Okay, so maybe your debt is climbing each month and you’re losing track of it all. Maybe you’re frustrated that no matter how much you try to pay debt down, you’re still facing high interest and fees. Maybe you’ve just landed in this position and you’re trying to figure out how you’re going to pay it all down. A debt reduction plan is your answer.

To pay all of your debt down, a debt reduction plan can help you prioritize, set a plan of attack and keep yourself on track while you make progress.

How to Create a Debt Reduction Plan

Creating a debt reduction plan may enable you to better manage your debt. Left without a plan, it’s harder to keep track of and you could see the balances on your debt increase from fees and compounding interest.

With a debt reduction plan in place, it’s easier to keep track of your debt and your progress. You’ll see clear success of your plan in action. Here are four steps to creating a debt reduction plan.

1. Audit Your Expenses

Something to keep in mind when you’re auditing yourself: Don’t beat yourself up. It’s not about what you’ve done or what circumstances have gotten you here. It’s about figuring out what to do now that you’re here. So, let’s figure out what to do.

Your first step is to take a look at everything you’re spending money on. By auditing your expenses, you’ll be able to see where all of your money is going. What portion of your income is going toward daily spending, monthly bills… and to debt?

To audit your expenses, we suggest filling out a spreadsheet listing your bills and monthly payments. This will allow you to keep tabs on how your money is being dispersed and decide what costs you could potentially cut out ASAP.

2. Audit Your Debts

After creating a list of expenses, separate out your list of debts. With this list in hand, you can now start to understand how much of your income is going toward your debt. This is known as your debt-to-income ratio. Knowing your debt-to-income ratio will help you see the big picture and understand what options you might have available to reduce debt.

Then, take this list of debts and mark how much you’re paying toward them each month. Are you making the minimums, more than the minimums? Also list out what your interest rates or APRs are for each.

It’s also helpful to know what kind of debts you have. Some of the debts to consider in your debt reduction plan include:

  • Credit card balances
  • Personal loans
  • Student loans
  • Medical debt
  • Auto loans

This part of your debt audit can help you figure out which ones should be paid off first.

3. Create a Plan to Pay Down Debt Each Month

Now that you have a bird’s eye view of your finances and the details of your debts, now it’s time to Set. Your. Goals.

What debts do you want to pay down first? How much of your monthly income can you contribute to paying these debts down, on top of the minimums you’re making now? Which debts do you feel comfortable sitting out there if you can’t pay them off right away? Your debt reduction plan should help you answer these questions.

How do you figure out your priorities? There are several methods out there, such as the debt snowball and debt avalanche methods that can help you pay down debt on your own.

It’s also important to consider all of the options you have available.  Some of the common ways other people have paid their debt down include:

  • Part-time work or increased income
  • Cut out extra monthly spending
  • Negotiated interest rates
  • Taken out a debt consolidation loan

4. Consider Debt Consolidation as an Option in Your Debt Reduction Plan

A debt consolidation loan is an easy fit for a debt reduction plan. Here’s why: With a fixed-rate personal loan, you could have a single monthly payment to keep track of, and the interest rate on the loan could be lower than the interest rates on your existing debt. Debt consolidation is a great option for someone who wants to simplify their debt payments.

Why A Debt Reduction Plan is Important

When you have your plan in place, you are more likely to be successful. With an approach that is achievable and realistic for you and your finances, your debt reduction plan is going to help you on your way to pay down debt.

Think about your debt reduction plan like any project you have in your life or career. How do you set your mind to a goal and achieve it? Set a daily reminder, keep a notebook, create a spreadsheet, have a complex system of sticky notes, maybe even tell your Facebook friends—it doesn’t matter how you plan and keep track of your goals. Just keep track and check in with yourself often.

And by the way, it’s okay not to reach your monthly goals every now and then. Continue to keep yourself accountable and adjust. Even with the perfect debt reduction plan, life still happens. Take it in stride and remind yourself of the hard work you’re doing right now to reduce your debt.