of debt they carry.

They’ll begin with high hopes. But many of them will quit before reaching their goal. Disappointed and discouraged. Defeated.

Is there something that they could have done differently that would have given them a better chance at success? I think so. If you watch people long enough, you’ll see patterns and learn lessons. Let’s examine some of those lessons.

You can find all kinds of advice about how to get out of debt. The internet is full of the stuff. But, when you boil it all down, three things form a foundation for a get-out-of-debt effort.

Tool #1: Time

First, don’t expect immediate results. You won’t be getting out of debt in a matter of days or weeks. The only way to eliminate your debts quickly is to inherit a large sum of money, win the lottery or declare bankruptcy. The first two are unlikely. The third may remove debts quickly, but you’ll suffer with a lower credit score for years to come.

Recognize that it will probably take about as long to get out of debt as it took you to get into it. You can speed up the process, but you won’t eliminate debt that took 10 years to accumulate in 10 months. You can shorten the time by being aggressive in your payback plan, but it will still be a long process.

What’s the takeaway? You need to be prepared for a marathon. This is not a sprint. If you’re prepared for the long haul, you won’t be disappointed and discouraged when a year passes and you haven’t eliminated all your debts. You’ll expect a long battle and be ready to fight it.

Tool #2: A Good Plan

Second, because it’s a long process, you need a good plan. A good plan will stand the test of time. The longer you work with a good plan, the more you appreciate its usefulness.

There are a number of good plans readily available. You may find that one is particularly well-suited to your situation. Any good plan will have a number of characteristics.

• It will include all your debts. That’s important to help you see the whole picture.
• It will help you evaluate exactly how bad your debt situation is. Not only will you know how much you owe, but you’ll know how much it’s costing you in interest each month/year.
• It will include a priority of which debts to pay off first. Smallest to biggest? Highest to lowest interest rate? Some combination of the two?
• It will let you know how much money you’ll have each month to repay debts.
• It will free you from having decisions to make each month. You know how much money you’ll have and which debt is being reduced first. The decision is already made. It’s just a matter of executing your plan.
• It will allow you to calculate an approximate date that you’ll be debt-free.
• It will help you monitor your progress. You should be able to predict where you’ll be six months from now. And, then compare your actual results to that prediction.
• It will take your personality into account. Some people need the motivation of seeing many small accounts being repaid quickly. Others are happier watching the average interest rate they’re paying decrease each month. A good plan will be tailored to your personality.

A good plan will do all those things. Some offer other bells and whistles. But any good plan should do all of the above things. If your plan doesn’t do them, keep looking for one that does. This job is hard enough with a good plan. Don’t weigh yourself down with a bad one.

Tool #3: Motivation

Finally, the third tool is to find a way to keep yourself motivated throughout the process. Once again, you’ll need to know what would encourage you when you’re thinking of quitting.

For some people, rewards along the way work well. Perhaps a nice dinner or that coffee maker you’ve wanted would be a good reward when your car loan is repaid. Knowing that a reward is within reach could be enough to keep you going.

For others, one big reward at the end is the best motivation. I know of people who’ve wanted to go on a cruise for years. They’ve added the cost of the cruise to their debts. And when it’s all paid off, they’ll be packing their bags. To remind them now, they’ve posted pictures of cruise ships around the house as a continual reminder.

Getting out of debt is a tough challenge. But a worthwhile one. And one that you can accomplish with the right tools and sufficient determination!

• 6 Legit Ways To Pay Off Debt Quickly
• Reduce Your Debt With a “Sinking Fund”
• Debt Consolidation: Is It a Good Deal?
• Do You Have a Relationship With Debt?
• The Rule of 72 (or How To Easily Double Your Debt)

Reviewed December 2023

About the Author

Gary Foreman is the former owner and editor of The Dollar Stretcher. He's the author of How to Conquer Debt No Matter How Much You Have and has been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.