If you are juggling credit cards, loans and bills, it is easy to feel like money is happening to you. The good news is that a clear debt repayment plan turns a vague worry into a list of small, doable steps. You do not need to be a maths person or earn more money to start. You just need to know what you owe, decide where your extra money goes, and track it.
This guide walks you through six simple steps to build your own plan today.
Why a plan works better than willpower
Paying off debt "when you can" rarely works, because there is always something else that needs the money first. A plan decides in advance where every spare pound, dollar or euro goes, so you are not making the same decision again every payday.
A good plan also helps you see progress. Watching balances shrink, even slowly, is what keeps most people going.
Step 1: List every debt
Start by getting everything on paper (or in a spreadsheet). For each debt, write down:
- Who you owe
- The current balance
- The interest rate (often shown as APR)
- The minimum monthly payment
- The due date each month
Include credit cards, store cards, personal loans, car finance, overdrafts, buy now pay later balances and anything you owe to family or friends. Use your latest statements or log in to each account rather than guessing. It can feel uncomfortable, but facing the real total is the most important step, and it is usually less scary than the number you have been imagining.
Step 2: Work out your monthly numbers
Next, find out what is coming in and going out each month:
- Your income after tax
- Your essentials: housing, utilities, food, transport, insurance and childcare
- The minimum payments on all your debts
Subtract the last two from your income. What is left is the money you could put towards paying debt down faster. If the number is zero or negative, do not panic. Move on to the next step, and see the section on getting help at the end of this guide.
Step 3: Find extra money
Even a small extra payment makes a difference, because it goes straight at the balance. Look for two or three changes you can realistically keep up, such as:
- Cancelling subscriptions you do not use
- Cutting back on takeaways or impulse buys for a few months
- Switching providers for phone, internet or insurance
- Selling things you no longer need
- Putting one-off money, such as a tax refund or bonus, towards debt
Be realistic. A plan that is too tight is one you will quit. A small amount you can sustain beats a big amount you cannot.
Step 4: Choose your payoff method
The two most popular methods are the snowball and the avalanche. In both, you pay the minimum on every debt, then put all your extra money on one "focus" debt. When that debt is cleared, you roll its payment into the next one.
- Snowball: focus on the smallest balance first. You clear debts quickly, which can be very motivating.
- Avalanche: focus on the highest interest rate first. This usually costs less interest overall.
Here is an example. The amounts are only illustrations.
- Store card: balance 400, interest 18%, minimum 20
- Credit card: balance 2,500, interest 27%, minimum 75
- Car loan: balance 6,000, interest 7%, minimum 150
With the snowball, you would tackle the store card first, then the credit card, then the car loan. With the avalanche, you would tackle the credit card first (27%), then the store card (18%), then the car loan (7%).
Which is better? The one you will stick with. If you need early wins, start with the snowball. If you are motivated by saving money, choose the avalanche. Some people clear one tiny debt for a quick win and then switch to the avalanche.
Step 5: Set up your system
A plan only works if it runs without much effort:
- Set up automatic payments for your minimums so you never miss a due date
- Schedule your extra payment for just after payday, before the money gets spent
- Keep one place where you track balances and log every payment
- Build a small starter buffer so one surprise bill does not push you back onto a card
Step 6: Review monthly and celebrate progress
Once a month, take 15 minutes to update your balances, check how much you paid and adjust if your situation has changed. Looking at the numbers regularly keeps you in control.
Also mark the milestones along the way, such as your first 10% paid off, your first cleared debt and the halfway point. Pick a small, low-cost reward for each. It sounds simple, but celebrating progress helps you keep going when it feels slow.
Common mistakes to avoid
- Leaving a debt off the list. Your plan is only as good as your information.
- Paying only the minimum. Minimums are designed to keep you in debt for a long time.
- Making the plan too tight. Leave a little room for life, or you may give up.
- Adding new debt while paying off old debt. Try to keep new borrowing to a minimum.
- Ignoring fees and interest. Know what each debt really costs you.
- Skipping your monthly review. Small problems are easier to fix early.
When to ask for help
If you cannot cover your minimum payments, are receiving letters or calls from lenders, or feel overwhelmed, speak to a free, independent debt advice service as soon as you can. Many people wait too long, and help is available. In the UK, services such as StepChange, Citizens Advice and MoneyHelper offer free guidance. In the US, the National Foundation for Credit Counseling can point you to nonprofit credit counselling. Availability differs by country, so look for a reputable, free or nonprofit service where you live.
Make it easier with a planner
You can do all of this with pen and paper, but it is easier when everything is in one place. The LevelGrow Debt-Free Journey Planner is an interactive Excel template designed for Microsoft Excel. You can list your debts, choose snowball or avalanche, see your repayment order, log your payments, plan your budget and track milestones. Choose £, $ or € on the Settings tab and every heading follows.
It is a digital download, so you can start straight away. View the Debt-Free Journey Planner.
Prefer an app to a spreadsheet? The LevelGrow Debt-Free Journey Tracker is an online app that lets you track your debts, log your payments and see your estimated debt-free date. It opens in your web browser, so there is nothing to install. View the Debt-Free Journey Tracker.
Want help with the budget side too? The Paycheck to Paycheck Budget Planner is an Excel template for planning your money between paydays, so you can see how much you have left to put towards your debts. View the Paycheck to Paycheck Budget Planner.
Browse more: Money & Budget Planners | Online Apps.
The bottom line
You do not need a perfect plan, you need a clear one. List your debts, find your monthly numbers, pick a method, automate what you can and check in once a month. Small, steady steps add up, and every payment gets you closer to being debt-free.
This article is for general information and organisation only. It is not financial or debt advice, and results will vary depending on your circumstances. If you are struggling with debt, please speak to a qualified, independent adviser.