What’s the First Thing You Should Do When Paying Off Debt?

Paying off debt involves many things, but what do you think is the first thing needed to break the cycle of debt? The answer may surprise you, but it works!

We’ve had the opportunity to help a number of friends and acquaintances lately with their finances. I guess being a personal finance blogger that really isn’t unique as I do talk or write about money nearly every day. 🙂 It is situations like these discussions though that energize me to continue to blog as I know there are many out there looking for help.

While each situation has been unique, there remains a common thread with all of them – paying off debt.

This debt has come in different forms or fashions with some being poor decision making to simply something they’ve had little control over. Regardless of the how behind the debt, the common theme was that they’re questioning what exactly the first step is that they need to take to attack their debt and see success.

This isn’t really getting at the method of paying off debt like the debt avalanche or the debt snowball, but what you need to do before even considering those. Essentially, what is the first step to take in order to begin killing your debt once and for all?

Paying Off Debt Requires Breaking the Cycle


Debt, especially consumer debt, usually results from getting trapped in some sort of cycle. Whether that cycle is the belief you “deserve” to purchase whatever the item is in question or simply viewing credit cards in an inappropriate light, they represent a cycle that needs to be broken.

This begs the question of what’s needed to break that cycle. In my opinion the thing that can break that cycle best comes in one form – an emergency fund.

I know emergency funds aren’t sexy; they’re something that people often disagree on. I get that. However, that doesn’t negate their importance especially with regards to slaying the debt beast. This might fly in the face of paying off debt as quick as possible as when you’re in the middle of it the last thing you want to do is hold back good money each month.

I understand that feeling and it makes sense on a number of levels, but the issue we should be concerned about should be breaking that cycle of debt. We should be concerned with viewing the credit card as the fail safe in the event something goes wrong with your car or if an emergency arises or if you suddenly need to get your heater fixed and so forth.

We need something to fall back on for those times because they WILL happen whether we like it or not. Of course, you should also do things like determine how much debt you have, pay at least the minimums on your debt and so forth but those can only take you so far if you have nothing to fall back on.

The Method You Use Doesn’t Matter


We tend to argue within the personal finance community as to what is the best method to pay off debt. I believe I’ve had posts on the site promoting both the debt snowball and the debt avalanche as the best ways to pay off debt. If you do a quick internet search you’ll see the same exact argument taking place on a variety of other sites. At the end of the day though the method you use doesn’t matter.

Yes, I know that you save money over the long run by using the debt avalanche and I know the debt snowball can provide greater emotional victories but I could care less which method you use – the point is to kill your debt and not the method you use to do it.

Personally speaking, I used both when paying off debt and leaned on the debt avalanche for the most part. The method though amounts to a hill of beans in comparison to breaking the debt cycle and thus why an emergency fund is so vital to that.

One thing to keep in mind when looking at starting an emergency fund is that it doesn’t have to be massive amounts of money. Yes, most experts will say your emergency fund should be three to six months worth of expenses but to someone paying off debt that is going to be insurmountable.

With that in mind, I believe it’s best to shoot for an emergency fund goal of $500 to $1,000 as that will cover the large majority of potential emergencies you can expect to experience. If that amount is too much to start out with then start with $250 or $300 and build from there.

It doesn’t have to be put away all at once either. If that’s your case then start out with putting away $25 or $50 or some other amount each month to help build that cushion. If you can automate this then even better. Mrs. Frugal Rules and I do that with our Discover Bank account to help us continue to build our cash cushion.

Paying off debt involves many things, but what do you think is the first thing needed to break the cycle of debt? The answer may surprise you, but it works!

You Need to Make it Work For You


While debt is horrible, each situation is going to be different, which is why it’s so vital to personalize your debt payoff plan. Heck, you might even find it necessary to look at unsecured loans as an option to consolidate debt, but that may not necessarily work for the next person. If you try what worked for someone else you’re likely going to face frustration as your situation is unique as was theirs. Thus, you need to make your debt payoff plan personal.

While there are some universal things like the aforementioned tracking of expenses, determining how much debt you have and so forth you need to make it work for you. Key in that is breaking the cycle of debt, which is what putting some money aside is meant to do – to help pave that road that will bring you victory in paying off debt and give you a foundation to continue to grow your wealth after.


What do you think is the first thing you should do when paying off debt? How long did you wait to start an emergency fund when you were paying off debt? What else do you think helps breed success in killing debt?



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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally. I'm also a freelance writer, and regularly contribute to GoBankingRates, Investopedia, Lending Tree and more. If you're wanting to learn how to monetize your blog, check out my blog coaching services to see how I can help you take your site to the next level.


  • I always say stop accumulating new debt is the first step. Seems silly to say, but people need to understand you can’t keep living beyond your means to be successful with money. After you handle that the e-fund is next because it plugs the leaks when life happens.

  • I actually did not have an e-fund for most of the time I was paying off debt, but my circumstances were pretty unusual: I had only three debts (two student loans and one credit card) and by the time I got serious about payoff, I could see that if I put *everything* to the debt ($2500 or more a month) I would be done with the student loans within a few months, and the credit card within a year. I did start building an e-fund very slowly once the student loans were done with and while I was still working on the credit card. Anyway, while I agree that an e-fund is important, the very first thing I’d do when paying off debt is assess my income and expenses — I’d work on the budget before anything else.

    • John Schmoll says:

      It sounds like what you did worked great for you C. I likely would’ve done something very similar. While I would agree that budgeting is important, what do you do about those who are budget averse but wanting to make a change? A think starting some sort of back-up savings is a great first step.

  • Kathy says:

    We never called it an emergency fund, but we had a savings account the whole time we were paying off the charge cards. Part of our paycheck went in to it automatically through payroll deduction and we tried to add more as we could. Now we call it our reserve account because we have categories within it matching our spending/budget categories.

  • Debt Hater says:

    I actually already had an (excessive) emergency fund already set up from all my earnings throughout college. I ended up decreasing the size of that significantly and throwing a lump sum right towards my debt.

    The cycle that I had to break was one of avoiding my debt. I was afraid to even acknowledge that it existed because I thought it wasn’t possible to pay it all back.

    • John Schmoll says:

      Sounds like you made a great move – especially to rid yourself of debt.

      I was in a similar situation myself. I didn’t want to face it for some time, I wish I could go back and smack myself!

  • Michelle says:

    The first step is to stop using the credit lines. After that, it becomes easier to see the bottom line of what you really owe to make a plan.

  • We have had a small e-fund as we’ve worked towards paying off all non-mortgage debt first (à la Dave Ramsey). We’re within sight of being debt-free except for the mortgage (I can hardly write that without cheering!), and the big e-fund will be next on our agenda. For me, just the simple fact of having money available and not spending it will be powerful in breaking the cycle of debt that is personally mine. I continue to have a compulsion to spend every available cent. A budget serves to limit the number of available cents, but it doesn’t deal with that compulsion to spend it all. I can’t figure it out, but it’s a powerful force. I’m hoping the discipline of growing a substantial e-fund will deal a fatal blow to it.

  • Couldn’t agree more. Your debt payoff plan needs to fit your lifestyle. Following someone else’s plan without tailoring it to your needs might leave you frustrated and no closer to paying off your debt.

  • I couldn’t agree more over which debt repayment plans works best–ultimately it doesn’t matter which one you use. Just use one that works best for you and stick with it! I find that a debt repayment tracking tool like Ready for Zero app can help you visualize your progress/success which helps boost motivation to keep working toward your goal!

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