Get Out of Debt Checklist

Want to get out of debt, but not sure where to start?  Begin with this checklist. Let's take it step-by-step.

Total All Your Debts

Woman paying with credit card in clothing store
Dan Dalton/Getty Images

Include credit cards, charge cards, student loans, car loans, medical bills, home equity loans, personal loans and any other debts that you may have.

Reduce Your Rates

Contact your credit card companies to ask for a better interest rate; look into consolidating your student loans (if you haven't consolidated them already); and check to see if refinancing your mortgage makes sense.

Sound like a lot of work? Just remember: lower rates, means less for you to pay.

Separate the Good from the Bad

Divide your debts into "good debts" and "bad debts." For the purpose of this exercise, consider good debt to be any debt that you took on for something that you expect to go up in value (your house, your education, your business) and bad debt to be any debt that you took on for something that you expect to go down in value (your car, furniture, meals out, vacations, clothes).

Pick a Debt to Tackle

Look over your list of bad debts, and decide which one you want to tackle first. It could be your smallest debt, your debt with the highest interest rate – the choice is yours, so decide what would motivate you most.

Then, select an order for paying off your remaining bad debts.

Dive into Your Plan

Make the minimum payment on all your debts, and apply as much money as you can to the first debt on your pay off list. Do this each month until you wipe out your first debt. Then, start again with the next debt on your list. Keep going until all of your bad debts have been paid off.

Go After Your Good Debts

Now, it's time to go after those good debts. Pick one to tackle first, and repeat the same process again.

Build a Better Future

Have all of your debts paid off? Then, it's time to build the future that you've always dreamed of! Create a fat emergency fund; save for your retirement; travel the world; take up a new hobby. With debt out of the picture, you're in charge!