How to make a debt payoff plan in 7 steps

"I really need to sort out my debts" is not a plan. It's a worry, and worries don't pay off balances. A written plan does something a vague intention never can: it gives you a date. Once you can see "debt-free by March 2029" on a screen, every decision gets simpler — an extra £50 a month isn't an abstract sacrifice any more, it's two months off that date. This guide walks you through building that plan in seven steps. It takes about an hour, and the only hard part is the first step. (Examples here use £, but every step — and the free planner — works exactly the same in any currency.)

Step 1: List every debt — honestly

Open a spreadsheet, a notes app, or the planner, and write down every debt you owe. For each one you need three numbers:

Two rules make this step work. First, it has to be complete. Include the debts that feel too small to bother with and the ones that feel too embarrassing to look at — the overdraft you've quietly lived in for two years, the buy-now-pay-later instalments spread across three apps, the money you owe a family member. A plan built on a partial list will be wrong from day one, and you'll feel it every month when the numbers don't add up. Second, use today's real balances, not the roughly-what-I-think figures in your head. Balances in your head are almost always optimistic.

When you're done, total the balances. That number can sting. Look at it once, take a breath, and remember: this is the biggest it will ever be.

Step 2: Work out your real monthly number

Your plan runs on one number: how much you can put towards debt each month on top of the minimums. To find it, take your monthly take-home income and subtract your essential spending — rent or mortgage, utilities, food, transport, insurance, the minimum payments themselves. What's left is genuinely spare.

Be honest here, not aspirational. If you spend £200 a month on food shopping in real life, don't write £120 because that's what a disciplined version of you might spend. A plan built on the person you wish you were collapses in week three; a plan built on the person you actually are just works. If the honest number is smaller than you'd like, there are practical ways to find more money to put towards debt — but start with the truth.

Then decide what share of that spare money goes to debt. It's tempting to say all of it, and for most people 100% is a mistake. A plan with zero room for a birthday, a night out, or a small treat feels like punishment, and plans that feel like punishment get abandoned. Committing 70–80% of your genuinely spare money, month after month for years, beats committing everything for six weeks.

Step 3: Decide whether to build a small buffer first

Before you throw everything at the debt, ask: if the washing machine died tomorrow, what would you pay for it with? If the honest answer is "the credit card", consider pausing to save a small cash buffer first — a few hundred pounds, not a full emergency fund.

This feels counterintuitive when the card is charging 25% and savings earn almost nothing. But the maths isn't the point; the pattern is. One surprise bill lands, goes on the card you just spent four months paying down, and suddenly the plan feels pointless — that's how people quit. A small buffer is what stands between a bad week and a broken plan. There's a fuller discussion of the trade-off in our guide to keeping an emergency fund while paying off debt.

Step 4: Pick your payoff order

You'll pay the minimum on everything, then aim all of your extra money at one debt at a time. The question is which one first, and there are two classic answers:

• Snowball: smallest balance first. You clear whole debts quickly, your list gets shorter, and each cleared debt frees up its minimum payment to attack the next. It's the motivational choice.
• Avalanche: highest interest rate first. Mathematically optimal — you pay the least total interest and, usually, finish slightly sooner.

People argue about this endlessly, and the argument mostly misses the point: the difference between the two methods is usually a few months and a modest amount of interest, while the difference between sticking to a plan and abandoning one is everything. If crossing debts off keeps you going, the snowball's "extra" interest is cheap for what it buys. We compare them properly, with worked numbers, in snowball vs avalanche — but the best order is the one you'll still be following next winter.

Step 5: Automate it

A plan that depends on you making the right choice every month is really thirty separate plans, and one of them will fail. So take willpower out of the loop:

• Put every minimum payment on direct debit, so a missed payment is never the thing that derails you (or dents your credit record).
• Set up a standing order for your overpayment to the target debt, timed to go out the day after payday.

The timing matters more than it looks. If the extra payment leaves on payday, you never see that money as spendable — you're paying yourself first, except the "yourself" you're paying is future, debt-free you. If it waits until the end of the month, it has to survive four weeks of ordinary life first, and it often doesn't. Decide once, automate it, and let the plan run without a monthly test of character.

Step 6: Plan for real life

A plan that assumes nothing will ever change breaks the first time something does. So build the changes in from the start:

• Windfalls: decide now what happens to a tax refund or a bonus — for example, half to the target debt, half to live on. Deciding in advance beats deciding while the money's burning a hole in your account.
• Pay rises: commit a slice of any future rise to the overpayment before your lifestyle absorbs it.
• 0% promotional rates ending: if a card jumps from 0% to 24% next June, your plan should know that now — it may change which debt to target first.
• Annual bills: car insurance, Christmas, back-to-school. They come every year; a plan that's surprised by December wasn't a plan.

This is exactly why the planner lets you model pay rises, one-off lump sums and scheduled rate changes: you can see how a £1,000 bonus in November or a promo rate ending in June moves your debt-free date, before it happens.

Step 7: Track and adjust monthly

Once a month — payday works well — log your actual balances against what the plan predicted. This takes five minutes and it's where the plan earns its keep.

Some months you'll be behind. That's information, not failure. A plan is a forecast, and forecasts get revised; being £80 behind in month four tells you to nudge next month or adjust the monthly number, not to give up. The people who finish aren't the ones who never slip — they're the ones who keep logging the numbers after they do. The planner's progress tracking does this against your plan automatically, so you can see the gap instead of guessing at it.

And when a debt clears — this is the good part — roll its entire minimum payment onto the next debt on your list. Your total monthly outgoing stays the same, but each remaining debt falls faster than the last. That's the snowball effect, and it's why the last debts on your list vanish far quicker than the first. Mark each payoff with a celebration that doesn't need a credit card: cook something good, take the day off chores, tell someone who gets it.

Start ugly, start now

You don't need the perfect method, the perfect spreadsheet, or the perfect month to begin. A rough plan you start this payday beats an optimised one you're still polishing in autumn — the first month of real payments teaches you more than any amount of planning, and you can adjust as you go. That's the whole design: seven steps, one date, and a system that keeps working on the weeks you'd rather not think about it. If you want the plan built for you, enter the list from step 1 into the free planner, and when you're ready to go deeper, the rest of our guides pick up where this one leaves off.

Sources and further reading

The explanations in this guide are based on published guidance from regulators, government-backed money services and established references:

• Making a plan to pay your debts — Citizens Advice (UK)
• Free budget planner — MoneyHelper (UK, government-backed)
• How to prioritise your debts — MoneyHelper (UK, government-backed)
• Debt snowball method — Investopedia