How to Create a Doable Debt Payoff Plan


Pay off debts


‘Debt is the worst poverty’ – Thomas Fuller

Having debts to pay is one of the biggest sources of stress. It can be daunting to think of a payoff plan when you are overburdened with debts. But nurturing a sincere interest to be debt-free is the first step in any plan.

Decide to be debt-free forever with this practical 6-step strategy for paying off all your debts:


1. List down ALL your debts

The very first step towards financial independence is to list down all your debts. This will help minimise nebulousness and you will understand your financial position accurately, along with facts and figures.

To make the list effective and useful, break down the list into the name of the debtor, amount, rates of interest and due payments.


2. Now start paying off the debt with the highest interest rate… 

…OR smallest one first – whichever gives you the biggest psychological boost to shift. A small loan with a high interest rate can spiral into a big amount in a smaller period of time. So after you have listed out your debts, start by paying the one that charges the steepest rate (not necessarily the biggest sum).

It pays to remember that credit cards are invariably associated with the highest interest rates and should be cleared off as soon as possible. This will help reduce the total cost of your debts.


3. Calculate your discretionary income

Discretionary income is calculated by first listing out all your sources of income like salary, rent, council tax, etc and then deducting necessary expenses. The remaining amount is called discretionary income. As far as possible, try to maximise the amount that you can pay towards debt.

You can free up cash to pay off your debt without making dramatic changes to your lifestyle.


4. Examine all the ways in which you can save money

Cancel unnecessary memberships and look for discounted deals for internet, phone and TV services. After the initial few weeks, curbing money wastage will become a consistent habit.


5. Transfer the payments from cleared debts onto outstanding ones

Once you have paid off debt 1, transfer all the money that you were originally paying towards debt 1 into debt 2. This will help you plug the other debts faster and will prevent wastage of money.


6. Keep updating your debt repayment plan

Regularly update your payment plan as you keep paying in your debts or when you need to factor in changes such as payrises. This will help you get a clear picture of the amount that is still remaining.

Creating a practical, consistent debt payoff plan helps you eliminate debt and save money.




  1. says

    I’m so glad you mentioned the psychological aspect and gave people the choice on which path to follow. I often say that the best plan is the one you’ll actually stick to… and if it takes a little bit of psychological trickery to make that happen, then so be it 🙂

Leave a Reply

Your email address will not be published. Required fields are marked *