Discover the 3 essential steps to take before paying off debt. Learn practical tips, real-life examples, and easy strategies to manage your finances smarter and faster.

3 Things to Do Before You Start Paying Off Debt

    Paying off debt can feel overwhelming. Whether it’s credit cards, student loans, or personal loans, the idea of sending money every month to creditors can stress anyone out. But here’s the good news: before you even start throwing money at your debt, there are some smart steps you should take first. Doing these will not only make the process smoother but also increase your chances of paying off debt faster.

In this article, we’ll cover 3 things you must do before paying off debt, complete with practical tips and real-life examples that you can apply right away.

1. Understand Your Debt Situation

Before you start paying off debt, you need a clear picture of what you owe. Sounds simple, right? But many people start making payments without knowing exactly how much they owe, what the interest rates are, or which debts are costing them the most.

Why it matters

If you don’t know the details of your debt, you might end up paying the wrong debt first, or missing deadlines that could hurt your credit score. Understanding your debt is like having a roadmap—you can’t get to your destination if you don’t know where you are.

Practical Steps to Take

• List all your debts: Include credit cards, personal loans, student loans, medical bills, or even money you owe family and friends.

• Note interest rates: Some debts have higher interest rates than others, which means they grow faster if you don’t pay them.

• Check minimum payments and due dates: This prevents late fees and penalties.

Example:

Let’s say you have:

• Credit Card A: $3,000 at 18% interest

• Credit Card B: $2,000 at 12% interest

• Student Loan: $10,000 at 5% interest

Knowing this, you can decide whether to tackle the high-interest credit card first (the debt avalanche method) or pay the smaller balances first (the debt snowball method).

2. Build a Small Emergency Fund

Jumping straight into debt repayment without a safety net can backfire. Life is unpredictable—car repairs, medical bills, or sudden expenses can pop up anytime. If you don’t have a backup plan, you might end up borrowing again, which defeats the purpose.

Why it matters

Having even a small emergency fund keeps you from falling back into debt when unexpected expenses arise. Think of it as a financial cushion—it protects your momentum.

Practical Steps to Take

• Start small: Aim for $500–$1,000 for beginners. This is enough to cover minor emergencies.

• Keep it separate: Store this money in a separate savings account so you don’t accidentally spend it.

• Automate savings: Even $20 a week can add up over time.

Example:

Imagine your car needs an unexpected $400 repair. If you don’t have savings, you might put it on a credit card at 20% interest. If you have a $500 emergency fund, you cover the repair without adding more debt. That small fund can save hundreds of dollars in interest and stress.

3. Review Your Budget and Cut Unnecessary Expenses

Before aggressively paying off debt, you need to know how much money you can realistically put toward it each month. This means taking a close look at your income and expenses.

Why it matters

Without a budget, you might overcommit or undercommit. A realistic plan ensures steady progress without feeling deprived or overwhelmed.

Practical Steps to Take

• Track your spending: Write down everything you spend for at least a month. Apps like Mint or YNAB make this easier.

• Identify non-essential expenses: These are things you can reduce or cut temporarily, like streaming subscriptions, dining out, or luxury items.

• Set a debt repayment goal: Decide how much extra money you can safely put toward your debt each month.

Example:

Your monthly income is $3,000, and your essential expenses (rent, groceries, utilities) are $2,200. You’re left with $800. After tracking spending, you realize you spend $150 on coffee and $100 on streaming services. By cutting these, you free up $250 extra for debt repayment.

Bonus Tip: Choose a Repayment Strategy

Once you’ve completed the three steps above, it’s time to choose a repayment method. There are two popular strategies:

1. Debt Snowball: Pay off the smallest balance first while making minimum payments on other debts. The psychological boost from paying off a debt completely motivates you to keep going.

2. Debt Avalanche: Pay off the debt with the highest interest rate first. This method saves the most money in interest over time.

Example:

Using our earlier example:

• Debt Snowball: Start with Credit Card B ($2,000), then Credit Card A ($3,000), then Student Loan ($10,000).

• Debt Avalanche: Start with Credit Card A ($3,000, 18% interest), then Credit Card B ($2,000, 12% interest), then Student Loan ($10,000, 5% interest).

Both work, but choosing one aligns your repayment plan with your goals and personality.

Practical Daily Habits to Support Debt Repayment

Beyond these three steps, creating small, supportive habits can make a huge difference:

• Track progress: Check your balances monthly. Celebrate small wins.

• Avoid new debt: Pause using credit cards unless absolutely necessary.

• Negotiate bills: Sometimes you can lower bills like cable, phone, or insurance.

Real-Life Example:

Emma, 29, paid off $12,000 in credit card debt in 18 months. Her key moves:

• Listed all debts and prioritized high-interest cards.

• Saved $800 in an emergency fund first.

• Cut her monthly coffee and takeout spending by $200, putting that directly toward debt.

By staying consistent, she avoided new debt and steadily reduced her balances.

Conclusion

    Paying off debt isn’t just about throwing money at balances—it’s about planning, preparation, and smart decisions. Before you start paying off debt:

1. Understand your debt – Know what you owe, interest rates, and deadlines.

2. Build a small emergency fund – Protect yourself from unexpected expenses.

3. Review your budget – Cut unnecessary spending and free up money for repayment.

Once these steps are in place, you can choose a repayment strategy, track progress, and adopt habits that support long-term financial health. Paying off debt can feel like a mountain climb, but with the right preparation, each step becomes more manageable. Start smart, stay consistent, and celebrate every milestone—you’ll get there faster than you think.