Drowning in multiple debts and ready to be done with repayment for good? First, if you don’t already have a budget, now is the time to get started. By knowing where your money goes each month, you can find room to put more toward what matters.
Sit down with your monthly take-home pay and a full list of household expenses to see exactly where your money goes, and how much is left over. Then try these strategies to make your budget work harder toward paying down multiple debts.
50/30/20 Rule For Paying Down Debt
This rule works well for beginners and anyone who thrives with structure, but it's also a solid framework for any budget. With this strategy, 50% of your budget goes towards your necessities, including housing, transportation, groceries, and utilities; 30% goes toward recreation and entertainment; and 20% goes towards savings and debt repayment. However, if you’re looking to speed up the repayment process, we recommend pausing pricey entertainment and dining options and instead stream a movie, dine in, or find activities that are free.
Zero-Based Budgeting for Debt Repayment
In this strategy, every dollar is given a “job” until you’ve budgeted your monthly income down to the last dollar, budgeting in necessities, savings, and repayment.
Pay Yourself First in Debt Repayment
For those looking to save but finding it hard to put money away into a savings account each month, transfer a set amount of money into your savings account before budgeting the rest for the month. The remaining money will be used for your bills, living off of, and debt repayment. This is also a great method for people looking to build an emergency fund or nest egg for retirement.4
Envelope Method for Paying Down Debt
Whether you prefer managing your finances digitally or on paper, the envelope method works either way. Assign an envelope to each spending category, like groceries, recreation, and entertainment, and once that money is gone, you're done spending in that category until the month resets.
More Tools to Help You Pay Down Debt
A budgeting app like Goodbudget or Honeydue can help you track all your bills right from your phone. And if you need more structure beyond budgeting, look into debt repayment strategies like the debt avalanche or debt snowball, both of which are designed to keep you motivated and on track.
You don't have to do this alone. Nonprofit credit counseling agencies offer credit counseling, budgeting help, and goal planning. If your debt becomes too difficult to manage on your own, they can also enroll you in a debt management plan where they’ll work with your lenders to consolidate your loans into one affordable monthly payment, lower your interest rate, and establish a clear repayment timeline with a foreseeable end.