Pay Off Debt And Break Free Of The Debt Cycle – You Can Do It!

Do you want to pay off debt and learn how to live debt free? Do you feel like you are stuck in a cycle of debt? Are you able to pay off your debt, only to fall back into it shortly after? That is what a debt cycle is, and many people fall into this…

Michelle Schroeder-Gardner

Last Updated: May 25, 2023

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pay off debtDo you want to pay off debt and learn how to live debt free?

Do you feel like you are stuck in a cycle of debt? Are you able to pay off your debt, only to fall back into it shortly after? That is what a debt cycle is, and many people fall into this cycle and can’t seem to get out.

Falling into debt over and over again can lead to insane amounts of stress, unhappiness, sadness, and feelings of hopelessness. No one wants to experience these feelings.

The thing is that there are lots of reasons for why you may have debt, like student loans, a mortgage, etc. In some ways, that kind of debt can be good, as it can be an investment in your future. Going to college can lead to a higher earning potential, and a home can add to your net worth.

While some debt can be positive for some people, that does not mean you should take out more than you need for student loans or buy a house that’s more than you can actually afford. Those big mortgages can cause a lot of financial stress. Even with “good” debt, you should always be responsible with your borrowing, take only what you need, try to pay more than the minimum when paying it back, and find ways to do it faster.

Then there is “bad” debt, like car loans, financing furniture, credit card debt, etc. This type of financing usually comes with high interest rates too. The sad thing is that most of this debt is completely avoidable.

Some people rack up large amounts of credit card debt, because they feel like it’s okay to spend more than they can afford, and this is a real problem for many. According to a study done by NerdWallet, the average household in the United States (who has debt) has an average credit card debt of $15,482.

When you add that all up, it equals $927 billion worth of credit card debt for American consumers. They break this down further and show that the average U.S. household pays around $900 in annual interest. 41% of consumers say they go into credit card debt because they are spending more than they can afford, while 33% say they are adding to their debt because they can’t cover their monthly expenses.

When you start off your life with student loans, add in a mortgage, add in a car payment, and then start spending more than you can afford, this quickly leads to being unable to pay off debt and be trapped in a debt cycle. And, because it can be hard to pay more than the minimum payments when you have this much debt, it’s very difficult to feel like you will ever pay off your debt completely.

But, I want to tell you that it IS possible to pay off debt and get out of the debt cycle.

Today, I will help you work towards finally getting out of the debt cycle so that you can live the life you want.


First, face your problem.

To pay off debt and get out of debt cycle, you have to first realize why you keep adding to your debt. This is probably going to be hard to think about, but the only way to do better is to really look inside and see where you are struggling.

You should think about the answers to the questions below:

  • Are you trying to keep up with the spending and luxuries of others?
  • Do you have an emotional spending problem?
  • Do you live beyond your means?
  • Are you afraid to face how much debt you have?
  • Do you feel like debt makes things seem more affordable?
  • Do you feel like you deserve everything you buy?
  • Do you truly understand how debt and interest rates work?
  • Are you living paycheck to paycheck?
  • Are you unprepared for emergencies?
  • Do you have credit card spending problems?
  • Do you know how much debt you actually have?

To pay off debt for good, you need to realize why you keep falling into debt. By knowing this you can stop adding to your debt, start paying it off, and prevent yourself from falling back into a debt cycle.

However, until you dig deep and think about these questions, it will be very difficult to pay off debt completely and the debt cycle may never end.

Side note: I highly recommend that you check out Personal Capital if you are interested in gaining control of your financial situation. Personal Capital allows you to aggregate your financial accounts so that you can easily see your financial situation. You can connect accounts such as your mortgage, bank accounts, credit card accounts, investment accounts, retirement accounts, and more. And, it is FREE.


Add up your total debt

This is related to facing your problem and is one of the questions you should be asking yourself in order to pay off debt. By adding up your total amount of debt you will be able to understand how to face it head on. This will allow you to create a plan to pay off debt completely.

Unfortunately, most people have no idea how much debt they have.

Adding up your total debt helps you gain control of your finances, instead of feeling like your debt is controlling you.

To add up your debt, you will need to gather statements and information about all of you debt. You will want to add up student loans, credit cards, your mortgage, any other types of loans, etc. You can create a spreadsheet, but using Personal Capital, which I mentioned earlier, is an easy way to see all of your accounts combined.

You will also want to know the interest rates of each loan to help you understand which debt is costing you the most. This can help you with different strategies to pay off debt quickly.

By adding it up, you will have a more realistic view of how to start to pay off debt and break out of the debt cycle.


Create a budget

While most people have some type of debt, not many people have a budget.

Actually, according to a survey done by Gallup, 68% of households in the U.S. do not have a budget.

But, budgets are something that nearly everyone needs, no matter what you financial situation is. However, for some reason there is this myth that only people who are “bad” with money need one. Would it surprise you to know that I keep a budget? It helps me track my cash flow and spending, and my budget helps me realize my financial goals.

Budgets help you manage your spending, savings, and help you reach your goals. But many people see budgets as something that will hold them back.

When you are wanting to pay off debt, a budget doesn’t hold you back, it helps you get ahead.

Budgeting can help you take control of your financial situation so that you can stop the revolving debt cycle.


Pay off debt

This isn’t going to be a surprise, but in order to get out of the debt cycle, you’ll have to pay off your debt.

Paying off your debt can lessen your stress levels, allow you to have more money to put towards something else (such as retirement), stop paying interest fees, and more.

After you total up your debt, you are probably staring at a pretty large number. It might feel unmanageable and it might cause some anxiety, but you just have to take the first step and start paying it off.

The rest of this article is really about the steps you can take to make debt pay off manageable. Working through these points won’t just help you pay off debt, they will help you stay out of debt.


Create a vision board

Having your financial goal displayed in front of you can make it that much more real, plus it’s nice to have a constant reminder of what you’re working towards. This might give you the motivation you will need to pay off debt. Various ways to make your financial goal visual include:

  • Create a graphic that demonstrates your goal, which could be a debt payoff number or what you think that freedom will feel like when you reach it. I did some research and found a blog post on A Cultivated Nest about many creative ways to do this.
  • Keep a picture of your goal on hand. You could even go all out and create a vision board on Pinterest, or you can create a poster board of all of the things that debt freedom will allow you to do.
  • Write down what debt free life will be like for you.


Start an emergency fund

An emergency fund is something that everyone should have. However, according to a report by, 23% of Americans have no emergency fund whatsoever. This same report found that only around 20% of families have enough in savings to cover three months of expenses. Surprisingly though, more families, 29%, have the recommended six months worth of savings.

This is scary to me, as having an emergency fund can greatly help you get through hard and unexpected situations that may arise.

An emergency fund can help if you:

  • Lose your job.
  • Have your hours cut back.
  • When your car breaks down.
  • If you have a medical expense, and so on.

Plus, an emergency fund can help you get out of the revolving debt cycle. This is because if an emergency does arise, you won’t be forced to rely on debt in order to solve your situation. Instead, you’ll have your emergency fund to bail you out!

Read more at Everything You Need To Know About Emergency Funds.


Spend less than you earn

The sad reality is that too many people live paycheck to paycheck. While there are many reasons for this, one major reason is that too many people are spending more than they can afford.

This can lead to credit card debt, high interest rates, and more. Living above your means can devastate your finances.

While I could definitely spend more than I do on clothing, shoes, etc. I choose to be frugal because I know that spending less than you make can change your life. Plus, learning how to spend less won’t just help you pay off debt, when you have reached that milestone, it can help you save even more for retirement – you can start investing in your future with very little money!

The bottomline is that you should always be spending less than you earn. If you aren’t, then you need to find ways to cut your budget and/or increase the amount of money you earn.


Save more money

Finding ways to save more money may allow you to pay off your debt a little faster, improve your financial habits, help you reach your dream sooner, and more.

It’s just that simple.

Read more at 30+ Ways To Save Money Each Month.


Make extra money

I believe that earning extra income can completely change your life in a positive way. You can stop living paycheck to paycheck, pay off your debt, and more, all by earning extra money.

In fact, because of extra income and my blog, I was able to pay off $38,000 in student loans within 7 months, leave my day job in order to pursue my passion, travel full-time, and more!

Making extra money can do something similar for you as well. It can help you pay off debt and break out of the debt cycle as you’ll be able to put more money towards your debt, and you will be able to spend less than you earn.

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Try using just cash

If your problem with debt is that you don’t know how to responsibly use credit cards or if credit cards are too tempting for you, then you may want to get rid of your credit cards and try using cash.

A cash budget can help you pay off debt because you use cash to pay for the majority of your purchases. Of course, there are certain expenses, like a mortgage payment, that you can’t do that with. But for the most part, when you are using a cash budget, any and almost all of your spending is done with cash.

A cash budget can help because:

  • It forces you to think about where your money is going.
  • It can prevent impulse shopping and clutter.
  • Spending actual cash “hurts” more than spending money with a credit card.

Read more at The Importance Of A Cash Budget.


Don’t try to keep up with the spending of others

Whether you are a young child and want that new toy everyone is playing with or an adult feeling the need to upgrade your house, car, etc., everyone has experienced wanting to keep up with someone else.

The problem with this is that keeping up with the Joneses can make it really difficult to pay off debt – it’s actually one of the things that adds to it!

When trying to keep up with the Joneses, you might spend money you do not have. You might put expenses on credit cards to, in a pretend world, “afford” things. You might even buy things you don’t really care about. The problems can go on and on.

This can then lead to a lot of debt and potentially set your financial goals back years, if not decades.

Stop caring about what other people are doing or buying, instead focus on your own long-term happiness by working towards financial freedom.

Are you stuck in the revolving debt cycle? What are you doing so that you can get out?

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Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. The greatest feeling you can have is when you send in the last dollar and become completely debt free. For me that occurred when I paid off my mortgage back in 2015 and then owned, “Every Blade of Grass,” on my property.

    It is a huge weight off your shoulders when you are debt free. It allows you to also make choices in improving your work lifestyle (you can look to get rid of aspects of your job you don’t like or even get a lower paying job as you no longer have to have a certain amount of money coming in to pay off debt).

  2. Awesome post, Michelle!
    I totally can relate to the point where you said:” You have to first realize why you keep adding to your debt.” Sometimes you don’t even realize that you are adding to your problems with spending, saving etc. Realizing That you DO have a problem is the first step to get out of that cycle and attain financial freedom.

  3. The Curious Frugal

    We are debt-free but that doesn’t mean I didn’t make some choices in the past that I wouldn’t make now! I’m sure it can feel so overwhelming to be that much in debt and can lead to some people feeling like they can never pay it off so what’s the point. I think it’s so helpful to highlight successful debt-payoff stories, like you do on this blog, and other places. Reading stories of real people who paid off massive amounts of debt would be so inspiring. Heck, I’m inspired reading those stories even though we don’t have debt to pay off. You can always learn something.

  4. Monique

    So would you suggest paying off debt quickly if you have the money. Or pay every month to help raise your credit score. I’m in the process of preparing to pay off my debt but I also would like to improve my credit score. I’ve heard that you shouldn’t pay off debt in one lump sum because it will not help your credit score.

    1. Are you paying interest every month?

  5. FI Playbook

    I heard you on the ChooseFI podcast, and I just came on your site today. Well, funny enough because I remember reading your blog a very long time ago (maybe 2009 or 2010? Or maybe a little later than that) and it’s so cool how you just kept on the path and now look at where you are! I don’t know you, but I’m so proud of you (not that you need me to be proud of you). Anyways, the podcast episode with you totally inspired me and especially now that I realized that I used to be one of your readers. And I’ve come full circled!

    Great post, and I can’t wait to dig into your materials!

  6. I like the idea of a vision board!

  7. Raz | MakeLivingGood

    Couldn’t agree more on this. A debt gives our life’s control to someone else which isn’t fun at all.

  8. George Raymond

    A person can pay off debt and break free of the debt cycle. The thing is that there are lots of reasons for why you may have debt is like student loans, a mortgage, etc. In some ways, that kind of debt can be good, as it can be an investment in your future.

  9. Overcoming debt is tough, but side hustling is the way to overcoming financial hardship.