How to create a debt payoff plan that actually works in 2025

Let’s face it: debt can feel like a heavy weight on your shoulders. Whether it’s credit card balances, student loans, or car payments, the stress of owing money can keep you up at night. But here’s the good news—you don’t have to stay stuck in the debt cycle. With a clear, actionable plan, you can take control of your finances and start working toward a debt-free life.

In this post, I’ll walk you through the steps to create a debt payoff plan that actually works. No fluff, no magic tricks—just practical strategies to help you tackle your debt head-on. Let’s get started!

Step 1: Know what you owe

Before you can create a debt payoff plan, you need to know exactly what you’re dealing with. Grab a notebook, open a spreadsheet, or use a debt tracking app, and list out all your debts. Include:

• The name of the creditor (e.g., Visa, Sallie Mae).
• The total balance you owe.
• The interest rate.
• The minimum monthly payment.

Seeing everything in one place might feel overwhelming at first, but trust me, this is the first step to taking control. If you’re not sure where to start, I’ve created a free debt tracker template you can download.

Step 2: Define your why

Why do you want to pay off your debt? Is it to save for a dream vacation, buy a home, or just sleep better at night? Whatever your reason, write it down and keep it somewhere visible.

Your “why” will keep you motivated when the journey gets tough. For example, maybe you want to save $500 a month once your credit card is paid off. Visualize what that extra money could do for you.

Step 3: Pick your battle plan

There’s no one-size-fits-all approach to paying off debt. Here are two popular strategies:

1. The Debt Snowball Method:
   • Focus on paying off your smallest debt first while making minimum payments on the others.
   • Once the smallest debt is gone, roll that payment into the next smallest debt.
   • Why it works: The quick wins keep you motivated.
2. The Debt Avalanche Method:
   • Focus on paying off the debt with the highest interest rate first.
   • Once that’s paid off, move to the next highest interest rate.
   • Why it works: You save more money on interest in the long run.

Not sure which method is right for you? Take this quick quiz to find out!

Step 4: Budget like a pro

A solid budget is the backbone of any debt payoff plan. Start by listing your monthly income and expenses. Then, look for areas where you can cut back (yes, I’m looking at you, daily latte habit).

Here’s how to allocate your money:

1. Cover your essentials (rent, utilities, groceries).
2. Make minimum payments on all debts.
3. Put any extra money toward your target debt (the one you’re focusing on first).

Pro tip: Use a budgeting app like YNAB or Mint to make this process easier.

Step 5: Boost your debt payoff plan power (Optional but Helpful)

If your budget feels tight, consider finding ways to bring in extra cash. Here are a few ideas:

• Sell unused items online (hello, old clothes and gadgets!).
• Start a side hustle like freelancing, tutoring, or dog walking.
• Ask for a raise or look for a higher-paying job.

Every extra dollar you earn can go straight toward your debt, speeding up your progress.

Step 6: Celebrate small wins

Paying off debt is a marathon, not a sprint. To stay motivated, celebrate your milestones along the way. Paid off your first credit card? Treat yourself to a small reward (that doesn’t involve spending money, of course).

Track your progress regularly—monthly or quarterly—to see how far you’ve come. I’ve included a free progress tracker  to help you stay on top of your goals.

---

Step 7: Avoid Common Pitfalls

Even with the best plan, it’s easy to slip up. Here are a few mistakes to watch out for:

• Taking on new debt: Put away the credit cards while you’re paying off old debt.
• Only making minimum payments: This will keep you in debt longer and cost you more in interest.
• Giving up after a setback: Life happens. If you overspend one month, don’t throw in the towel—just get back on track.

You’ve Got This!

Creating a debt payoff plan isn’t about perfection—it’s about progress. By following these steps, you’ll be well on your way to financial freedom. Remember, every payment you make is a step closer to your goal.

So, what are you waiting for? Start your plan today and take control of your financial future. And if you need a little extra help, download my free Debt Payoff Starter Kit , which includes a debt tracker, budget template, and progress checklist.

Bonus resources

• Apps to Try: YNAB, Mint, or Debt Payoff Planner.
• Books to Read: The Total Money Makeover by Dave Ramsey or You Are a Badass at Making Money by Jen Sincero.
• Further Reading: Check out my posts on How to build an emergency fund and Best side hustles for extra income.

Let’s do this together! Share your debt payoff journey in the comments —I’d love to cheer you on.