Debt is usually not a comfortable topic to discuss.  It can cause an extreme amount of stress and pressure for those who find themselves in a tough position. Learning at a young age how to manage debt and not bite off more than you can chew will be an invaluable skill.  The objective of this section is to help determine if you have a problem with debt and how to form a strategy to reduce your debt load if it becomes too great.

Do You Have a Problem?

If you think that you are starting to get in over your head with debt it is important to take action immediately.  Procrastination is not the answer when debt begins pilling up.  First, ask yourself a few questions to assess your situation:

  1. Are you missing payments on monthly bills?

  2. Are you forced to make a decision between paying bills and purchasing items necessary to live?

  3. Do you find yourself paying late fees on each bill?

  4. Do you lie to yourself or others regarding how much you owe?

If you answered yes to any of these questions it is time to start making a plan to reduce your debt burden.

Create an Action Plan

If you find that you are in over your head then making a plan to get out will be very beneficial.  First, you will have a strategy to get out of debt.  Second, you will feel better knowing you have a plan and a method for measuring your progress.

Commit to Making a Plan

Don't just say you will do it, actually do it.  Make a point to find a weekend to create your plan and avoid any unnecessary distractions.

Calculate Your Debts

An Excel spreadsheet will be very useful here!  Make a list of who you owe and how much you still owe.  Record your interest rate and your monthly payment.

Order Your Debt

When you start to pay off debts you want to pay off the highest interest balances first.  Organize your spreadsheet created in the previous step in order of highest to lowest interest rate.

Now, you may find that you have a bunch of small debts with lower interest rates and one large debt with a high interest rate.  If you want to see faster progress you might decide to payoff the smaller balances first.  If this helps keep you motivated and on track then go for it!

Calculate How Much You Can Pay

To complete this step you will need a budget of your monthly income and expenses.  If you haven't created a budget before, no worries. You can check out our lesson on budgeting.

Once you have a good budget in place you will determine your discretionary income.  This is simply what is left over each month after covering all necessary expenses such as rent and food.

Make Your Payments

Now that you know your discretionary income, you can put all your discretionary funds towards paying off debt.  You will want to make the minimum payments on all of your debts each month.  Be sure to pay by the due date to avoid further interest expenses.

Commit extra funds towards your highest priority debt you identified earlier in the process.  Once this first debt is paid off, take the funds you were using and put them towards your second priority debt. Continue this process until you are debt free.


  1. Stay positive, this will take some time
  2. Stay committed to your goal.
  3. Avoid taking on any new debts.
  4. Consider increasing your income with part time work.