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How to Budget to Get Out of Debt

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If you’re in debt, it can feel like you’re carrying around a big, heavy ball of worry everywhere you go.

It’s always in the back of your mind — when you’re staring at your bills, checking your bank balance, buying groceries, or trying to fall asleep at night.

You want out. But sometimes, it feels like you’re doing everything you can, and the numbers just don’t want to move in your favor.

The truth is, you can get out of debt. And one of the best tools in your arsenal to do it? A budget.

The best part is that a budget isn’t just a list of expenses or a way to cut out your favorite treats. It’s a personalized plan to help you move from where you are now to financial freedom in the future.

So, let’s jump in and figure out exactly how to make that plan.

How to Budget to Get Out of Debt

Step 1: Take a Hard Look at Your Debt

Before you do anything else, you need to know exactly what you’re working with. How much do you owe? To whom? What are the interest rates? What are the monthly minimum payments?

You might not realize it, but most people tend to underestimate — or even ignore — the amount of debt they really owe. It’s uncomfortable to look at that number head-on.

So, the first step to getting out of debt is easy to say but hard to do: look it in the eye.

List out every credit card, loan, or money owed to friends or family:

  • Credit cards

  • Personal loans

  • Student loans

  • Car loans

  • Medical bills

And next to each one, write down:

  • The total balance

  • The interest rate

  • The minimum monthly payment

When you’re done, take a deep breath. By this point, you should know exactly where you stand in the fight against debt.

Related: How To Set Up A Budget Binder

Step 2: Know Your Income and Expenses

To make a budget that actually works, you need to know how much money is coming in and where it’s all going.

First, track your income. Write down your after-tax (take-home) pay. If you have multiple income streams — like a side hustle or freelance work — add those too.

Next, list your monthly expenses: rent or mortgage, utilities, groceries, transportation, insurance, and so on.

If you’re not sure where your money goes, review your bank statements for the past two to three months or use a budgeting app. This will help you see your spending patterns and identify areas where you can make changes to free up more money.

Related: $5 Budget Challenge: How I Saved $10,000 in Just 3 Months

Step 3: Pick a Budgeting Method

Budgeting doesn’t have to be complicated, but it does have to work for you. There are many different methods people swear by — the key is to pick one and stick with it.

Let’s quickly go over some of the most popular and effective budgeting methods out there. Remember, the best budget is the one you can actually follow.

1. The 50/30/20 Rule

This simple guideline divides your take-home income into three categories:

  • 50% for needs: essentials like rent, food, and utilities

  • 30% for wants: non-essentials like entertainment, dining out, and hobbies

  • 20% for savings and debt payments

If you want to get rid of debt faster, tweak the formula — spend less on wants and put more toward paying off debt.

2. The Zero-Based Budget

In a zero-based budget, every dollar of your income has a job. Your income minus expenses equals zero. That doesn’t mean your account balance is zero — it means you’ve assigned every dollar to something, whether it’s bills, groceries, savings, or debt payments.

This method helps you stay intentional and ensures that all your money is used purposefully.

3. The Envelope (or Digital Envelope) System

This system works well if you tend to overspend. You allocate a set amount of cash into “envelopes” for each category — groceries, gas, entertainment, etc. Once an envelope is empty, that’s all you get for the month in that category.

These days, many budgeting apps let you do this digitally, so you don’t need physical cash envelopes.

Pick whichever method fits your lifestyle best — and then get to work making it happen.

Related: 6 Biweekly Budget Planner

Step 4: Build an Emergency Fund

Even when you’re in debt, it’s critical to build a small safety net — something to cushion you from unexpected emergencies.

It might seem counterintuitive when you’re trying to pay off debt, but trust me, you’ll thank yourself later.

If an emergency happens and you don’t have any extra cash set aside, what will you do? Reach for your credit card?

If so, you’ll not only have a broken fridge (or car or phone) to deal with — you’ll also have more debt.

An emergency fund is a separate pool of money designed to help you out when something unexpected happens.

Ideally, this should eventually cover three to six months of expenses, but since you’re focused on paying down debt right now, start small.

Open a savings account and put away a little each month until you’ve built up $500 to $1,000. Once you’re out of debt, you can grow that fund into a larger safety net.

Related: 8 Effective Ways to Cut Down Your Budget

Step 5: Choose a Debt Repayment Plan

Now it’s time to put your strategy into action. There are two main ways to tackle debt — both are effective, so choose the one that best fits your personality and keeps you motivated.

The Snowball Method

  1. List your debts from smallest balance to largest.

  2. Pay the minimum on all debts except the smallest.

  3. Throw every extra dollar you can at that smallest debt until it’s gone.

  4. Move on to the next smallest, and repeat until you’re debt-free.

This method gives you quick wins early on, which can be incredibly motivating.

The Avalanche Method

  1. List your debts from highest interest rate to lowest.

  2. Focus extra payments on the highest-interest debt first.

  3. Once that’s paid off, move on to the next highest, and so on.

This method saves you the most money in interest over time.

If you need quick motivation, go with the snowball. If you want maximum efficiency, go with the avalanche. Either way, commit and stick with it.

Related: How To Create A Budget For Beginners

Step 6: Cut Back on Unnecessary Spending

Budgeting and paying down debt isn’t about deprivation — it’s about making intentional choices with your money that align with your priorities.

Look at your spending habits and ask yourself, “Is this really where I want my money to go?”

Here are some simple ways to trim your expenses without feeling deprived:

  • Review your subscriptions. Cancel or pause memberships and apps you rarely use.

  • Cook at home. Eating out adds up fast. Try meal prepping for the week to save time and money.

  • Shop smarter, not more. Make a grocery list, check weekly deals, and compare prices — but don’t buy things just because they’re on sale.

  • Curb impulse buys. Wait 24 hours before making non-essential purchases. Chances are, you’ll forget about them.

  • Negotiate your bills. Call your phone or internet provider and ask for a better rate — you might be surprised what you can get.

Find areas where you can cut back and redirect that extra money toward paying down debt.

Step 7: Increase Your Income (If Possible)

We’ve all heard the saying, “Live within your means,” but what if your means could be higher?

Boosting your income is one of the fastest ways to pay off debt, especially if your budget already feels tight.

Here are a few ideas:

  • Freelance or take side jobs. Offer your skills online or locally — think platforms like Fiverr, TaskRabbit, or Upwork.

  • Sell stuff you don’t need. Clothes, electronics, or furniture can turn into quick cash.

  • Ask for a raise. If you’re doing well at your job, it might be the perfect time to ask.

  • Monetize a hobby. Baking, photography, tutoring — small side gigs can add up over time.

Every extra dollar earned brings you one step closer to financial freedom.

Step 8: Track Your Progress and Celebrate

Getting out of debt takes time and patience — it’s not a race. But that doesn’t mean you shouldn’t celebrate along the way.

Reward yourself for hitting milestones. Each small victory brings you closer to your ultimate goal.

Here are a few tips to stay motivated:

  • Visualize your progress. Use a spreadsheet, app, calendar, or even a whiteboard to track your debt payoff visually.

  • Celebrate small wins. When you pay off a credit card or hit a savings target, treat yourself in a budget-friendly way — order takeout, enjoy a movie night, or take a relaxing bath.

  • Stay connected to your “why.” Remind yourself regularly why you started — whether it’s to gain peace of mind, travel, or buy a home.

  • Review and adjust as you go. Life changes, and so should your budget. Be flexible and make updates as needed.

Step 9: Keep the Debt Away

Congratulations! You’ve done the hard work and are on your way out of debt.

Now, let’s make sure you stay that way.

Here’s how to keep debt from creeping back in:

  • Pay off credit cards in full each month. Use cash or debit whenever possible.

  • Keep one credit card for rewards or emergencies — but pay it off monthly.

  • Continue building your emergency fund until it covers several months of expenses.

  • Keep budgeting. You’ve seen how powerful it can be — don’t stop now!

Final Thoughts

Budgeting and paying off debt is a journey — it doesn’t happen overnight. The important thing is to start and stay consistent.

You don’t need to be perfect from day one. What matters is that you keep showing up, keep adjusting, and keep going.

Each payment is another step toward your debt-free future. You can do this — just take it one day at a time.

Onwe Bright Chimeremeze
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