How to Get Out of Debt: A 5-Step Plan You Can Start This Week

Debt rarely disappears on its own. What makes the difference is not a big income or a lucky break, but a simple plan you can follow every month. This guide walks you through five practical steps you can start this week, based on the approach taught by Maximiliano Nicolás, attorney, U.S. military veteran and bestselling author of The Path to Financial Freedom and Happiness.

Step 1: Write down everything you owe

You cannot fix what you cannot see. Make a list of every debt: credit cards, personal loans, car loans, store credit and money owed to family or friends. For each one, note the balance, the interest rate, the minimum monthly payment and the due date. Seeing the full picture on one page is often uncomfortable, but it is also the moment you take back control.

Step 2: Build a realistic monthly budget

Start with your net monthly income. Then list your essential expenses (housing, food, transport, utilities, insurance) and your minimum debt payments. Whatever is left is the money you can use to speed up your debt payoff. Review your last two or three months of bank statements: most people find small recurring expenses, such as unused subscriptions, that can be cut immediately.

Step 3: Choose a payoff method and stick to it

Keep paying the minimum on every debt, and put all your extra money on one target debt at a time. Two well-known methods help you pick the target:

• Avalanche: pay the debt with the highest interest rate first. It usually costs less in total interest.
• Snowball: pay the smallest balance first. Quick wins keep you motivated.

When one debt is paid off, roll its payment into the next one. The best method is the one you will actually follow.

Step 4: Stop adding new debt

Paying down debt while adding new charges is like bailing water from a boat with a hole in it. Put your credit cards away while you work the plan, and build a small emergency fund so an unexpected expense does not send you back to borrowing.

Step 5: Track your progress every month

Set a fixed day each month to update your debt list and your budget. Celebrate every debt you close. Discipline, not perfection, is what moves you forward: if you have a bad month, adjust the plan and keep going.

Learn the full method with CanalMarket Academy

Our course Getting Out of Debt explains each of these steps in more detail, and the CanalMarket Academy memberships give you access to our on-demand courses on personal finance, business and leadership. Plans are billed monthly and you can cancel anytime.

Want to go deeper? Read The Path to Financial Freedom and Happiness, or message our team on WhatsApp to find the right course for you.

This article is for educational purposes and is not personalized financial advice. For decisions about your specific situation, consult a qualified professional.