A Step-by-Step Guide to Paying Off Debt

One of the most common challenges we hear from potential clients is: How do I pay off my debt? It’s one of the top goals they list during our free consultations, and for good reason.

Figuring Out Debt Solutions

Getting out of debt provides financial freedom, reduces stress, and allows for better financial planning. But where do you start? There’s no one-size-fits-all solution, but there are key variables to consider. Below, we break down an effective, step-by-step strategy to help you pay off debt efficiently.

..we break down an effective, step-by-step strategy to help you pay off debt efficiently.

Step 1: Get Your Finances in Order

Before making a debt payoff plan, you need a clear picture of your finances. We use a customized system I created based on my experience as a consultant and Fractional CFO that takes the information from QuickBooks® and organizes it in a way where we can track and analyze the data on a regular basis. This system gives our clients an overall view of their financial situation, helping them make informed decisions.

One section of this system is focused on their debt and available credit. We use this section to create strategic plans to eliminate their debt.

This system gives our clients an overall view of their financial situation, helping them make informed decisions.

Step 2: Choose a Payoff Strategy

Once you have a full financial overview, it’s time to start paying off debt strategically. We guide our clients through two main approaches:

The Snowball Method (Quick Wins): 

Apply extra income to the smallest debt first. Once that’s paid off, move to the next smallest. This builds momentum and gives a psychological boost with each victory.

The Avalanche Method (Minimize Interest): 

Apply extra income to the debt with the highest interest rate. This method saves the most money in the long run. Ultimately, we let our clients choose the method that keeps them motivated and on track.

Sometimes we discuss strategies of moving debt to zero interest credit cards so we can save the client money while they are paying off other cards. This is why it's good to have all the creditor information laid out so we can see what we have to work with.

This is why it's good to have all the creditor information laid out so we can see what we have to work with.

Step 3: Leverage Paid-Off Debt to Pay Down More

As soon as one debt is eliminated, take that payment amount and apply it to the next debt. This accelerates the payoff process. For example, if you were paying $200 monthly on a now-paid-off credit card, redirect that $200 to the next debt. This technique, often recommended by Dave Ramsey, helps create a snowball effect in eliminating debt faster.

Step 4: Increase Your Income Streams

While budgeting and strategizing are essential, increasing income can significantly speed up debt payoff. As part of our Fractional CFO Services, we work with clients to explore creative ways to bring in extra income, such as:

• Launching new products or services

• Raising rates or prices

• Cutting unnecessary expenses

• Selling unused assets

  
  

By generating additional income and putting it directly toward debt, you can accelerate your financial freedom.

Final Thoughts

Paying off debt isn’t just about making payments—it’s about having a strategy that works for you. Whether you choose the Snowball or Avalanche method, the key is consistency and a clear financial plan. With our bookkeeping and Fractional CFO services, we help clients take control of their finances, increase income, and eliminate debt step by step.

Let us know if this blog helped. If you would like a Free Consult, CONTACT US!

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#Finance #Budget #Money #BusinessStrategy