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How to pay off debt

Carrying debt is often compared to carrying a weight — and it’s a weight that feels even heavier as questions ramp up during uncertain times.

  • Should you save more money or pay off debt?
  • Is your credit score impacted if you don’t make minimum payments?
  • When debt feels like it’s pressing down, how do you begin to get out?

Katie Scofield answers questions like these for a living — literally. As Numerica Credit Union’s financial education officer, she has even written the workbook on paying off debt.

She wrote it from experience. After making “every money mistake I could,” Scofield paid off $78,000 in debt by committing to a simple strategy.

Every situation is different, and it takes time and dedication to pay down debt. But there is hope — a tried-and-true recipe for tackling debt that has liberated Scofield and thousands of others.


Launch your own debt-free success story with Numerica’s workbook!

Paying off debt


Here are 5 steps for achieving this freedom:

  1. Start with your why
  2. Use a budget
  3. Stop adding new debt
  4. Roll a debt snowball
  5. Celebrate every win

Start with your why

There is a heaviness to debt that weighs down the present while casting a shadow on future dreams. You can try to compartmentalize or ignore it, but it’s best to face it head on and be honest about the cost — not just in interest payments, but in life.

“What’s your why?” Scofield said. “The very first thing is to realize there is a problem and decide there is a reason to do something about it. You might have to get mad about it, too.”

Whether it’s health, relationships, or retiring early, write down why you are ready to get serious about tackling debt. This is your north star.

Once you have your answer, there are two common hurdles (among several) that can keep people from charging out of the gates: hopelessness and an aversion to sacrifice.

How do I get out of debt if I’m living paycheck to paycheck?

When you’re living paycheck to paycheck, it can be hard to feel hopeful about your situation. It can be particularly dispiriting when you compare yourself to neighbors who seem to be living the good life.

Not so fast. For every 10 households in your neighborhood, statistically 8 of them are living paycheck to paycheck. (You know the Joneses you are always trying to keep up with? They are probably one of them.)

Paycheck-to-paycheck living is often connected to at least a few splurges you really can’t afford.

“You have to decide you don’t want to live like that anymore,” Scofield said.

What sacrifices do I need to make to get out of debt?   

Sacrifice isn’t a popular word in our have-it-all culture, and part of why it gets a bad rap is FOMO — that fear of missing out.

Sometimes, it helps to turn FOMO on its head: What will you miss out on if you don’t make this sacrifice?

Don’t miss out on better relationships.
Has debt caused conflict in your marriage? Marriage.com sites money as the second most common reason for divorce after infidelity. The health of your most important relationships is improved when the stress of debt is removed from the equation.

Don’t miss out on productivity and peace of mind.
A 2019 report from the Filene Research Institute links personal financial stress to workplace performance.

It makes a comprehensive case that employees stressed about personal finances have a higher degree of absenteeism and struggle with cognitive ability, productivity, and basic physical health.

A study by global business research consultant Mercer calculates that about 5% of a company’s payroll is at risk of being spent on employees distracted by their finances during work hours.

Don’t miss out on better physical health.
Scofield said she knows firsthand the connection between financial and physical health. She said she physically can feel the difference between debt-burdened and debt-free.

So it’s worth it, but there is real sacrifice involved.

“You are going to have to sacrifice,” Scofield said. “There are things you are going to have to say no to. But it works. With planning and sacrifice, it really works.”

For some, that might mean a “beans and rice”-style food routine. For others, it might look different.

“When my husband and I decided to make the change, we cut way back on things that were wants, not needs,” Scofield said. “We sold a car he wanted to restore. I stopped all subscriptions, getting my hair and nails done, and eating out, among other things.”

Use a budget

It’s nearly impossible to pay off debt without a budget. Creating a budget helps you get an idea of where your money goes each month so you can determine how much you have available to put toward reducing your debt.

“The budget is your tool for spending; it gives you permission to spend,” Scofield said. “But if I’m paying X amount of dollars to coffee or subscriptions or gym memberships I don’t use, can I take that money and reallocate it to my debt?”

Can you downsize the cable bill or cut back on eating out? A budget is a blueprint to help you do this.

A budget also lists your monthly debts. Listing out your debts in your budget will give you a better idea of where your money is going. Typically, your mortgage is the last debt you will pay off.

Perhaps the trickiest part about a budget is actually using it. Scofield said 76% of Americans claim to have a budget. Compare that with the similar number living paycheck to paycheck. Your budget is a living, breathing, real-time money tracker that should be consulted and updated regularly.

Stop adding new debt

Henry Wheeler Shaw said, “Debt is like any other trap — easy enough to get into, but hard enough to get out of.”

One of the main ways this trap keeps people confined is that debt has a way of multiplying. Don’t rely on credit cards or loans to make ends meet — that just adds more debt. Break the habit by comparing your budget to your spending habits regularly, and take action on what you see.

Leave your credit cards at home to reduce temptation. Make purchases with cash or a debit card. Pay your recurring bills with your financial institution’s bill pay service. The bottom line is to only spend the money you have.

“You can’t pay off debt if you are still accruing new debt,” Scofield said. “I love nice cars. I love nice things. But at what point do you say, ‘I want to retire when I’m 50. That means I must stop creating debt.’"

Roll a debt snowball

Have you ever had debt grow like a snowball rolling downhill? The good news is getting out of debt can work much the same way.

Start by organizing all of your debt from smallest to largest. List everything — from credit cards to mortgages. Next, scour your budget for those savings you identified earlier. Consider a side hustle or yard sale to help jumpstart the process. Now that you’ve identified a pool of money for your initial snowball, you’re ready to start.

What debt should be paid off first?

Apply every dollar you can spare to your smallest debt balance while making minimum payments on everything else. Do this each month until your smallest debt is paid off, then roll that into the next-smallest debt.

Should I consolidate my debt?

Scofield said she typically counsels against debt consolidation, which acted more like a Band-Aid than a cure in her experience.

“I have consolidated debt personally six times, and I have racked back up credit card debt,” she said. “Next thing I knew, I was $20,000 in new debt. Your behaviors and lifestyle have to change, or the same thing will continue to happen.”

Tips to help the snowball grow

Here’s how snowball magic happens. Every time a debt is retired, the entire payment owed to the previous debt can now be applied to the next largest debt.

In addition to this, apply any extra money like bonuses, pay increases, or sales of a big item directly to your debt snowball. Every extra dollar helps your snowball move faster to get you out of debt.

Celebrate every win

While the ultimate goal is being debt free, each step along the way is worthy of celebration. After all, every month you pay down debt instead of add to it shows how you are actively flipping the script.

So find ways to measure your progress, such as a paper chain or thermometer that helps you visualize the goal. Every time you reach a milestone, find a free way to celebrate. Call a friend who is cheering you on. Hike a hill and scream out your accomplishment. Throw a dance party.

The point is progress. The money being paid toward debt today will one day go in your pocket, yours to keep. That’s what you call a celebration.

Ready to get rolling toward a life without debt? Download the workbook.

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