Managing Debt: Paying Down Debt While Staying on Budget
A few years ago, I found myself buried under credit card debt. At first, it didn’t seem that bad. Just a little splurge here and there, nothing major. But over time, the balance grew, and with it, my anxiety. The minimum payments were barely making a dent, and I felt like I was running in circles. I knew I had to make a change, but there was a problem: I didn’t want to sacrifice my entire life to get out of debt. I still had goals, experiences I wanted to enjoy, and the freedom to live life. The solution? A strategy for paying down my debt while staying on budget, so I could work toward financial freedom without feeling like I was giving up everything I loved. In this post, I’ll share how I paid off my debt by managing it effectively and sticking to my budget.
Understanding the Weight of Debt
At first, I didn’t fully understand how much debt was impacting my life. I knew the monthly bills weren’t fun to pay, but I wasn’t connecting the dots between my debt and my bigger financial picture. When I finally sat down to add up all my debts, the number shocked me. Credit cards, personal loans, and store cards—it all added up to thousands of dollars. Debt can feel like a weight on your shoulders, making it harder to breathe, harder to plan, and harder to save. I had been paying the minimums on my credit cards for months, thinking it was enough, but that only kept me in the cycle. Debt isn’t just a financial issue—it’s emotional and mental. It creates stress, limits your options, and prevents you from building the future you want. The key to breaking free from this cycle? Changing how I viewed debt, and learning how to tackle it head-on while still living my life.
Step 1: Know Your Debt and Create a Plan
The first step to getting out of debt is understanding exactly what you owe. When I looked at all my debts together, I realized I had spread myself too thin, paying little amounts toward several balances without focusing on any one of them. I made a list of all my debts, including the creditor, balance, interest rate, and minimum monthly payment. From there, I created a payment plan.
Two popular methods for managing debt:
The Debt Snowball Method:
You focus on paying off your smallest debt first while making minimum payments on others. Once that debt is paid off, you move to the next smallest balance. This method builds momentum and motivation as you pay off each debt.The Debt Avalanche Method:
You focus on paying off the debt with the highest interest rate first while making minimum payments on the others. This saves you more money on interest in the long run, though it can take longer to see results in the beginning.
For me, the Debt Snowball Method worked better because it gave me quick wins, which kept me motivated. I used every extra dollar I could find in my budget to pay off the smallest balance first, and then I moved on to the next.
Step 2: Cut Back and Allocate Extra Funds
Paying down debt requires more than just sticking to your minimum payments—it requires making a concerted effort to pay off that debt faster. To do that, I had to look closely at my budget and find ways to free up extra money. I found that even small savings—like making my own coffee instead of buying it every day—added up. I put all these savings toward my debt repayment fund.
Here’s how I did it:
Cutting discretionary spending: I started by reducing my entertainment budget. No more dinners out every week. I swapped in homemade meals, movie nights at home, and free activities like hiking or visiting a park.
Lowering subscriptions and services: I canceled any subscriptions I didn’t absolutely need. That meant cutting out streaming services, subscriptions to magazines, and even some of the apps I didn’t use regularly.
Selling unused items: I went through my home and sold things I didn’t need—old electronics, clothes, furniture. That extra cash went straight to paying down my debt.
Step 3: Automate Your Debt Payments
One of the best decisions I made was automating my debt payments. That way, I never had to worry about forgetting to make a payment or accidentally spending the money I had set aside for debt repayment. By automating the process, I made paying off my debt a priority and removed the emotional struggle. I set up automatic payments for the minimums on all my accounts, and then I manually sent extra payments toward my smallest balance or highest-interest debt. Automating payments helped me stay consistent and avoid the temptation to dip into those funds for something else.
Step 4: Stay Disciplined, But Allow Flexibility
One of the most challenging parts of managing debt while staying on budget was staying disciplined. The temptation to splurge or “reward” myself after paying off a debt balance was real. But I had to remind myself that this was about long-term freedom. That said, I didn’t want to completely deprive myself either. I allowed for occasional rewards—like a low-cost outing with friends or a small treat—so I didn’t feel resentful of my budget. The key was balance. By sticking to my plan most of the time, I was able to enjoy small moments without throwing my budget off course.
Step 5: Celebrate Milestones and Stay Motivated
Paying off debt takes time, and staying motivated can be tough. But every time I paid off a debt, I celebrated it, even if it was a small victory. Paying off my first credit card balance was such an exciting moment, and I used that motivation to keep going. It’s important to acknowledge your progress and reward yourself in small, meaningful ways. Each step you take toward paying down your debt is a win. Whether it’s a big or small payment, give yourself credit for making the effort.
Conclusion:
Managing debt while sticking to a budget isn’t easy, but it is possible. The key is having a clear plan, being disciplined, and making small, intentional changes in your lifestyle to free up money for debt repayment. Remember: debt repayment is a marathon, not a sprint. But with patience, consistency, and a well-thought-out strategy, you’ll find yourself inching closer to financial freedom with every payment you make. Take control of your debt today—start small, stick to your plan, and watch your debt diminish over time. You’ve got this!
Disclaimer: I am not a financial advisor. The information shared here is based on my personal experiences and research. Please consult with a certified financial advisor or planner before making any financial decisions. Every individual's financial situation is unique, and professional guidance is recommended for tailored advice..