7 Ways to Pay Down Your Debt This Year

Every new year, millions of Americans vow to save more money, make better decisions with their finances, and pay down debt. While the first two can be difficult at times, with the proper focus they are fairly easy feats to tackle. Paying down debt, on the other hand, is a goal that many people seem to have the most trouble with. Why? Mainly because once it spirals out of control, it becomes difficult to manage or your emotions play into wanting instant gratification. Sometimes you simply can’t make ends meet and you need to borrow to keep your head above water. No matter the reason, 2017 has to be the year that we say enough is enough!

The following are seven steps to actually paying down your debt this year.


1. View Debt in the Right Light

The first step in actually paying off your debt this year, is to recognize that debt is the enemy and must be eradicated immediately! Your mindset is very important to the debt reduction mission because if you view debt as something that is necessary, then you won’t see the urgency in getting rid of it. On the other hand, when you see debt like it is, you will be motivated to do what needs to be done to get rid of it.

READ: How to Create the Right Mindset to Pay Off Your Debts


2. Prioritize Your Budget

If you don’t know where you are going, then it will be difficult for you to get there. Your budget is your literal roadmap telling you exactly where your money should go. To that point, you can’t really eradicate debt if you don’t know how much is coming in and going out. As you create your budget, make sure you are prioritizing savings first but then allocating a portion for debt reduction.


3. Ask for a Lower Interest Rate

What hurts us most about debt is not paying back the money that we borrowed, but the interest rate that is tacked on. Many people would be shocked to know that you can call your credit card company and ask for an interest rate reduction, which you’ll likely be given. Or you can call your student loans and do the same thing. Often just requesting autodraft for your student loan payment can can qualify you for a .25% interest rate reduction. But you have to ask! Your chances of getting that interest rate reduction are even greater if you are a customer in good standing. The worst that can happen is they say no, but again you’ll be surprised at what you can accomplish by just asking.


4. Snowball Your Debt

Snowballing your debt is the act of arranging your debt from smallest to largest, paying the minimum amounts on all accounts, then using the rest of the money that you have allocated towards debt to pay down or pay off the smallest account. Subsequently, the next month you would pay the minimums on all of your accounts again and continue to snowball what is left over to the smallest accounts until everything is paid off. Many financial experts are against this method because they state that you should pay off the accounts that have the highest interest rate first. From a practical perspective, this makes sense (and is a great alternative) but snowballing your debt is more about gaining some small wins in order to give you the confidence to keep going instead of being discouraged by debt that isn’t moving.

READ: Which Strategy is Best to Reduce Your Debt?


5. Make More Money to Pay off Your Debt

Now that you have a sense of what is needed to pay off your debt, it is important that you maximize your income potential to use that money to reach your goal faster, like taking on a part-time job or starting your side-hustle. Regardless of what form it takes, making more money can turn your debt reduction dream into a reality.

READ: 15 Creative Ways to Make Money


6. Temporarily Cut Your Expenses

I know you work hard for your money and that you want to enjoy the fruits of your labor, but if you are serious about your debt reduction goal then it may be time to make a temporary sacrifice in order to increase your cash flow to pay off your debt. Getting rid of cable, freezing your gym membership (because you can work out without paying for one), or bringing in lunch to work, are just a few examples of sacrifices that can be made to give you some extra bucks. Keep in mind that this is temporary so as you knock down your debt, you will be back to living the high life in no time.


7. Cash in Rewards Points

Research shows that people love to get rewarded. If you are compensated for a particular action, and truly appreciate that compensation, it is very likely that you will be more inclined to take that action again and again. This is why reward points are so popular and profitable for credit card companies. They are literally rewarding you for doing something that will gain them more money. If you think about it, they lose nothing by giving you rewards in return for you to spend more money, which allows them to profit off of the interest you’re paying.

I know that the system is set up to give you less if you redeem your rewards for cashback instead of buying what is on their catalog. But, if you have a fair amount of unused rewards, getting cash back and using that to pay down your debt may be the best way to go.


What are some other things you plan to do to pay down your debt this year?


This article was originally published on Feb 9, 2017. 

  • I’ve recently been taking #1 very seriously. I’ve always looked at money like it was sucking the life out of me, and I realized that it was. I was letting it. Having a positive, smart outlook on finances really makes you get in front of them and not let them push you around. Thanks for the advice!

  • The point number 3 is absolutely correct. There is yet another way to reduce the interest rate on your credit cards. You can enroll in a debt management program to lower your interest rate. Credit counselors will negotiate with creditors to reduce interest rate and arrange an affordable payment plan.

    By the way, you can also lower the insurance premiums by using the same trick. Just tell the insurer that you would switch to another insurer if he doesn’t lower your premium.

  • Maybe it’s because of how I was raised, but it really boggles my mind with how much debt people have and how the continue to increase it and buy mindless items…. It really is time for people to squash their debt and there are all types of ways to do so, so thanks for this!!


    • Breanne

      From your posts on your blog, it looks like you spent some time living at home. Many people don’t have that option. The cost of living on your own is costly, and compounded at a time when people start to repay on low paying entry job budget, its actually quite easy to go into debt (without it being caused by mindless items).

      • Melissa Thompson

        I definitely didn’t have the option to live at home. I am divorced, but have lived on my own since I was married almost 8 years ago. I never wanted to place that burden on my parents, but I definitely placed it on myself. People have to royally screw sometimes to learn, not because it’s necessary or anything, but just because they didn’t educate themselves (like me) about the value of a dollar. I am “paying” for it now. Pun intended!

  • I like the snowballing idea…Provides a great morale boost once you pay something off small!


  • Taste of France

    I agree with the experts that snowballing debt sounds like a bad idea. Debt payments are a step forward, and interest are steps backward. Higher interest is a bigger step backward. Get rid of those first. And stop getting into debt! Just don’t buy stuff if you don’t have the money. It isn’t fun, but sometimes life isn’t fun.

  • Cutting out shopping! And cutting back on alcohol so our monthly expenses are lower and more left for debt repayment.

  • Genevieve C.

    I’m assuming this blog refers to “debt” such as credit card balances, student loans, car payments, etc. However in regards to #1 and to clarify–*mortgage* debt is NOT (necessarily) “the enemy” and isn’t usually feasible to “eradicate immediately”. Assuming the residence you own is in a growing market, having a reasonable amount of debt helps you build wealth and overall enhance your net worth. Using a guideline of keeping your monthly mortgage payment (including insurance, taxes, and any maintenance fees) below 30% of your net income is a good idea, and I personally prefer below 25%.

    I say this because we should not necessarily have a “fear” of debt; you just need to follow all the other steps above concerning budgeting, cutting expenses etc. to properly manage debt. Home ownership is something all grown women should make it a priority to have knowledge of; in fact it would be a good idea for EveryGirl to do a detailed piece on guidelines to learning about budgeting for mortgage payments, and the process of acquiring a home in general.

  • Ashley

    This post was so helpful. Thank you for sharing!

    Turquoise and Chaos

  • Robin @ And Then We Tried

    Changing your mindset is a definite must, but old habits die hard! We’ve recently started an open dialogue about debt and steps that have really helped us. It’s a struggle but having debt hide as a taboo topic doesn’t help anyone! For some camaraderie and an extra push to get started check out our post on our debt journey: http://andthenwetried.com/2017/10/how-im-paying-off-debt/

  • Jasmin J. Will Williams

    It may not be the best decision but I deferred my student loans and put the extra money to my car loan to pay that off quickly and once I pay that off, I can go back to paying my student loans above the minimum payment.