So, it’s finally happened.

After years of telling yourself that everything is okay, and you can manage your debts just fine, you’ve come to the point where you just can’t pretend anymore. Basic debt management practices aren’t working, and you need to take direct action to try and resolve the problem once and for all.

There’s no doubt this is a scary time, when you’re going to feel overwhelmed by the task ahead of you. However, it is worth remembering that — as scary as it feels — there is no doubt this is actually a positive moment in your financial management. This is the beginning of a journey that concludes with your being debt free, and ensures you can live your life as you want, without the stress and worry that debt inevitably causes.

To help you take the first steps of that journey, here’s a step-by-step guide to how you should venture forward into challenging your debt once and for all…

Step One: Create a spreadsheet

First and foremost, you’re going to need to see all of your debts clearly, which means mapping out exactly what you owe and to whom. This is a scary task, as few of us keep tabs on the exact figures we owe, but it’s an essential part of planning a debt management strategy that will work for you.

Let’s use an example to help explain this guide properly. Here’s the kind of information you need to assemble in your spreadsheet:

  • Creditor: Bank of America
  • Amount owed: $3,000
  • APR: 18%


  • Creditor: Amex
  • Amount owed: $2000
  • APR: 12%


  • Creditor: VISA
  • Amount owed: $700
  • APR: 15%

And so on and so forth, until you have all your creditors listed, along with the amounts owed and the APR.

Step Two: Assemble a reasonable monthly budget

Put together a financial budget that covers all the essentials you need to buy, as well as your current debt repayments. This budget will hopefully leave you with a surplus amount, which you can use for debt repayment. For example:

  • You earn: $2,000 per month
  • Your expenses (household bills, rent, mortgage etc.): $1,500
  • Your minimum debt repayments: $300
  • Your surplus would be $200.

Step Three: Contact your creditors (if necessary)

If you can no longer afford to make minimum payments on your debts, contact your creditors to request a payment freeze. They may not agree, but it’s worth asking.

If you can cover the minimum payments, you can now move onto…

Step Four: Learning to snowball

“Snowballing” debt is a technique that has won a huge amount of praise. The idea is simple: you seek to pay off your lowest debt first— so using the example above, you’d use your $200 surplus to pay off your VISA, while just servicing the minimum payments on the other, larger debts. You can use a debt snowball calculator to ascertain which debts you should be paying first, and also get an idea of how long it will take you to pay everything off.

“Snowballing” debt is popular thanks to the psychological boost of actually being able to outright pay off a debt, and has been proven to be the most effective method for sticking to a long-term debt repayment plan.


While going through all of the above may be a challenging time, it’s a crucial step towards your future financial freedom. So start your spreadsheet, learn to snowball— and look forward to your debt-free future.


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