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6 Strategies That Can Help You Become Debt-Free

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In a Nutshell

Living debt-free will improve your credit score and expand your opportunities for housing and jobs. It doesn’t take long to accumulate debt, but it can take time to pay it down. Keep reading to learn the steps and strategies you can use to get started on your way to a debt-free life.

Written by the Upsolve Team.  Reviewed by Attorney Andrea Wimmer
Updated August 4, 2021


Living debt-free will improve your credit score and expand your opportunities for housing and jobs. It doesn’t take long to accumulate debt, but it can take time to pay it down. That’s because interest charges pile up on top of the original debt amount. If you have several credit cards, or even just a couple, those interest charges can add up quickly. You’ll need to do more than make minimum debt payments if you want to be debt-free. Keep reading to learn the steps and strategies you can use to get started on your way to a debt-free life. 

Step 1: Avoid new debt. 

The first thing you can do to stop your debt from accumulating is to stop using your credit cards. Credit cards are convenient, but new charges mean more interest, and spending too much may harm your credit score. Debit cards from banks and credit unions can give you the same convenience as credit cards, and they don’t tack on those high extra interest charges. If you don’t have overpayment protection, you can only spend what you have. If you have overpayment protection, consider stopping the service so you don’t get stuck with extra fees if you overspend on your account. 

You may need to use a card for an emergency, but if at all possible, use cash instead. Cash guarantees you have the money for the purchase and you won’t be stuck with hidden fees or interest. Wouldn’t it be nice to watch your credit card balance go down?

Step 2: Get your personal finances organized.

Simply stopping new charges is a quick first step, but if you’re serious about living debt-free, you’ll need to get your personal finances organized. For many people, this is the most time-consuming step. Set aside some time to make a list of all your debts and expenses. It will help if you review your credit report and any recent bank, loan, or credit card statements. You’ll also need to make a list of your income sources. You’ll still have to pay your ongoing expenses while you pay down your debt, and it’ll be a balancing act. Once you have your personal financial information together, you can move on to the next step. 

Step 3: Start budgeting.

Once you have a list of your debts, expenses, and income, you can make a budget. You’ll want to put this in writing, or on a spreadsheet or app that you can easily access. If looking at your budget and tracking it is a pain, you’re more likely to avoid dealing with it. Choose a budgeting method that is easy for you. 

Your lists will give you an overview of what you have available to spend. A budget will turn into an action plan telling you what you can spend and where. You’ll want to look at when your major bills—housing, utilities, and car insurance—are due and write them down. You can create a daily, weekly, or monthly budget based on your income sources. Figure out exactly how much you must spend each month and where that money is coming from. If your expenses are more than your income, take time to think creatively about how you can reduce your expenses or increase your income. 

Someone living on tips may want to rely on a daily budget while someone who gets paid twice a month will find it more practical to develop a monthly budget. Think hard about your current and future financial goals. The budget should help you manage your current expenses and plan for your future. 

It’s easy to write down what bills you have in front of you, but it gets trickier when you consider the unexpected. Daily living often includes unexpected health care expenses, repair bills, and expenses for kids. A traffic ticket, car tow, or arrest can hit your budget hard. Write down a draft budget—what you’re going to pay, how, and when—but then keep track of what you actually spend over a month or two. Go back and tweak your budget after you get a good look at your actual spending. 

Stopping credit card spending, making a detailed list of your financial situation, and developing a budget puts you on a solid foundation for advanced debt reduction plans. You can now consider whether you want to add additional debt reduction strategies to your budget. Here are six to consider.

Strategy 1: Pay more than minimum payments each month.

Paying more than the minimum payment each month on your credit cards, car loans, or mortgage, will help you reach your debt-free goals sooner. Debt usually comes with interest rates. Credit cards and revolving charge accounts often have high interest rates. Because of the interest, the longer you take to pay off a debt, the more you’ll end up paying. If you can double what you pay each month, you’ll save a lot of money over the long run and dramatically reduce how much time it will take you to pay down the debt.

Strategy 2: Debt snowball method.

The snowball method is a popular way to pay down credit card debt. You concentrate on paying down your debt with the lowest balance by paying more than the minimum each month. It’s less painful than trying to tackle all your debts at once or your debts with the highest balances first. You’ll reach your first goal faster, and that can be a great motivator to help you reach your final goal of being debt-free. 

While you’re paying down that credit card with the lowest balance by paying more than the minimum, you simply make the minimum monthly payments on your other cards. Once you pay off your card with the lowest balance, you start on the card with the next-lowest balance. Eventually, all your credit card payments will add up to a $0.00 balance on your debt. Often, small steps can help you reach a big goal. 

Strategy 3: Consider ways to get extra cash into your budget for debt payment.

If you need to find money to pay down your debt, consider lowering or eliminating some of your expenses. Here are some ideas:

  • Shop around for cheaper car insurance rates.

  • Shop around for cheaper cell phone rates and internet service rates.

  • Compare the cost of cable to the cost of streaming subscriptions.

  • Use reward points to save on gas for your car.

  • Eliminate one day of food delivery or eating out.

  • Let your online purchases sit in your cart for 24 hours before you buy. Then, ask yourself if you can use that money to pay down debt instead.

You can also take a look at your utility bills. Appliances, heating, and cooling are the largest uses of electricity in U.S. homes. Utilities can eat up a quarter or more of your budget. Anything you can do to reduce your use of a washer, dryer, hot water tank, heater, or air conditioner will reduce your electric or gas bill. It’s a good habit to shut off the lights and devices when not in use but reducing your appliance use is where the big savings are. Here are a few things you can do to lower your electric or gas bill:

  • Use a crockpot, air fryer, toaster, convection oven, or microwave instead of the oven or stove when you can.

  • Plan your meals so you can defrost food in the fridge instead of the microwave.

  • Reduce your use of hot water. Will a cold-water wash give you the same results?

  • Spin your clothes twice before drying.

  • See if a dryer ball helps your clothes dry faster.

  • Hang clothes to dry if you can.

  • Turn your thermostat higher in the summer and lower in the winter.

  • Turn a room space heater or air conditioner down a notch.

  • Put some inexpensive weatherstripping in windows and door frames.

  • If you need to buy a new (or used) appliance, opt for an energy-efficient model.

  • Substitute a steam espresso machine for your drip coffee and coffee shop runs.

  • Plug kitchen appliances into a power strip that you can turn off when not in use.

Don’t put yourself in danger by making a house too hot or too cold, and don’t create more stress for yourself by trying to save pennies instead of dollars. Research your daily appliance usage and see if you can change some daily habits. Take your savings and make an extra payment toward your debt. 

You can also contact utility companies to see what payment arrangements are available that are more convenient to match your budgeting needs. 

Strategy 4: Speak to credit card companies about renegotiating your contract.

Some credit card companies will agree to renegotiate your contract. You can call your lender and ask them for a lower interest rate. If you can pay a chunk of your debt in one lump sum, you can ask the company if they’d consider a debt settlement to resolve the debt for less than what you owe. You can reduce debt faster through debt settlement if you have extra money. It doesn’t hurt to ask about debt settlement or a repayment plan. 

You can try to settle a debt yourself or hire a debt settlement company to negotiate on your behalf. Just be sure to research the debt settlement company with the Better Business Bureau (BBB) and the Consumer Financial Protection Bureau (CFPB) first to make sure they are a reputable company. 

Strategy 5: Speak to a credit professional about debt management.

There are also reputable credit counselors that can help you manage your debt and negotiate with creditors on your behalf. A nonprofit credit counselor will even offer a free first session where you can discuss the amount of money you owe and debt repayment. You can find accredited credit counselors through the National Foundation for Credit Counseling (NFCC). 

A credit counselor will help you create a debt management plan with new repayment options. A counselor will also help you create a budget, and you’ll get tips and education on personal financial management. You may or may not get the results you want, but with an accredited agency, you should at least get a step ahead of your debt. 

Be sure to check any credit counselor or debt management company you work with to make sure they are reputable. You can check the BBB, CFPB, Federal Trade Commission, and your state’s attorney general’s office to see if the credit counseling agency you’re interested in working with has had any complaints filed against them.

Strategy 6: Consider consolidating.

Debt consolidation is a strategy to reduce debt. But we saved this for last because it means you’ll accumulate new debt—which is against the debt management principle we wrote about at the beginning of this article. If you have old debt but are now in a more secure place in your life with a higher or more steady income, debt consolidation might work for you. 

The basic concept of debt consolidation is that you merge all (or some) of your loans into one bigger loan with a lower interest rate. This is often done using a balance transfer. Debt consolidation will give you one monthly payment to make for the debts you consolidated. You could end up paying less in total interest over the life of the loan if your interest rate for the new loan is lower than it was for the old loans. But debt consolidation doesn’t always come with lower interest rates. 

Your current credit score will affect your interest rate for a debt consolidation loan. If you take out a personal loan to manage your debt, your interest rate could be higher, so be sure to crunch the numbers before you decide to consolidate your debt. Review the interest rates on your student loans carefully before a balance transfer. Student loans tend to have low interest rates. 

If you’re a homeowner, a home equity loan can give you the funds you need to consolidate your debt. You’ll get a lower interest rate compared to a personal loan or credit card. Credit card interest rates often run from 15%–21%, but home equity loans tend to run 3%–12%. The long-term savings is a plus, but you risk losing your house if you default on the home equity loan. That’s a big risk, and only you can decide if it’s a risk you’re willing to take. 

Many people will consolidate debt from high interest rate credit cards to lower interest rate credit cards. While this is not a bad idea, it’s important to read the terms of the agreement in the fine print before you sign anything. Credit card companies are notorious for reeling people in by offering low or no interest. But that low interest rate often changes after a time period or if you’re late with a payment. Read the fine print. 

There’s no one-size-fits-all solution to debt consolidation. It will depend on your financial situation, ability to pay down the new debt, and current access to credit opportunities. 

Let’s Summarize…

There are numerous strategies you can use to reduce your debt and achieve your goal of being debt-free. Managing debt through debt consolidation, a debt management plan, or through the snowball payment method are just a few methods of debt relief. Don’t be afraid to reach out to a professional nonprofit credit counselor, consumer attorney, or other financial professional if you need help managing your debt. 

Consumers have over $4 trillion in non-housing debt according to a recent CFPB report—you are certainly not alone. With some education and research combined with strict budget management and healthy spending habits, you’ll be able to reduce your debt and reach your goal of being debt-free.



Written By:

The Upsolve Team

Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.

Attorney Andrea Wimmer

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Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor. While in private practice, Andrea handled... read more about Attorney Andrea Wimmer

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