How to get out of debt
Training 455 minuteshow to get out of debt
You are 34, a delivery driver. You owe $3,000 on a card, $1,200 on an appliance loan and $800 to your brother. Paydays come and go, the debts stay.
Training goal: Make a plan and get debt free
▶ Play this trainingSituation
1. You do not know the exact balances or rates. You open every bill with dread.
- List every debt: balance, rate, minimum, due date
- Leave the letters closed until things ease
- Pay whoever reminds you loudest
2. The card charges 24%, the minimum is 3% of the balance, now $90. It shrinks with the debt, so $3,000 takes about 15 years to clear.
- Pay the minimum and stay relaxed
- Find $110 in the budget and pay $200
- Pay $20 above the minimum
3. Where can $110 come from? You spend $140 on food delivery and $45 on three streaming services.
- Take a new loan to pay the old ones
- Halve delivery and keep one streaming plan
- Cut nothing, life is hard enough
4. Five months later the appliance loan is paid off. $80 a month is free. Savings are just $300, and you earn with your car.
- Add the $80 to the card payment
- Celebrate with a new installment purchase
- Save the $80 for 3 months to reach $540, then hit the debt
5. The car breaks down: $400 to fix. The card has room again, and the cushion holds $540.
- Put it on the card, leave the cushion alone
- Skip all debt payments for a month
- Pay from the cushion, then refill it
What you will learn
- Step one: a full list of debts with their rates.
- Pay above the minimum and stop new borrowing.
- A small cushion protects the plan from surprises.
Your real-life step
Add all your debts to "My debts" and see the date you become debt free.
Questions and answers
Where do I start getting out of debt?
List every debt, stop new borrowing, build a small buffer and put extra on one debt at a time.
Which debt should I pay off first?
The highest rate saves the most money. The smallest balance gives a quick win and motivation.
What if I cannot make my payments?
Call your lenders right away: many offer a pause or a new schedule. Silence costs more.
More trainings in this module
- Good debt vs bad debt
- APR explained
- Credit score
- How to build credit
- Clearing debts: the snowball
- Credit cards and interest
Numbers are illustrative. A game, not financial advice.