How to Get Out of Debt: A Step-by-Step Guide for 2025

If get out debt step is on your radar, this short guide cuts through the noise. Here is what is worth knowing, and how to put it to work today.

Key Takeaways

• How to Get Out of Debt: A Step-by-Step Guide for 2025 We all know the basic principles of how to get out of debt.
• Spend less than you make and put any extra cash towards your debt.
• But, in practice, organizing what you need to tackle first and how to get started can be overwhelming.

How to Get Out of Debt: A Step-by-Step Guide for 2025

We all know the basic principles of how to get out of debt. Spend less than you make and put any extra cash towards your debt. But, in practice, organizing what you need to tackle first and how to get started can be overwhelming.

Written by Chelsea Brennan, CFEI® Last Updated: April 30, 2025 Reviewed by Jeff Proctor

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We all know the basic principles of how to get out of debt.

Whether you’re broke, have a low income, or have bad credit, the steps are all the same. Spend less than you make and put any extra cash toward paying off your debt.

In practice, though, organizing what you need to tackle first, and knowing how to get started can be overwhelming. It can leave you feeling trapped and prevent you from getting started altogether.

To help you on your way to financial freedom, we’ve put together this simple, step-by-step guide to help you build a debt payoff plan. It doesn’t matter if you have no money or your income is low. Even with bad credit, you can still put this guide to good use.

Let’s walk through the steps to help you get out of debt once and for all.

Step 1: Find Out How Much Debt You Owe

You can’t develop a debt payment strategy until you know exactly what you’re up against.

It’s time to gather up all your debts - from that $40 store credit card balance to your $30,000 car loan - and put it all in one place.

Write down the debts you have, how much you owe on each, the interest rate, and the minimum payment.

If you aren’t sure about the interest rate, take the time to open your accounts to find the exact number. High-interest rate debt is a bigger drag on your success than low-interest debt, so you need to know which is which.

Totaling it all up in black-and-white may be scary, but you’re getting ready to cut that number down! Promise yourself that is the highest your debt number will ever be.

Step 2: Choose Your Approach

Once you know exactly how much you owe, it’s time to put a plan together for how you’re going to get out of debt.

Throwing money at a different debt every month, without tracking your progress, is a surefire way to burnout. You’ll feel like you’re spinning your wheels and will give up too soon.

The best way to pay down debt is to focus on one piece of debt at a time until that is entirely paid off. In the meantime, make only minimum payments on the other debts.

This gives you milestones to celebrate, motivates you to keep going, and keeps you organized along the way.

So the question is, how do you decide which debt to pay off first?

There are two main philosophies when it comes to making this choice: the “Debt Snowball Method” and the “Debt Avalanche Method.”

Debt snowball method

In a nutshell: Prioritize your debts from smallest to largest, ignoring interest rates.

Remember making snowmen as a kid? You would start with a small snowball, then roll it along the ground, picking up more snow until you had a massive snowman belly. That’s the concept behind the debt snowball.

With the debt snowball, you start by paying off your debt with the smallest balance, regardless of the interest rate.

While you pay off that debt, you make minimum payments on all the others.

Why is it called the debt snowball? Because the amount you put toward the principal (your balance) snowballs every month. You keep putting the same amount of money toward your debts, even as you pay each one off, increasing the amount that goes toward the principal over interest.

Debt avalanche method

In a nutshell: Prioritize your debts from the highest interest rate to the lowest, ignoring size.

The methodology of the debt avalanche is similar to the debt snowball, except that with this method, your goal is to minimize interest costs. No extra profits for those greedy creditors from you!

With the debt avalanche, you start by paying off the debt with the highest interest rate, regardless of size.

Then move on to the debt with the next highest interest rate.

Why an avalanche instead of a snowball? By eliminating high-interest costs first, you put more of your cash toward actual principal over time. This means getting out of debt somewhat faster (and cheaper).

Decide which debt you will tackle first

What’s more key to you? Getting quick, early wins by paying off small debts, or paying the least amount of interest?

Both the snowball and avalanche methods have their benefits. And while the debt snowball isn’t mathematically the cheapest way out of debt, it is one of the most effective. Pursuing a debt-free life can be a long process, depending on where you are starting. Paying off a few debts early on can really get you excited to keep going.

Action Item: Choose whichever method sounds best for you, then organize your debts in that order. After, you’re ready to start making payments.

Step 3: Make Some Big Changes

While small, day-to-day changes matter, a few big changes can fast-track you to getting out of debt. Consider these ideas and decide whether the expense they represent is truly worth it to you.

Get rid of your credit cards

Are credit cards burning a hole in your pocket? It may be time to cut them up.

If credit card debt is part of your problem, sticking to cash and debit cards can help you reset your spending mindset. Nothing is more discouraging when you’re paying off debt than realizing you increased it accidentally with an impulse credit card purchase.

Once you are officially debt-free and used to spending less than you make each month, you can revisit the issue. In the meantime, credit card rewards don’t offset interest charges.

Sell your car

Have a hefty car payment? Consider selling your car for a cheaper, used model to eliminate the debt and reduce your insurance costs.

Look for good used car deals outside of new car dealerships. You’ll have more room to haggle with private sales and at independent, used car dealers. Just be sure you have a good mechanic look over the car before you purchase it.

Don’t have a car payment? Decide whether your family can get by with one car instead of two. Dropping your spouse off at work in the morning might feel like a hassle, but if that extra 15 minutes saves you $500 a month, it might be worth it.

Stop investing (for now)

Saving for the future is essential, but when you have expensive debt that is holding you back, you need to set your priorities. Pulling back on investing in the short-term can put you in a better position to invest adequately in the future. View each dollar you save in interest cost as a dollar wisely invested.

Note: We would never recommend cutting your 401(k) contributions to a point where you don’t receive your full employer match. That’s free money, and the instant return is more than worth whatever you are paying in interest.

Cut cable

Today, you can watch most of your favorite shows online, and even notable sporting events are offering free streaming options.

We watched the Super Bowl last year via Amazon Prime.

If you haven’t cut the cord yet, it’s time! Traditional cable packages run over $100 a month and can be a major drag on your goals - be conscious of how numerous streaming services you sign up for, though.

Sell your unused stuff

We could all do with a bit of minimizing. But instead of heading to the dumpster with your kids’ old toys and that ice bucket Aunt Marge sent you, list them for sale on Gazelle, OfferUp, or Craigslist.

On average, people have over $1,000 worth of stuff in their house that they don’t use. When we went through our minimizing process, we sold over $1,200 of books, toys, extra kitchen gear, and more.

The fringe benefit of this exercise? You realize how numerous things you’ve paid good money for that you didn’t really need. That tough reality makes it easier to say no to spending in the future.

Related: How to Make the Most Money Selling on Craigslist

Step 4: Create a Monthly Budget

Want to know how much you can put toward debt each month? You’re going to need a budget.

A reasonable budget lets you you understand where your money is going. It alerts you to where cash is leaking out to things that don’t really matter to you. And it clues you in on how much you can afford to spend on the things you do want.

By building a budget thoughtfully and allowing yourself some flexibility, you can reduce money stress by knowing there is always money in the bank for the things you need.

How to make a budget

Before you dive in, remember one thing:  the budget you create today is not set in stone.

Your categories, spending, and habits w

Final Thoughts

The bottom line: a little research on get out debt step goes a long way. Compare your options, watch for seasonal offers, and never pay full price when a better deal is one click away.

Originally published at dollarsprout.com.