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6 Moves to Make in Your First Month of Debt Repayment

Time to get serious about paying off your debt? Here’s what to do first.

So, it's time, is it? Time to get serious about paying off your debt?

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Congratulations! If you've made the decision to begin repaying your debt instead of generating more, that is huge! Repaying debt can feel so daunting that people avoid it, making minimum payments until their dying day. But facing your problems is always better than running away from them, and, in deciding to do that, you have taken a giant step forward.

Still, it's easy to feel overwhelmed when you're just starting to repay debt. If you're not sure where to start, here are some thoughts for you.

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1. Stop Overspending

It might seem obvious, but this is the very first step to take when you want to begin digging yourself out of a financial hole. Stop making more debt!

Start by analyzing where you're spending. Is all of your spending necessary? Are there areas — like eating out, buying clothes, or going to happy hour — where you're spending a lot more than you thought you were? (See also on Wisebread.com: Start Saving With This One Simple Tool)

Looking at this takes some courage, as it can be hard to actually see just how much money you're putting towards things that don't matter. However, the only way out is through, at least in this case, and once you know where you're spending too much, it's easier to make better choices.

All of this assumes that you are not overspending simply because you don't have enough money. If that is the case, then your first step is to figure out how to make more or lower your expenses. There are always options, but they will differ depending on your situation. The point is, you won't know where to start cutting until you know where you stand with spending.

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2. Add It Up

When you have a spending plan in place, add up all of your debt. List each debt source, including total amount owed, monthly minimum payment, and interest rate.

This step tends to stop people in their tracks. However, it's essential to know the total amount of damage before you can take steps toward eliminating it. And, sometimes, seeing exactly how much you owe, all in one place, is just what you need to feel motivated to make significant changes in your life.

3. Prioritize Your Debt

There are a lot of different ways to decide which debt to focus on first. Obviously, you need to make at least minimum payments on all of your accounts. But after that, you need to decide which debt will receive higher payments until it's paid off. Then, you can move on to a different account.

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4. Set Repayment Goals

Look realistically at your finances, at how you're planning to change your spending patterns, and decide when you think you can pay off your first debt. Set that date as a goal. Circle it in all of your calendars. Set an alarm for it on your phone. Do whatever you have to do to get that date in your head.

Having a goal will help you feel motivated, and it will also give you some sense of progress as you move forward. For instance, if you decide it will probably take you six months to pay off your first debt, you'll know after three months that you're about halfway there. That can be satisfying in and of itself.

Set these goals knowing that you can always change them. If your financial situation changes, you can always change your goal, too, moving it forward or backward as circumstances dictate.

5. Generate More Income

If you want to pay off your debt as quickly as possible, think about ways to generate more income. This will not only make your repayment move faster, but it will make it so the process isn't just about cutting back all the time, which can feel demotivating after a while.

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For some people, making more money is as easy as working overtime. Others have to be more creative. Think about taking on freelance projects, turning a hobby into an entrepreneurial enterprise, or selling things that you find around your house on eBay or Craigslist. Depending on your skill set and how much time you have, the possibilities are truly endless. (See also on Wisebread.com: 15 Ways to Make Money Outside Your Day Job)

6. Reward Yourself

It's important that you realize just how significant of a choice you've made to reduce debt. You can mark a time as important by celebrating it. Just do this in a way that doesn't mean spending a lot of money. Buy the special coffee, learn a new recipe or treat yourself to an extra dessert. Sure, these things cost a little bit, but they aren't a shopping spree at the mall.

Make sure you build rewards into your whole system. You can buy yourself a coffee every time you pay X amount off, or reward yourself with something small every month that you follow through with your budget. It's important to stay motivated and to reprogram your brain to actually enjoy this repayment process.

Plan a big reward for the day when your debt is all paid off. Maybe that's the day you can start saving for your dream vacation, or maybe you can talk a friend into taking you out for the evening. Plan a big party at your house, spend a weekend in the mountains, or do whatever it is that feels right. Knowing this is coming will help keep up your motivation through the hard days.

This article is from Sarah Winfrey of Wise Bread, an award-winning personal finance and credit card comparison website.

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This article is from Wise Bread, not the Kiplinger editorial staff.