Habits That Will Help You Pay Off Debt

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Dealing with debt can be challenging and stressful, but you're not alone. As of December 2021, Americans held a collective $108.3 trillion in revolving debt, much of which is credit card debt.

Creating a plan to pay off your debt is the first step toward debt freedom, but you can do more to ease the process. Adopting healthy financial habits will help you get out of debt and improve your overall finances. Not sure which habits to change? Try one of these strategies that will work for people with any amount of debt.

Key Takeaways

  • Simple habits can make a big difference in your progress toward paying off debt.
  • Making and sticking to a budget is essential, and budgeting apps can make it as painless as possible.
  • Making a habit of putting extra cash toward your debt can help you pay off those balances faster.
  • Setting goals and celebrating each step toward them can help keep you motivated to become debt-free.

Create and Use a Budget

Establishing a budget sets a solid foundation for your finances. In addition to helping guide your spending decisions, a budget can also give you a firmer grasp on how much money you have going in and out each month. Looking at it closely can help you discover areas where you can free up money—and then use this “extra” cash to pay down debt faster.


The 50/30/20 method is a common budgeting strategy in which you allocate half your budget toward essential expenses, 30% toward wants, and 20% toward debt and savings.

While you can create a budget in a notebook or on a worksheet, using a budgeting app may make it easier to stay on track. In addition to helping you set your budget categories and projected expenses, an app can track your spending throughout the month and let you know where you stand at all times. Some of the best budgeting apps include additional features like bill tracking, spending alerts, or investment management.

Build Emergency Savings

Having an emergency fund is critical for staying out of debt. Without access to emergency savings, you may have to turn to credit cards or loans to cover unexpected expenses.

While prioritizing your debt payments is important, you don't have to choose between paying off debt and saving money. You can—and should—do both, even if you don't have a lot of extra cash after bills and expenses. It all adds up, and these strategies can help you save a few dollars at a time:

  • Set up recurring automatic transfers to a savings account.
  • Use bank programs that round up each debit transaction and move the difference to savings.
  • Split your direct deposit paycheck into multiple bank accounts. 

Make Extra Payments

Paying more than the minimum is key to saving money on interest and eliminating your debt years ahead of schedule. Using a strategy like the debt snowball or debt avalanche is more effective than spreading larger payments haphazardly among all your debts. Both debt-payoff methods require you to make larger lump-sum payments toward a target debt while paying the minimum on your other debts. With the debt snowball, your target debt is the one with the lowest balance. The debt avalanche, on the other hand, targets the debt with the highest interest rate.


You don't have to commit to one strategy for your entire debt payoff process. For example, you might start with the debt snowball to get rid of a few small balances, then switch to the debt avalanche for your remaining debt to minimize the overall amount of interest you’ll pay.

Making extra payments toward your debt reduces your balance much faster and accelerates your debt payoff process. Anytime you get a lump sum of extra money, like a tax refund or a bonus, consider putting at least a portion of it toward your debt.

Set Goals

While paying off your debt likely ranks pretty high on the list of things you want to accomplish, it doesn’t have to be your only financial goal. In fact, setting other goals can help you stay motivated to work on your finances. For example, you may have dreams of buying a home, taking a luxury vacation, or building your savings up to $10,000. 


Showcase your goals in a place where you see them often, like on a vision board or your phone’s background. Seeing them can remind you why you’re working so hard and inspire you to keep going.

Celebrate Small Wins

Even with a solid strategy and extra payments, paying off debt can take a long time. It's important to recognize and celebrate your progress along the way as you make strides towards your goal. Even seemingly small things, like paying off a balance or reaching $1,000 in your savings account, are worth celebrating—and can help motivate you to work toward the bigger wins.

Seek Assistance

You don't have to go through your debt journey alone. You can find support from online groups, social media, or like-minded friends. Facebook groups, Reddit forums, and Instagram hashtags are good ways to connect with other people who are working to get out of debt. You might also reach people who have paid off their debt and are willing to help others on their path to debt freedom.

If you're having difficulty making your minimum payments, consider getting professional help through a reputable consumer credit counseling agency. These firms can help you create a budget, make a plan to pay off your debt, or work with your creditors. A credit counselor can negotiate lower interest rates and minimum payments. They can also create a debt payment plan that helps you tackle your debt once and for all.

The Bottom Line

Establishing better financial habits takes time and practice, and with consistency and time, you'll get better at it. And the sacrifices you're making today will feel worth it when you’re enjoying the rewards of your hard work: a $0 debt balance and healthy progress toward your financial goals.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Board of Governors of the Federal Reserve System. "Consumer Credit - G.19."

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