Ultimate Guide to Creating Your Own DIY Debt Management Plan

Are you knee-deep in debt and not sure how to dig yourself out? There are plenty of organizations out there that can help you out. But what if you’re the do-it-yourself type and you like handling things all on your own? Well, you’re in luck! By being organized, diligent, and having grit, you can become debt-free by way of a DIY debt management plan.

In this handy guide, we’ll offer a step-by-step approach to creating a debt repayment program and implementing it on your own.

Here’s how to roll up your sleeves and get your debts paid off:

Tally Up Your Debts

First, create a list of all your debts. This can include money owed on:

• credit cards
• student loans
• auto loans
• medical bills
• personal loans

The list of your debts should include:

• the name of the lender
• total amount owed
• interest rate
• minimum payment due each month

Just so you have everything in one place, you can also include the contact info of each lender, and any other pertinent details (i.e., terms, fees).

If it’s been a while since you’ve last paid attention to your debts, call your lenders to get the skinny to make sure your info is up-to-date and accurate.

Create a Plan of Attack

When it comes to figuring out the best tactic, two popular debt repayment methods are the:

• Avalanche debt payoff method
• Snowball debt payoff method

To start, no matter which strategy you choose, you’ll want to make the minimum payments on all your debts. Otherwise, your credit will suffer.

With the avalanche debt payoff method, you focus on paying the debt with the highest interest rate. Once that “mother of debts” is paid off, you take the money you’ve been putting toward it toward the debt with the second-highest interest rate, and so forth.

A major benefit of this method is that you’ll save money on the interest. The downside is that because it can take awhile to pay off that first debt, you may find yourself struggling to stay motivated.

There are two major differences with the snowball debt payoff method. Whereas with the avalanche method you pay based on interest rate, with the snowball method you pay based on the balance. The other major difference is that you start with the smallest amount, then work your way up.

A big advantage of the snowball debt method is that you’ll enjoy wins earlier. It’s quite a satisfying feeling to pay off your first debt, and if you do it earlier in the game, chances are you’re more likely to keep the momentum going. A downside is that you may be paying more in interest on your loans.

Prioritize Your Debts

Rearrange your debts in order of which one you’d like to tackle first. After doing some math, figure out how much money you’ll be paying on each date, and the target date to pay it off. That’ll help you stay organized and on track.

Focus on a Single Debt

No matter which repayment method you decide on, focus on chipping away at one debt at a time. It’ll help you make greater headway, and it’ll make it easier to track and manage your debts.

Plus, because you are tackling one debt instead of spreading your efforts among several, you can pay more of the principal. In turn, you’ll save more on interest.

Hit “Pause” on Accumulating More Debt

If you can, close or freeze your credit card accounts while you are in debt payoff mode. While you’re paying off debt, you definitely want to avoid accumulating more debt. Otherwise, you may find yourself feeling like you’re taking a step backward, ending up at Square One.

Note: Closing a credit card could negatively impact your credit. That’s because your balance-to-limit ratio, or credit utilization ratio, is affected when you close a card. Your credit utilization ratio is the outstanding balance on all your cards against the maximum limit on all your cards combined.

So if the spending limit on all your cards is $30,000, and you have an balance of $9,000, your credit utilization ratio is 30 percent. (The lower your credit utilization ratio the better. A general rule of thumb is to keep it under 30 percent.) When you close a credit card, depending on the limit on that particular card and your total outstanding balance, your credit card score could get dinged.

If you’re not quite ready to close out your credit cards with debt, many credit cards now have a “freeze card” option where you can momentarily hit the “pause” button on your card.

Slash Expenses

When paying off debt, see where you can cut back on your expenses. Lowering living expenses means more money can go toward your debt.

A few pointers on slashing expenses:

Figure out your expenses

If you don’t already have a budget, figure out what your expenses are. This includes everything from rent, bills, monthly subscriptions, gas, insurance, food, entertainment, and shopping.

Go for the big wins

Your three major spending categories are housing, transportation, and food. If you can save on any one of these three spending areas, you can save larger amounts of money each month.

Go for the easy wins

Easy wins on slashing expenses include recurring expenses. This includes car insurance, bills, and monthly subscriptions. Contact the company and see if there are any discounts, or negotiate for a lower rate. You may be able to save by enrolling in autopay or making a yearly payment instead of a monthly one.

Another way to gain easy wins is to nix stuff you aren’t using. For instance, if it’s been a while since you last stepped foot in a gym, cancel your gym membership.

Be sure to check out all our budget guides for thorough advice on slashing common expenses.

Think of Ways to Bring in More Money

See if there are any growth opportunities at your current job to earn more. If you’ve been a valuable employer, either by helping the company save money, make more money, make things more efficient, or reducing stress on your team, use that as leverage for a raise or a bonus.

Outside of your job, look for ways to earn more money by way of a side hustle. There are plenty of ways to make extra money, such as tutoring, pet sitting, ride sharing, freelance writing, and so forth.

Commit to any extra cash you receive toward your debt. This includes not only money from a raise, bonus, or side hustle, but cash gifts and small windfalls that come your way.

Order a Credit Report

As paying off your debt affects your credit, it’s important to keep tabs on your credit when paying off your debts. You’ll also want to check your credit report to see if there are any inaccuracies in your personal information, payment history, and debts listed. Debts that are unpaid and have been sent to a collection agency also usually show up on your credit report. You’ll be able to see which agency the debts have gone to.

If you need to file a dispute, you’ll need to contact the credit bureau agency directly. The credit bureau typically has 30 days to to investigate your dispute.

You can order a credit report for free at AnnualCreditReport.com. You’re able to order one from each of the three major credit bureaus—TransUnion, Experian, and Equifax—during a 12-month period. While your credit report is free of charge, there’s typically an additional fee to see your credit score.

Monitor Your Credit

While paying off your debt, monitoring your credit will help you see how your debt payoff efforts is boosting your credit. As you pay off debts and lower your balances, your score typically goes up.

There are a handful of free credit monitoring services that allows you to monitor your credit and check your credit score for free. Many popular money management apps and credit card companies also allow you to check your credit score.

You’ll also want to get a credit report to make sure your payment history, balances, and so forth are reflected accurately. As you can get a free report every year from each of the three credit bureaus, you can stagger receiving them throughout the year.

Contact Your Creditors

While this may feel intimidating, remember: It’s in both parties’ best interest to get your debts paid off. When talking to a rep from the lender, you can work with them on a repayment schedule, and possibly negotiate for a lower interest rate or pay a lower amount than what you originally owe.

Before giving a call, have as much information on hand as possible. Know that it usually requires more than a single call and could take a series of calls before you come to an agreement. Patience is key.

Negotiate With the Collection Agencies

Also scary, but essential. For any debts that have gone to collection agencies, you’ll need to contact the agency directly to create an agreement on a payment plan. You’ll also want to be prepared to make an offer. At the end of the day, lenders want to have the debt cleared, so they may be open to accepting less than the original amount owed.

Make It Easy to Pay Off Your Debts

While paying off debt requires a lot of effort, there are ways to make it “easier,” so to speak. Besides negotiating on the outstanding balance, a few things that could help you make payments on time:

Set up auto-pay

The fewer steps you have to take when paying off your debt, the easier it will be. Set up auto pay on all your debts. That’ll ensure on-time payments.

Make extra payments

Besides making more than the minimum payment each month, aim to make an extra payment each month. If you’re feeling particularly ambitious, aim to make weekly payments.

See if you can move the payment due dates

If you’re having problems paying on time, contact your lenders to see if you can move the dates payments.

Consider Debt Consolidation

There are several ways to consolidate your debts:

Transfer your debts to a 0 percent transfer credit card

If you have strong credit, you might qualify for a credit card with a zero percent intro rate. If that’s the case, it could help simplify payments and save you money on the interest.

Consolidate debt by taking out a loan

Once again, if you have strong credit, it could potentially save you money on the interest or make it easier for you to manage your debt. However if you have poor credit, be prepared for high interest rates. In that case, it may not be worth it.

Consider Refinancing

If you have strong credit and high-interest debts, refinancing your debt could help you lower your interest rate, have smaller monthly payments, and help you save money overall. Conversely, if you have poor credit you may not be able to net the best terms and rates. Before deciding, shop around and ask questions to make sure it’s the right choice for you.

Know It’s an Emotional Journey

A lot of strong emotions come with having debt. For example, grief, denial, shame, fear, stress, anxiety, and anger. Some days your debt may feel like it’s eclipsing joy and happiness in your life. And guess what? That’s perfectly normal.

It’s helpful to know that when it comes to carrying debt, you’re certainly not alone.

By understanding that it’s a process, and accepting the emotions that come with debt, you’ll be able to manage your payments, but your emotional and mental well-being as well.

Stay Motivated

Because paying off debt can be a long and arduous journey, you’ll need to tap in to your arsenal of motivational tactics to stay on top of your plan. For Melanie Lockert, who paid off $81,000 in student loans, she sublimated anger into a motivational tool.

“Anger can be a powerful motivator when it comes to debt payoff,” says Lockert, who is the founder of Dear Debt. “When I realized I was paying $11 per day in interest, it felt like highway robbery. I was so angry. Instead of festering in that feeling I channeled it into paying off my debt.”

Get support

Lockert also recommends getting support. Perhaps join a Facebook group that talks openly about paying off debt, or about personal finance in general. Confide in those who are going through a similar journey, and share both your struggles and wins.

Track your progress

Get creative and go beyond templates and spreadsheets. You can track your progress by way of a debt thermometer, or create a grid of squares, with each square representing $100. Each time you pay off $100, color in each square.

Celebrate your wins

It’s important to celebrate minor victories along the way, no matter how small. Treat yourself to something simple each time you’ve passed a checkpoint. And once you’ve made your last payment, do something special to commemorate the occasion (within reason, of course). After all the hard work and perseverance you’ve put in to debt repayment, you certainly deserve it.

Envision Your After-Debt Plans

Envision how your life will be after you become debt-free. A tremendous weight will be lifted off your back. You’ll be able to bulk up your savings, and make progress on those money goals you’ve put on hold for so long.

If you’d like some help in coming up with a debt management plan, reach out to Money Management International (MMI). Our certified credit counselors are available around the clock.