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It’s time. You’re ready to start paying off debt. You’re not going to let anything get in your way this time. You’ve reviewed all your accounts and know how much in loans and credit card debt you need to pay off. So, what do you do first? Here are two things you MUST do to be successful in paying off debt.

Get a better understanding of your income and spending habits with a budget

We know that the mention of creating a budget makes many people stop reading or maybe even run the other way, but it really is the foundation and starting point to get out of debt. And it doesn’t have to be a complicated budget either.

Start with the simplest version of a budget—write down your take home income (what gets automatically deposited into your account or the amount your check is made out for) and then start collecting a list of your expenses. Use Verve’s budgeting worksheet to help you gather key expenses, such as housing, utilities, loan payments and more. It can be easy to estimate all your expenses, but it’s well worth the time to look up the actual costs of everything (as you could be accidentally underestimating your expenses). If your expenses vary from month to month, average your last three months of expenses to get a better picture of your actual costs. Check out this step-by-step budgeting guide to help you get started.

Plan for the unplanned by building an emergency fund

After you have established a budget and know how much you need to cover your expenses each month, it’s time to work on an emergency savings fund. The size of your emergency savings fund will vary based on your expenses, but a general rule of thumb is to set aside $1,000 in an emergency fund before paying off debt. After you have $1,000 set aside you can start tackling debt, and you may even want to set aside a little in savings each month to grow your emergency fund to a point where you have three to six months of living expenses saved up for a rainy day.


While waiting to start paying off debt may not be what you wanted to do, knowing what you have to work with by budgeting is key. It can help you identify some causes of debt that you need to address first. And an emergency fund can help you from going further into debt by being able to cover unplanned expenses with your savings, rather than a credit card (which will cost you much more in the long run through interest).

Looking for more tips to help you manage your debt? Check out our monthly blog posts.