Debt freedom: A 7-day crash course

Need help getting out of debt? Jump-start your efforts with award-winning personal finance journalist, author, and speaker Jean Chatzky’s easy, practical 7-day crash course.

“I can't promise you'll be able to wipe the balances completely clean in just 7 days,” she says. “But I can set you on a 7-day crash course that will get you out of debt as efficiently as possible.”

Day 1: Categorize

Start by making sure you're clear on the differences between good debt and bad debt. Good debt is usually cheaper, as well as an investment in something—a car, a home, or an education. Bad debt is high-interest rate debt like credit cards.

Day 2: Assess the problem

You need to face your debt head on. Pull out all of your debt statements and organize by interest rate, lowest to highest. You'll likely note that credit cards—again, considered bad debt—carry the highest rates. We're going to focus on paying those down.

Day 3: Break it into manageable pieces

Take the amount of credit card debt you have in total, and chunk it down. Paying off $5,000 in debt becomes paying off $300 in debt a month, or $10 a day.

Day 4. Run the numbers

Some online calculators allow you to take your debt, plus how much extra you can put toward paying it down, and plug it into an algorithm that will tell you how long the process will take. Doing this math is motivating.

Day 5: Track your spending

You need to find extra money in your budget to put toward debt. Tracking allows you to pinpoint the $150 a month you're spending on babysitters, or the $30 a week on lunches.

One thing you shouldn’t touch? Your retirement savings, whether an individual retirement account (IRA) or your employer’s 401(k) or 403(b) plan. Sticking with retirement savings, even if you’re paying down debt, helps you plan for the long haul and avoid future debt crises.

Day 6: Make changes

Cut small things first—manicures, extraneous groceries, 1 date night a month. If you still need more money, move on to bigger cuts, like negotiating with the health club or adjusting your tax withholding.

Day 7: Pay it down

Put the extra money you found toward the card with the highest interest rate, while paying the minimums on the others. Continue paying down debt in that order.

You're well on your way. Good luck!

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