How to Get Out of Debt

By Sterling Xie. Edited by Swastik Patel


Debt is a painstaking financial obligation that plagues the lives of millions. Paying off debt certainly is difficult in itself as one forces themselves to free up part of their budget each month to address their debt. However, this process can be easily simplified in the three steps outlined below. 

First Step: Creating a Budget

Though it sounds trivial, creating a budget is an essential starting step to determining how much you can spend based on how much you need to save each month to pay off debt. To do this, make a list of all your expenditures (including groceries, bills, memberships, debts, loans, taxes, etc.) and all your assets (house(s), car(s), income, etc.). Using a spreadsheet or calculator, calculate your disposable income each month by subtracting your net expenditures from your net income. 

Second Step: Restructuring the Budget

If your budget does not already include a savings and emergency fund, you should create them. The savings fund is used to save for landmark goals like buying a house or car, whereas the emergency fund is like a rainy day fund in case you lose your job or reach a period of financial crisis. After that, look to cut unnecessary expenditures in order to attain a larger monthly disposable income. Then, set aside the amount you need to pay off on debts and loans each month from the disposable income. 

Third Step: Choosing a Debt Repayment Plan

Often, the best way to pay off debt is through a graduated debt repayment plan. The graduated debt repayment plan is a stepped repayment plan that has proven effective when you know you likely will make more money in the future (which is the case with most people). If you are young and have just graduated from college (with perhaps a student loan or credit card debt), you would want to pay less to begin with. Your salary at that point in your career would likely be the lowest as you are still waiting for promotions or better-paying jobs. 

The other option is with a fixed debt repayment rate, where you would pay the same amount every month with interest. This plan would be more beneficial in cases where you have a steady income and can easily pay off debt with your restructured budget.


Paying off your debt is a daunting task, but it can be easily simplified with the three steps outlined above. Creating a budget and understanding your financial situation is critical to paving the road for financial sustainability and getting to your debt-free life.

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