Debt is like any other trap, easy enough to get into, but hard enough to get out of.”

-Henry Wheeler Shaw

Being in debt is terrible and the debt burden makes you understand the importance of savings, investing and value of money. Main reasons for debt are- no control over spending and lack of financial planning. So how should one plan to pay off debt?

Plan out a smart debt repayment strategy, stick to it and in no time you can be free of bad debts. Sounds easy right? Using your credit cards ‘smartly’ is more beneficial than finding out the smart ways to get rid off it. But paying off debt needs good planning with execution and lot of patience. Debt should be dealt with a disciplined approach. Well, one can start by getting into a written budget before the month begins. And see how much they can afford to pay.

• First step is-  to organized your debt. Make a spread sheet and list down your debt, its type, interest rate, amount of loan, balance remaining etc.
• Then to start tracking your expenses, remove unnecessary expenses and to postpone the spending which has low priority. This will help you to save money.  Start downsizing your expenses on travel, eat outs, entrainment, costly memberships etc.. It can help in saving extra money to pay off debt.
• Direct this savings towards debt repayment. In this way, you can determine how much you can pay off on your debt each month. Make sure to put in the minimum payments for all debts that are not your number one priority.
• ‘Interest on debts grow without rain.’- Yiddish Proverb. List down your debts and find out the debt with highest interest. Credit cards and personal loans have high interest. Therefore, paying off these loans should be first priority.
• Understand the difference between good loan and bad loan. For example, home loan is popularly known as ‘Good debt’ as it gives the benefit of tax efficient and in a way helps build equity through home/property.  Many time we get so much stressed by ‘paying off debt quickly’ idea that we can make the wrong decision instead of using our money prudently. Think before paying off your home loan, why? read here.
• Find out the ways like debt consolidation, refinance etc. methods which can help in reducing the different loans and interest rate. Debt consolidation is great way to reduce some interest component and to reduce EMI payments, but it does not guarantee that you will be debt free or you can spend more. All you need is to pay off debt early and not to use credit cards or take any further loans.
• Keep updating and tracking of your debt repayment sheet.
• Find out ways to increase your income and income sources
• Also, what require is change your mindset  for spending and to alter habits & attitude towards savings. Many time after paying off debt people get into debt trap easily and reason is -poor spending habits and mistaken behavior towards saving.

Taking smaller steps, disciplined approach and calculated risk as per your financial situation could definitely help to come out of the debt burden and live life debt free!

Note:- Above article based on one of my Quora Answer.