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From the Experts at

How to Reduce Debt: 4 Tips for DIY Debt Reduction

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A smiling woman stands in a field of yellow flowers after learning how to reduce debt.

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It can be surprisingly easy to go into debt—and surprisingly difficult to get back out of debt. But with a little dedication and planning, it is possible to reduce your debts on your own, without sacrificing your lifestyle. Here’s a four-step plan for how to reduce debt and get on better financial footing:

1. Evaluate your debts
2. Look at your budget
3. Make a debt-reduction plan
4. Start negotiations

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    1. Evaluate Your Debts

    Americans have $1.04 trillion in outstanding credit card debt, also known as revolving debt, according to 2019 data from the Federal Reserve. Before you can start figuring out how to reduce debt, it’s important to know where you stand.

    Collect all of your financial documents and print out your free annual credit reports. You can check your credit score for free on and use our free Credit Report Card to see exactly where you stand. Knowing which accounts are dragging your credit score down may help you prioritize your debt payments.

    Now grab a piece of paper and write down the balance, annual fees, interest rate and monthly amount due for each of your debts, including auto loans, personal loans, payday loans and credit cards. Make a note of your total minimum monthly payments.

    Expert Tip:

    You don’t need to include your mortgage loan or student loans at this time. These loans have relatively long terms and low APRs, so it is better to focus on paying off your other debts first. Just make sure you’re making your regular payments for these loans on time.

    2. Look at Your Budget

    After you have collected the information about your debts, take a look at your monthly budget. Write down your monthly income after taxes. Then add up your monthly expenses, including rent/mortgage payments, childcare expenses, student loan payments, insurance, utilities and groceries.

    If your monthly expenses are too high, look for ways to reduce your spending. Consider turning off your cable subscription or carpooling as ways to cut back temporarily. The more you can pay toward reducing your debt each month, the sooner you will be debt-free.

    Expert Tip:

    If you don’t have a lot of places to cut, you may have to focus on bringing more income in instead of having less money going out. Side jobs like delivering food, being a ride-share driver or offering tutoring services may not pay a lot, but every dollar adds up when you’re trying to get out of debt fast.

    3. Make a Plan to Reduce Debt

    Use the information from your list of debts and your budget to fill in the following chart. Subtract your minimum debt payments and monthly expenses from your monthly income after taxes. The remaining amount should be used to pay off debt. Whether you decide to tackle the smallest balance or the highest interest rate first is up to you, but having a plan of attack is important.


    Continue this cycle each month until the first debt is paid off and then move on to the next account. During this time, you should not add any new charges to your credit cards if you can avoid it. Track your progress with a chart like this:


    Expert Tip:

    If this type of plan feels overwhelming, you can also consider debt consolidation. Debt consolidation requires taking out a loan that you may not qualify for if your credit isn’t good. These loans can also create an even bigger debt hole if you don’t practice the behavior changes required to keep from running up your credit cards again while you’re still paying your debt consolidation loan.

    4. Start Negotiations

    While following your repayment plan, you should contact your creditors and lenders to see if you can improve the terms on your debts. You may be able to lower your interest rates or negotiate a reduced settlement on some debts by speaking with the customer service or financial aid department. It is especially easy to negotiate the terms of debts that have been charged off by the creditor or are in collections already.

    Expert Tip:

    Taking advantage of balance transfer offers can help as well. Moving a balance to a credit card with a 0% introductory rate for 6–12 months can save you a lot in interest. Just be sure to keep each of your credit card balances below 30% of the credit limits to avoid damaging your credit score.

    The Bottom Line

    How do you overcome debt? By consistently putting as much as possible toward your debts, curbing destructive spending habits and thinking of the entire effort as more of a marathon than a sprint. Signing up for an automated payment system and keeping a chart of your progress on the refrigerator can help you stay on track. Don’t forget to celebrate your successes when you reach major milestones—in ways that don’t involve going into debt, of course.

    Expert Tip:

    Sign up for’s free Credit Report Card. It lets you keep track of your credit report, see your credit score and find out what you can do to improve your score as fast as possible.


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      Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

      • Kelly

        I owed over $132.000.00
        to the I.R.S solely because of the illegal actions of my ex-wife, who cunningly
        and illegally manipulated things to her benefit. I negotiated a settlement
        wherein they accepted approximately $1,200.00 through what was known as
        “Offer And Settlement Through Negotiated Settlement”. The
        procedure was arduous. The offer that I.R.S. accepted entailed
        payment of the $1,200.00 in $100.00 per month payments each and every month for
        one year. I paid the full amount and the I.R.S. discharged the
        debt. WAHOO!! I am a free man. As they say, the only things
        in life that are certain are death and taxes!! I can personally attest to
        the fact that the plan set forth in this article are absolutely true!!!

        • cjjohnson

          I would love to know how you got them to settle I owe 13,000.00 and they will not settle with me I pay 150.00 a month and it never goes down plus they get my refund for the last 3 years 2,000.00 a year..

      • Coral Mercintile

        If you want to reduce your debt then you should reduce your spending especially when you don’t have much budget or authentic source for debt repayment.

      • hassan

        Many people think that they can get out of debt themselves. That they
        don’t need help. While it is true that there are many things that
        someone can do to help themselves get out of debt, there are also
        situations where people simply need help, where things that are out of
        their hands have affected their life and they simply can no longer meet
        their financial obligations, as much as they would like to.

        • Credit Experts

          Agreed. Sometimes bankruptcy is the best solution.

          • cjjohnson

            like when you have thousands of dollars in medical bills that your crappy insurance didnt pay…

      • cjjohnson

        how good is the 3/2/240 rule for filing bk against back income taxes?

        • Gerri Detweiler

          I am not sure what you mean by how good it is. If you qualify it may be a way to put tax debt behind you.

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