Follow This Five-Step Plan for Paying Off All of Your Debt

When you're facing debt of any kind—especially a sum that feels overwhelming—it can be easy to bury your head in the sand. "But the worst thing you can do when you're in debt is nothing," says Colleen McCreary, chief people officer of Credit Karma. The sooner you take action—no matter how small your progress may seem—the sooner you kickstart your path to becoming debt-free, she explains. Not to mention, thanks to interest rates, neglecting your debt can make what you owe grow to even more unattainable amounts.

If you find yourself in debt, here's what the experts say you need to do right away.

Get to the root of the problem.

When on the path to tackling any debt, the first thing you should do is to find out how you got yourself here, says McCreary. "Are you in debt because you've been overspending on your credit card or are you in debt intentionally because of something like a student loan?" If you've accidentally gotten yourself into debt, do an immediate audit of your expenses to see where you're overspending, and cut back on anything that isn't absolutely necessary for the time being (think things like subscriptions on autopay), says McCreary. Then, reprioritize your spending to focus on the essentials, like rent and food.

Assess the amount of debt you owe.

Even though it may seem daunting, it's important to understand the entirety of your debt. Gather any and all statements and take note of how much you owe, what the minimum monthly payments are, what the interest rates are, and when payments are due, says Kathy Entwistle, a private wealth advisor and founder of The Money Date Box. Record everything in one place, so it's easier to see the full picture. This can be as simple as compiling a spreadsheet in Excel or linking your credit cards to a free app that will compile the information on your behalf, adds McCreary.

Develop a strategy.

Once you understand the big picture of your debt, you need to create a plan that you know will stick. Your plan should, ideally, include paying the minimums for each debt, if you're able, says Entwistle. This helps you avoid penalties like late fees that can add to your debt, plus helps preserve your credit score, she explains. Of course, it's always favorable to pay as much as you can, though, so if you can afford more, consider doing so. Though paying off smaller debts in full can have psychological benefits, it's typically preferable to pay off debts with the highest rates first, says Entwistle.

When it comes to choosing a strategy for paying off your debt, the decision can be personal, adds McCreary: "The best thing for you to do is develop a plan that plays to your strengths and motivations—even if your plan differs from someone else's."

Rework your budget.

As part of your plan of attack, you should rework your budget so that it prioritizes your payment plan, says McCreary. "Cut back on spending in certain areas, and see if you can and figure out how to save additional money for payments." When you're first getting started with budgeting, a simple spreadsheet can help make the transition go smoothly. There are also apps, like Mint, that will keep track of your spending for you.

As a basic rule of thumb, Entwistle suggests asking yourself one important question before charging something to a credit card: Could I pay this off this month if I wanted to? When you charge more than you can pay off, your debt begins to snowball, she explains.

Celebrate small wins.

"Paying off debt is a huge accomplishment, and it won't happen overnight," says McCreary. "One way to fight fatigue is to celebrate small wins along the way." Don't forget to stop and celebrate your debt repayment victories with little luxuries—a coffee with friends, a manicure, or another affordable treat. "This way, you'll constantly be working toward a fun, tangible, and positive goal."