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6 steps to kick-start your debt repayment plan in 2024

CNBC Select offers advice on how to make 2024 the year you confidently manage your debt and get your finances back on track.

Good For
Retirement Planners
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11 min read
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Debt is a four-letter word that can cause a lot of stress.

Americans carry an average debt balance of $96,371, including credit card balances, car and student loans, mortgages, etc., according to credit bureau Experian's latest data. Yet, the average salary is only around $55,800 according to Q3 2022 data from the Bureau of Labor Statistics.

While that amount of debt may seem striking compared to how much Americans earn per year, not all debt is created equal. Low-interest debt, such as mortgages or even student loans, can often be a common part of someone's long-term financial plan. Meanwhile, credit card debt typically comes with sky-high APR which can make it difficult — and expensive — to pay off.

For debt of any kind to be manageable, you need to have a plan to pay it off. That's especially true when high-interest debt balloons out of control. It can be overwhelming to know where to start, but sometimes you simply have to begin.

Ahead, CNBC Select offers a step-by-step guide to helping you get started, so you can make 2024 the year you finally get your debt under control.

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Look at the numbers

The first step to any debt payoff plan is to understand how much debt you have. You may feel anxious about looking at those balances, but once you understand where you stand financially, coming up with a plan is really just simple math.

List your debts and how much you owe, either by hand or in a spreadsheet. You should include both kinds of debt: revolving loans (credit card balances) and installment loans (student loans, mortgage, car loans, etc.).

A budgeting tool like Empower might make it easier to add up the total and track your payoff progress.

Pulling your credit report is another helpful way to get your debt snapshot. Credit reports list your total outstanding debt, plus other facets of your credit score like payment history and number of recent inquiries. While you're at it, check your report for errors. Make sure every account and balance you see looks accurate and up-to-date. (Learn how to dispute an error on your credit report.)

Decide which debt repayment plan you want to follow

The two most common debt payoff methods are known as the snowball method and the avalanche method. Both of these plans have their pros and cons.

With the snowball method, you focus on paying off the smallest balance first. Some argue this is a good plan because you can get a win early on and then stay motivated to pay off the rest of your balances.

With the avalanche method, you pay off debt with the highest APR first. With this method, you will likely save some money in the long run because you're prioritizing balances with higher interest rates.

Some people like what's called a "reverse snowball," or paying off the biggest balance first, because when it's over, the rest of the balances seem small in comparison.

When you write down your debt balances, also include the interest rates. Notice which ones feel like "low hanging fruit." Maybe your largest balance sticks out like a sore thumb and you feel ready to pounce on it first. Or perhaps the lowest balance is so small you feel excited to pay it off right away and get an instant win.

The Lacys, who spoke with Select, paid off $21,000 of credit card debt in less than two years by starting with their smallest balance of $1,200. They paid it off in just one month. It felt so good, they kept going.

All debt payoff plans have their own sacrifices and benefits, so it's important to understand what motivates you to keep going. You can also change up your methods as you go along to fit your lifestyle, or figure out a whole different repayment plan altogether.

Figure out your baseline budget

The start of the new year is a great time to look at your spending from the past year and really understand where all your money goes each month. As you begin to plan your debt repayment, take time to calculate your baseline budget, or the minimum amount you need to pay your basic bills.

Make a list of your essential expenses (needs, not wants). This includes housing, utilities, food, transportation and the minimum monthly payments on all your bills. You can pull your year-end credit card statement and/or checking account statements to see how your spending broke down over the past year.

You'll also want to know the minimum payments you can make on all of your debt balances each month. This can be separate from your baseline budget, but it will be a non-negotiable portion of your monthly spending.

As you're reviewing your expenses, look for areas where you might trim your spending and redirect it toward debt repayment. When you're trying to tackle a big balance, every little bit does help. (Learn more about variable and fixed costs here.) But there might be bigger sacrifices you can make (such as selling your car or getting a roommate) so you can pay off your debt faster.

If you want to track your spending more closely in the new year, consider signing up for a budgeting app like You Need A Budget (YNAB) or Mint. With YNAB, each dollar you earn is assigned a spending bucket, and many users have found it a useful app when they are trying to pay off debt.

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Allocate your money

Once you know your baseline budget and you know the minimum you need to pay on your debt each month, you can figure out if you have any discretionary income to put toward additional debt repayment. First, subtract your baseline costs from your take-home pay. The difference between what you bring in and what you need to live on is your discretionary income. This is what you use to spend on any variable costs and, more importantly, pay your debt off with.

Depending on your income and expenses, you might have an extra $50 to put toward debt or an extra $500. Don't obsess over the number. Right now, you should just be focused on making realistic payments toward your debt.

Once you know how much discretionary budget you have, decide how much you want to keep for yourself and how much to put toward debt. Be realistic. You might split it up 50/50 ($250 for spending money and $250 for debt payoff, to use our example), or if you share income with a partner, you might decide to let them cover certain expenses so you can allocate all of your remaining money toward debt repayment.

Don't forget to budget for your happiness: Nyajuok Mangongo, 36, who paid of $87,000 of credit card debt, found it was more manageable because she budgeted $100 to spend on herself per month. She also sought out additional income streams to help her pay off the debt faster.

If you feel overwhelmed trying to make a plan for your money, there are apps that can offer guidance. PocketGuard lets you create goals, including debt payoff. The app will automatically calculate your goals into your budget, then tell you how much you have to spend each day until the next time you get paid.


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Information about PocketGuard has been collected independently by CNBC Select and has not been reviewed or provided by PocketGuard prior to publication.

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Save on interest

You can pay off debt a lot faster when you find ways to save on interest. One smart way to manage your debt is to do a balance transfer from high-interest credit card(s) to a 0% APR credit card that offers no interest for up to 20 months.

The Citi Simplicity® Card, for instance, comes with 0% intro APR for the first 21 months from date of first transfer on balance transfers (after, 19.24% - 29.99% variable APR; balance transfers must be completed within four months of account opening). There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5). (See rates and fees).

Make sure you read the fine print before requesting a transfer (most have a small fee of 3% to 5%) and also be aware that you may need good or excellent credit (scores 670 and greater) to get approved.

Personal loans can be a good alternative to balance transfers. The interest rates for personal loans are rarely 0%, but they are typically lower than the APRs you're paying on your credit card. LightStream offers loans with flexible terms and interest between 7.49% - 25.49% APR with AutoPay*. 

Happy Money might be a better choice if you have multiple debts to pay back. You can have Happy Money pay your creditors directly for no fee. Once the lender pays off your credit card balances, you just have to repay them in monthly installments, which can help streamline your debt repayment process.

Happy Money

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Stay accountable and celebrate your progress

Paying off a lot of debt isn't easy so it's important to find ways to stay motivated along the way. Recruit a friend or partner who will hold you accountable to your plan and then look for ways to celebrate the wins, big or small.

You could set up a monthly money date on your calendar to track your progress and/or knock out tasks. Plan low-cost ways to celebrate when you hit your targets (make a nice dinner, have a dance party, treat yourself to a small splurge such as a face mask or nice bottle of wine, etc.).

As blogger Aja Dang told Select earlier this year, the most affordable and (perhaps most meaningful) way to celebrate your progress is to find others who understand your journey and surround yourself with support.

Enjoying the process will also help you avoid needing the instant gratification that comes from buying something you can't afford or don't need. As personal finance blogger Jordanne Wells shared with us, her debt payoff journey picked up speed when she stopped trying to score new credit card sign-up bonuses and focused instead of putting extra cash toward her debt.

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Bottom line

Paying off debt isn't easy, but it is worth it in the long haul. In the past year, Select has interviewed dozens of former debtors who have paid off five-figure debt or more. It takes focus and commitment, but nobody regrets the sacrifices they've made to become debt free.

*Your LightStream loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 7.99% APR with a term of 3 years would result in 36 monthly payments of $313.32

Information about PocketGuard has been collected independently by CNBC Select and has not been reviewed or provided by PocketGuard prior to publication.

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.