Tired of most of your paycheck going towards debt? Practice these financial habits to ditch debt for good.

4 minute read

If a big chunk of your monthly income goes towards paying credit cards and loans, you’re probably used to being broke. However, just because you’ve grown accustomed to paying hundreds of dollars or more every month towards debt doesn’t mean you have to accept this reality as a way of life.

Even if you feel overwhelmed by the amount of debt you owe, don’t give up. By developing and practicing these eight financial habits, you can knock all that debt out of your life and avoid getting into the same situation again.

1. Face the brutal truth

It’s hard to admit that you’re in debt over your head, but if most of your income goes towards paying credit card bills, it’s time to face the truth. Don’t be too hard on yourself, either. Many people take on too much credit card debt, but plenty of people also dig their way out eventually. First, you have to be honest with yourself that you have a debt problem. Then you can start making a plan to pay it off and develop the financial habits to pull it off.

Find out: Save Hundreds of Dollars Every Month by Tweaking These 6 Spending Habits

2. Stick to a budget

If you don’t have a budget, now is the time to create one. You can download a free (or nominal fee) budgeting app like Mint or YNAB (You Need a Budget) to get started and receive tips on saving, reducing spending and paying off debt. Once you have a realistic budget, you will know where all your money is going and can create a debt repayment plan. Some budgeting apps even make suggestions on ways you can trim certain monthly expenses.

Find out: How to Create a Budget and Stick to It

3. Work with a credit counselor

There’s nothing wrong with asking an expert for help getting rid of debt. Meeting with a credit counselor at a free or nominal fee nonprofit credit counseling agency is a good place to start. The credit counselor can help you create a realistic debt payoff plan. The counselor may also be able to negotiate with your creditors if you’ve fallen behind or need a different payment arrangement.

Don’t stop all communication with one meeting, though. Once the plan is in place, you’ll have a relationship with a credit counselor who can help you figure out how to cut expenses and consult on changes you can make to your budget as you pay your debts off one by one.

Find out: What is Credit Counseling and How Does it Work?

4. Commit to a debt repayment plan

Once you have a debt repayment plan in place, make a commitment to stick with it. Sure, you’ll miss pulling out the credit card to pay for dinner and never checking your credit card balances because the amounts will depress you. But staying true to your debt repayment plan will bring gratification sooner than you might think, especially if you pay off smaller debts first.

Find out: Setting Up a Debt Repayment Plan That Works

5. Never make only the minimum payment

If you’re making only the minimum payment due on your credit card statement, that’s what is keeping your credit card debt high. To get an idea of how long it will take to pay off a credit card making only the minimum payment — and how much interest you will pay — experiment with different monthly payment amounts on an online credit card interest calculator. Here’s an example to help you get started.

Let’s say you have a credit card balance of $5,000, and make only the monthly minimum payment (typically 2 percent of the balance) of $100. With that plan, you’ll pay more than $3,000 in interest and it will take nearly seven years to pay it off. If you make $300 payments, you’ll pay off the balance in just over a year and a half and pay only $612 in interest.

Find out: 4 Reasons to Stop Making Only The Minimum Credit Card Payments

6. Track spending

The best way to curtail spending is to keep track of where all your money is going. You could be spending hundreds of dollars a month on small purchases. Maybe you go out to lunch every day at work or make multiple trips to the grocery store each week, paying $20 or $30 for a bag or two of groceries at a time. Everyday purchases add up fast.

You can probably keep track of spending on a budgeting app. But you can also keep track by writing down small purchases on a notebook in your car and checking your debit card and credit card spending daily at your online accounts.

Find out: 6 Easy Ways to Track Your Spending Habits 

7. Enlist financial moral support

You may be surprised by how many of your friends are in the same debt-trap situation. Ask a good friend who also wants to pay off debt to be your debt buddy. Then keep in touch to report your progress or the occasional setback and inspire each other to practice good financial habits.

Find out: 6 Ways to Enlist Your Friends’ Help When Trying to Pay Off Debt

8. Check your credit report regularly

Most people don’t check their credit reports regularly, but knowing where your credit accounts stand can inspire you to pay off debt faster. You can also monitor the reports for unfamiliar accounts, which can be a sign of identity theft. You’re normally allowed to order one free credit report a year at AnnualCreditReport.com. Due to the COVID-19 pandemic, however, you can get one free copy every week through April 20, 2022.

Find out: How to Read a Credit Report Step by Step Like a Pro

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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

Published by Debt.com, LLC