How to Create a Debt Payoff Plan without Losing your Mind

When you decide to create a debt payoff plan, it can seem like an overly daunting task, especially in the beginning.

When you have calls coming in 5 & 6 times a day, bills in the mailbox from creditors and collections, and no idea where to start. Yeah, it is overwhelming, to say the least.

How do I know? Because I have totally been there.

The bills piled up to a point that was embarrassing to admit. The calls were being screened, blocked, and ignored (like I had the money to give them anyway). Then, the summon’s papers showed up regarding a new creditor taking me to court for collections.

That was the last straw. Seriously, how did I let it get this far?

That was the point when I realized it all had to stop. The calls, the collections, the stress. The problem is, when it gets that bad, where do you start? When it is time to create a debt payoff plan, what is the first step?

Once I figured it out for myself (after hours/days of research, stress, and tears over the hole I had dug) I decided this was information best shared.

Why?

Because everyone needs to know how to get organized to get back out of the mess of debt. Everyone needs to know how to create a debt payoff plan because no one should have to live under a mountain of debt forever.

Time to Answer the Calls

Yes, I know. This step does not sound fun, or enjoyable. I am here to tell you though, that once you start talking to these people, you will be surprised.
Not only do they not want to be crappy with you (for the most part), they actually want to help you!

Yep, you read that right. They want to help.

You see, if you keep ignoring them, they have to keep calling. If you pick up and try to explain, most of them are going to work with you. That’s because them receiving even a little bit of money a month is better than them not talking to you, or better yet, them getting screamed at.

Not only that, once you talk to them and set up a plan, they quit calling!

Amazing stuff right?

Collect all of your Debt

All of those bills you have been stashing in a box in the bottom drawer of your desk. Yep, those. Pull those puppies out.

Next, gather up all of the envelopes you have lying around that came in the mail that you were too depressed to open. We are going to need those too.

Sit down with all of your wicked little envelopes, a pen, and a piece of paper. It is time to come to terms with what this debt monster looks like.
Start listing out each of your debts. The total amount owed, the minimum owed, and the payment date. Finding debts that are in trouble? (Generally, those printed in BOLD RED.) Let’s list a phone number with those, as well as highlight them on your list.

You are going to want to call those nice people too so that you can create a debt payoff plan with them for that specific debt too.

Don’t fret. It seems like a lot, but it will become easier.

Get an Idea of your Credit Score Situation

Depending on how long you have been ignoring your debt, this could be the scariest part yet. Trust me though, it is essential when you are working to create a debt payoff plan.

Nowadays there are several sites out there that claim to give you a FREE and accurate credit report. Of these, I have personally tried both Credit Karma, and Credit Sesame, and trust them both. While they differ slightly in the scores they provide, they have given me a fair representation of where my credit stands in the past. They both also provide additional information and tools to help to improve your credit score, which will be helpful to you in the future.

So why do you need to get an idea of your credit score situation to create a debt payoff plan?

Often, when you go exploring your credit score, you will find additional debts that are hiding and affecting your credit. Yeah, you are going to want to add those to that list we made earlier.

Plus, paying off your debt is going to cause your credit score to rise. Being able to track where you started, and how your score is improving is going to provide inspiration. Later on in your debt payoff journey, when you are tired of paying things off, you can look back at your rising credit score and see that you are making a difference.

Sometimes, it is going to be the little things.

Lay Out all your Numbers in a Monthly Budget

Yes. I know. You don’t want to.

But this, my friend, too shall pass.

Seriously though. Do you remember that pen and paper you had earlier? Sit back down with them and start organizing.

List out your bills by name, date due, and minimum due. Make sure that you are incorporating your regular bills (utilities, rent/mortgage, gas, groceries, etc.) into this budget too.

Now, list this out into what has to be paid by week to stay on time, and compare these numbers with the amount you have coming in for the corresponding week. Hopefully, these numbers seem to look less scary at this point, and if not, do not worry, I will have a post soon to cover that as well. Your goal here is to stay as current as possible, with as many bills as possible.

Even if you are paying only the minimum at this point, that is something.

Create a Debt Payoff Plan

You have all of the numbers together. You have figured out the scary part, and now it is simply time to figure out how long (at most) it is going to take you to get rid of it.

In order to do this, simply start listing out your debts in the order that you want to pay them off. Then list out how long it will take you to pay them off at the minimum payment. Add in how much extra you can throw towards paying off your debt per month, and figure up how quickly you can pay off each debt. Organization is key here, but really, it is as simple as that.

Something to keep in mind, there are many different plans out there that you can follow to pay off your debt faster. Personally, I have decided to follow Dave Ramsey’s snowball method, but everyone’s situation is different, and so that may not work for you. I suggest you research the different plans out there and determine what works best for you when you create a debt payoff plan.

What is holding you back on your journey to get out of debt? Have you ever tried to create a debt payoff plan in the past? Any tips you didn’t see here? Let me know in the comments below, and best of luck on your journey!