Dealing with debt - Part 1

Dealing with Debt

As much as we all hate debt, a lot of us have to admit that we have debt or have had debt at one point in time. Credit cards, student loans, car notes, overdrafts and mortgages are usually the big items in our debt portfolios. It's easy to get overwhelmed with so many bills to pay but the good news is that with changed spending habits and re-prioritizing your finances you can pay your debt off and have peace of mind. 

Below are steps that will hopefully assist you on your journey to becoming debt free.

Step 1: Get RADICAL about your debt

Make a mental commitment to get rid of your debt ASAP, think of it as a "do or die" matter  - you need it out of your life immediately and under no circumstance should you apply for any new credit cards.

Step 2: Write it all down

Visual representation of your debt is the most important step. This will give you an overview of all your debt in one place. Gather all your credit card statements, overdraft and loan statements etc and write down the amount you owe for each one of these items along with their associated interest rate. 

At this point its also important to differentiate between good debt and bad debt. An example of good debt is a mortgage. A home is an asset that will appreciate in value over the long term despite the ups and downs of the real estate market. Remember population is growing at record paces but no one has figured out yet how to manufacture land. An example of bad debt is your credit card, this is a liability. You’ve spent the money - its gone - and you are left paying high interest on an item that’s probably not doing anything for you. Keep in mind though that debt is still debt, you are just prioritizing by moving the good debt to the bottom of your pay off list and putting  the bad debt at the top of the list sorted by highest interest rate.

Step 3: Put your list where you can see it - EVERYDAY

There’s nothing like a jolt back to reality when you are getting ready to go out and buy the latest Louboutin platforms and you have your debt staring back right in your face on your bathroom mirror before you step out; or have it as your phone screensaver  that you'll see each time you need to make a call or reply a text. Having your debt listed in a place where you can see it everyday will keep your mind on track.

Step 4: Cut up those credit cards

So now you have your list written and posted in a place you’ll see it all the time. Why are those credit cards still in your wallet? You don’t need them. If you cant bare cutting them up, put them in plastic bag fill it up with water and put that bag in the freezer until you’ve paid each one of them off, never to be used again. I suggest that you keep one credit card for a serious emergency that your current emergency fund might not be enough to cover but don’t carry this card around with you in your wallet as you might be tempted to use it at some point.

Step 5: Start paying off those debts

The next and most important step is that you commit to paying off your debt - this goes back to getting radical! Grab that list of yours and begin by paying off the smallest debts followed by the ones with the the highest interest rates. Its very important that you pay MORE than the minimum payments each month as minimum payments usually only cover the interest you owe and little or no principal. Your goal should be to pay as much as is feasibly possible to get rid of your debt ASAP.

Step 6: Create an emergency fund

A lot of people think debt should be paid off before any savings begins because you might as well use that money you are saving to pay off your high interest credit cards but I disagree. I firmly believe that as you pay off your debt you should also start building a small emergency fund i.e. 50 - 100 dollars a pay check, so that if something comes up instead of turning to a credit card and increasing your debt all over again, you can turn to your savings deal with your rainy day and have your debt remain the same until you are financially able to return to paying it off.


I hope the steps I listed above will help you out on your road to financial freedom. In dealing with debt part two, I will talk about consolidating debts, living within your means and staying OUT of debt. 

See part 2 here.

Bola Onada Sokunbi


Bola Onada Sokunbi

Bola is a Certified Financial Educator, money coach, finance writer, business strategist, social media influencer and founder of Clever Girl Finance, a platform that empowers and educates women to make the best financial decisions for their current and future selves and to pursue their dreams of financial independence in order to live life on their own terms.