Debt often feels like a mountain that grows higher every day. More reminders arrive, costs and interest pile up, and somewhere along the way the shame sets in. You tell no one, you stop opening the letters and you hope things will get better on their own. That is human, but it does not make the mountain any smaller.
Starting again after debt rarely works with one big leap. It does work with a series of small steps you can see and keep up. That is what this article is about.
Debt weighs on more than your bank account
A meta-analysis by Thomas Richardson, Peter Elliott and Ronald Roberts (2013) brought together dozens of studies and found a clear link between debt and psychological problems such as depression and anxiety. That link probably works in both directions: debt causes stress, and people who are struggling psychologically get into debt more easily. What matters is this: if you feel bad because of your debts, you are not weak. You are reacting to a difficult situation.
Shame is one of the biggest obstacles here. It means people only look for help once the problems are already large. Yet help makes the most difference precisely early on: fewer costs have been added by then and you have more options.
Why small wins work
The researchers David Gal and Blakeley McShane (2012) looked at how people with several debts paid them off. Those who managed to pay off individual debts completely were more likely to become entirely debt-free in the end, regardless of the total amount they repaid. A debt that really disappears feels like progress, and that feeling helps you persevere. Teresa Amabile and Steven Kramer (2011) described something similar at work: visible progress, even small progress, is one of the strongest sources of motivation.
To be fair, though: mathematically it is usually cheaper to tackle the debt with the highest interest rate first (the avalanche method). Starting with the smallest debt (the snowball method) sometimes costs a little more, but gives you a win sooner. The best method is the one you stick with. Do bear in mind that some debts always take priority, whatever you choose.
An example: Sam
Sam (31) had an outstanding credit card balance, an overdue mobile phone bill, a hospital bill and a consumer loan for a car that had since been sold. When a letter from a bailiff arrived, he finally called the social services of his local authority. A debt mediator drew up an overview with him and contacted his creditors. They agreed a repayment plan he could manage, with his rent and energy taken care of first.
Sam chose to pay off the phone bill in full first. After three months he could cross it off his list. “It was the smallest amount,” he says, “but it was the first time in two years that I felt something was moving forward.” He also set aside a small amount every month, so that a broken bike or a trip to the dentist would not become a new debt.
How to take the first steps
- Make everything visible. Put all your debts on one list: who you owe, how much, what interest rate and whether there are already arrears or a bailiff involved. That means opening the letters you would rather leave unopened, too. If you like, do it together with someone you trust.
- Protect the basics first. Rent or mortgage, energy, water, food, insurance and taxes take priority. Arrears on these have the most serious consequences. Only then do you divide what is left among the other debts.
- Ask an accredited debt mediator for help. You can go to the social services of your local authority or an accredited debt advice service for debt mediation. They help you get an overview and negotiate with your creditors. If a voluntary arrangement does not work, many countries also have a court-based debt settlement procedure; find out about the rules in your country.
- Choose your order and write it down. Snowball or avalanche, or a mix of the two. Put your list up somewhere you will see it and visibly cross out every debt you pay off.
- Build a mini buffer. Even a few tens of euros a month help you absorb the next setback without a new loan.
Be careful with companies that promise to make you debt-free quickly for a fee or that offer you a new loan to pay off your old debts. Consolidating debts like this can lower your monthly payments, but it can also raise the total cost. If in doubt, ask the social services of your local authority or an accredited debt adviser for guidance first. The financial regulator or the government in your country often also offers reliable explanations about credit and debt.
A small exercise: your log of wins
Building habits takes time. In the research by Phillippa Lally and colleagues (2009), it took on average about two months for a new behaviour to become more or less automatic, with large differences between people. A log of wins helps you get through that period. Every week, note three things you have done for your finances, however small: opened a letter, made a phone call, put ten euros aside, cancelled a subscription. After a month, read back over everything you have done. Often only then do you see how far you have already come.
Starting again also means regaining peace of mind
Being debt-free is a fine end goal, but peace of mind starts much earlier. It starts the moment you know how big the mountain is, that there is a plan and that you are no longer on your own. Every debt paid off and every euro in your buffer gives you a little more space in your head. That is resilience in practice: not one big leap, but a step every week.
With the Pay off debts faster tool you can see when you could be debt-free using the snowball or avalanche method. In the You can learn to budget course you build, step by step, a budget that suits your life. And if you would rather draw up your overview together with someone, one of our budget coaches can guide you, in confidence and without judgement.