7 things smart people do now to get out of debt soon

Business Insider

29-05-2025

If you're not earning a lot, getting out of debt may seem out of reach — but it's not impossible.
From automating payment to deciding on a debt payoff strategy to avoiding extreme budgets, smart money moves can help you get out of debt soon, regardless of how much you earn.
1. Automate your debt payments
Setting up automatic debt payments is a great first step to paying off debt.
"Set up regular payments from your checking account right when you get paid to pay down your debt," says Bobbi Rebell, CFP and personal finance expert with BadCredit.org. "If the money goes to the debt first, you won't be able to spend it elsewhere."
Next, work on increasing how much you can put toward debt.
"Focus on freeing up more of your money so you can increase your debt payments," she continues. "Small modifications add up and can make a huge difference in not only paying down debt but preventing future debt that has a nasty habit of creeping up the minute we let our guard down."
2. Decide on a debt payoff strategy
And you can't just decide to pay off debt. You need a strategy, experts say.
"There are a few common approaches to paying off debt regardless of income: avalanche, snowball, and consolidation," says Sabino Vargas, CFP, Senior Financial Advisor at Vanguard.
The avalanche method focuses on paying off debt with the highest interest rate first while making minimum payments on other debt, he explains. For the snowball method, you pay the debt with the smallest balance first while making minimum payments on the other debts. Once that debt is paid off, you reallocate payments to the next lowest balance, and so on.
Debt consolidation might be an option for people with a significant amount of debt, and it could save on interest. "In this method, you combine multiple debts into a single loan, often with a lower interest rate, leaving you with one monthly payment to manage," Vargos says.
3. Be lazy. Yes, really!
"One of the most powerful things you can do is to be lazy and do less," Rebell says. "What I mean by this is just don't motivate yourself to go out for coffee. Instead, make it at home or just skip it. Spot something you want on Instagram? Before you buy, tell yourself you will come back to it later, and you may. Or you may not."
Another "lazy" tip that can help eliminate debt? Don't store your credit card numbers on your devices.
"[This] will force you to make the effort to put in the numbers each time. And hopefully you will … take the lazy way out and just not bother!" Rebell says.
4. Avoid extreme budgeting
Sure, sticking to a budget is one way to properly allocate money to paying down debt, but it won't work if that budget is too restrictive or extreme, which Rebell says could backfire.
And that cliché about millennials not being able to afford to buy a house because of their penchant for avocado toast or fancy coffees? Not accurate, says Alex Moore, Vice President and Financial Advisor at Wealth Enhancement.
"Skipping lattes or avocado toast alone isn't going to pay off your student loans," he says. "The average American spends $2,091 a year on eating out and $2,050 a year on entertainment. The math doesn't work out.
"What will have an impact is tracking and being intentional with each dollar you spend. I prefer cash because it forces you to think about each purchase and decide if the spend is worth it," he says. "Sometimes you really do need a latte to get through the day, and that's OK."
5. Don't ignore the rest of your finances
Even if your main focus is paying off debt, don't ignore the rest of your financial picture.
First, pad your emergency fund so that next time an unexpected expense pops up, you won't be forced to put it on a credit card.
"Three months of expenses is the typical number," Moore says. "Without that cushion, you'll end up accruing new debt as you pay off old debt. The emergency fund gives you some margin for error if an unexpected expense pops up, even if it's not mathematically the most effective use of the dollars. Reduce your spending and get your emergency fund set up first before you begin aggressively paying off the debt."
It's also wise to balance debt payment with saving and investing. Vargos warns against forgetting about your employer-matched 401(k).
"When it comes to saving and investing, continue to save toward your retirement plan so you can take advantage of your employer's match program and not leave money on the table," he notes.
6. Know your debt
Assess the type of debt you have. If it's high-interest debt from credit cards or personal loans, focus on paying that off before investing or saving, since those high interest rates cause your debt balances to grow more quickly.
"Take the time to understand the math of your debt. That means knowing how much you owe and the interest rate, aka the cost associated with that debt," Rebell says.
And think about your debt's interest rate versus the rate of return on your investments.
"If the projected rate of return is higher than the interest rate, consider allocating more money toward investments or saving in higher-yielding accounts," Vargos says.
And when it comes to getting serious about paying off debt, high earners aren't immune.
"When I encounter debt, it's typically with high-income, high-debt folks," Moore says. "For them, the challenge is accepting that they need to reduce their lifestyle. It's a bitter pill to swallow when your friends are going on expensive vacations and you're not. The process of paying off debt is as much psychological as it is numerical."
7. Know when it's time for professional help
If you have more than $7,500 in unsecured debt (such as credit card debt, personal loans, and medical bills) and are feeling completely overwhelmed, you might consider a debt relief company.
Debt relief companies provide a service called debt settlement, where they negotiate with your creditors to settle your debts for less than the amount you originally owed. Once enrolled in a debt relief program, you make one monthly deposit into a dedicated savings account where you build up funds for settlements. Each time the debt relief company negotiates a settlement with a creditor (and you've approved the terms), both the settlement amount and the debt relief company's fees are paid from your dedicated account. This process continues until all your enrolled debts are resolved, usually 24-48 months.
Note that even though the debt relief company is negotiating with your creditors, it can't guarantee results. You don't pay the debt relief company fees for their services until they've negotiated a settlement and you've approved it. The process may damage your credit score — but not as much as bankruptcy.