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What is your goal?
You know everything about your debts—the interest rates, monthly installments, and the total repayment amount. All monthly installments are entered into your household budget a few days in advance to avoid delays.
However, your goal isn't just to pay back the borrowed money. You will get rid of your debts sooner than the repayment schedule suggests. Just because you have, for example, twelve installments left, it doesn't mean you will be debt-free only in a year. Everything depends on you—how ready you are for the entire process. Will your motivation, determination, and persistence help you overcome your debts? I hope so!
Preparing a debt repayment plan
You already know the details from previous materials; now we will prepare a quick cheat sheet that will set your direction for the coming months.
- Compare your income and expenses — You will do this using your household budget. What amount do you need to allocate for daily living and debt repayment? Do you have any surplus left? Which expenses can you eliminate?
- Prepare your debt list — Organize your liabilities in one place. Keep this list in plain sight. Print it out and hang it, for example, on the fridge.
- Choose a debt repayment method — Once you have a full summary of your debts, it's time to choose which ones to pay off first. Both versions of the snowball method work the same way, but they base the order on either the interest rate or the remaining balance. Decide what matters more to you—eliminating the most mathematically advantageous debt or achieving small wins by closing off individual financial obligations. If your debts are of similar size, always pay off the one with the higher interest rate first.
- Increase your income — Sell unnecessary items, take on overtime, try to earn a bigger bonus, start a side hustle, or switch to a better-paying job. You will certainly feel more physically tired, but according to many debtors, the mental relief of having an increasingly smaller burden of overwhelming debt is worth the price.
- Start paying off and paying down!
In what order should you pay off your debts?
The snowball method allows you to pay off debts quickly, but not all debts are created equal. Some are simply more important than others. While most people struggle with consumer loans, such as installments for new electronic gadgets, there are also more pressing obligations.
Which debts should you pay off first?
- Debts involving a bailiff — It is too late for games here. A bailiff has effective tools to garnish a portion of your salary or seize assets to cover your debts.
- Debts related to your daily life — Bills for electricity, water, gas, and rent. These expenses, while seemingly minor, can turn your life upside down.
- Government fees — Taxes, fines, and administrative penalties. Government agencies do not negotiate; they simply seize what is owed, which can shatter not only your repayment plan but also your ability to manage your regular debt.
- Extremely high-interest loans — A payday loan at 800%? Those offers exist. This is no joke. If you have this type of debt, do not leave it for later, even if you have chosen a different repayment method. Ignoring usury—because that is what it is—will multiply your problems in a very short time. These are usually small amounts, so you shouldn't have trouble clearing them. Check your contract to ensure that early repayment doesn't incur additional fees.
How do you stay motivated?
Fighting debt is not easy. Let’s be honest—you will face moments of doubt and feelings of helplessness. You might even be feeling them right now. That is natural. However, there are things that will help you see the light at the end of the tunnel.
- A solid action plan For those without debt, this might seem funny. How is this supposed to help? You have just done more than hundreds of thousands, perhaps even millions of other debtors! You have taken matters into your own hands. You can see that this plan makes sense and has a real chance of success. The path from creating it to putting it into action and achieving success is not far off.
- Systematic extra payments Once you start this process, you will see how much it can accelerate your entire battle with debt. Stick to making extra payments, and instead of spending the money freed up from a paid-off installment on consumption, use it for further extra payments.
- List of successes Nothing is more motivating than quick results. Write down all the debts you have already paid off. Watch as the list of overcome debts grows, while the list of those remaining to be paid shrinks.
- Celebration Fighting debt is not just a miserable experience. That mindset is exactly what leads to paralysis and inaction. Celebrate every small victory. Every debt paid off. It’s not about throwing a party for all your friends, but allow yourself a moment of joy with your family.
What should you avoid doing as a debtor?
One of the most common mistakes is avoiding contact with creditors—whether it’s a bank or a collection agency. Yes, they are persistent because they want their money back, but do you really believe that ignoring them will make them stop calling you?
No! That won't happen. On the contrary—they will become even more insistent and firm. Contrary to popular belief and urban legends, they aren't a gang of thugs looking to track you down the moment you pick up the phone.
They are ordinary people with ordinary jobs. They don't want to argue either, and they would much rather have a civil conversation with someone who, for a change, actually wants to pay back what they borrowed. Show them you want to do it. Tell them what your plan is and what steps you have already taken. Make a partial payment and show them you are serious, or inform them that you are just finishing paying off another company and will deal with them next, but you need a little more time. You might even be able to negotiate a new payment schedule.
I believe you can handle your debt, as long as you consistently stick to the plan you have chosen.
