How to Reduce Debt Now: 7 Simple Steps to Take

Just as our daily use of smartphones has become normalized, so too has high debt. But to what extent? The average U.S. household carries $104,755 in debt as of mid 2025, research from Experian suggests, covering everything from mortgages and cars to student loans and credit cards.

In fact, the average American holds $6,735 in credit card balances. Much of this isn’t for “extra” expenses; it’s essential. 4 in 10 adults say they rely on credit cards to pay monthly bills, a recent Civic Science report found. Factor in that credit card debt is notorious for high APRs that easily multiply your balance, and you’re looking at an uphill battle.

This can feel overwhelming, especially if you fall into these statistics. How does one even start paying off this mountain of debt? Fear not. With a clear, step-by-step plan and a couple of smart tools, you can start taking large chunks off your debt and feel more in control within weeks.

Disclaimer: This article is for education only and isn’t financial advice. Talk to a licensed professional for guidance on your situation.

Step 1: “How do I figure out how much debt I really have?”

Many people underestimate their total debt. They focus on a single card or the highest balance that’s causing them the most stress. Answering this question requires an honest inventory of your entire debt picture.

Looking at your financial reality may feel emotional, and that’s okay. Remember, knowledge is power. Once you know what you’re working with, you can build a solid plan.

Create your debt inventory

First, collect statements for every debt you owe, such as:

• Credit Cards
• Buy Now, Pay Later (BNPL) Plans
• Personal Loans
• Student Loans
• Auto Loans
• Medical Debt
• Mortgages/HELOCs

Got everything? Now, jot down the following four pieces of information for each one:

• Current Balance: The total amount you still owe.
• Interest Rate (APR): The Annual Percentage Rate; the cost of borrowing the money.
• Minimum Payment: The smallest amount the lender requires you to pay.
• Due Date: The day of the month the payment is required.

Here’s an example of a debt inventory:

Why the interest rate is key

The dopamine hit from paying off any small balance feels great, but the interest rate is the single most important factor when you decide which debt to pay off first.

High APR debt can grow scary fast and cost a lot more than a low APR debt, even if the balances are similar. For instance, paying off a 25% APR credit card first saves you significantly more money than paying off a 5% APR student loan. Always tackle high APRs first.

How Pine can Help You with Debt

“There is no shortage of advice on how to reduce debt. The problem isn’t knowledge; it’s execution. You know you should call your cable company to negotiate a lower rate, but you don't have three hours to sit on hold. That’s where Pine comes in. We don't give you a to-do list. We are the 'done' list. We make the calls, handle the arguments, and get your money back.” - Stanley Wei, CEO of Pine

Step 2 – “What’s the best way to pay off debt: snowball vs avalanche?”

Debt snowball – best if you need quick wins

How it works: You pay extra toward the debt with the smallest current balance first, while paying only the minimum on all your other debts. Once the smallest debt is paid off, you "roll" that full payment amount into the next smallest debt.

Why it helps: This method is designed to give you early, tangible wins and a confidence boost. This is backed by behavioral research suggesting people are more likely to stick with a long-term strategy when they see quick progress.

Debt avalanche – best if you want to pay the least interest

How it works: You pay extra toward the debt with the highest APR first, regardless of its balance. Once that’s paid off, you apply that full payment amount to the debt with the next highest APR.

Why it helps: This is the mathematically optimal choice. With average credit card APRs around 21.39% (Federal Reserve, Aug 2025), tackling the highest rate can save you thousands of dollars and cut your total repayment time by months, even years.

How to choose the right method for you

Choose Avalanche if you’re disciplined and willing to delay gratification. This pays off your debt as quickly and cheaply as possible.

Choose Snowball if you’ve tried the Avalanche method before and quit. In this case, making progress is more important than achieving mathematical perfection.

Regardless of your choice, our biggest piece of advice is to pick one and stick with it until you’ve paid off your debts.

Step 3 - “How can I cut my monthly bills so I can pay more toward debt?”

Many U.S. households are financially stretched; 41% of Americans use credit cards to cover major everyday bills like rent, loan payments, childcare, and even groceries. The fastest way to create “free space” in your budget is by reducing your fixed costs. This extra cash can then be channeled toward your debt goals.

Target the big three first – housing, transport, and food

Want to pull big levers that save you money right away? Focus on these three:

• Insurance (housing & auto): Get quotes from three competitors. Ask your current insurer about bundling discounts or adjusting your deductible. Easily save up to $1,000 or more.
• Transportation: If you have a car payment, research refinancing your auto loan to a lower interest rate to potentially save $100+ per month.
• Food: consider buying in bulk, meal planning, and reducing (or even eliminating) restaurant/takeout spending. You could save $1,000s per year.

Easy wins: phone, internet, and streaming

Call and ask for loyalty discounts or promotions: Service providers save their best deals for new customers. Call your current phone and internet company, mention you are considering switching to a competitor, and ask for a "loyalty discount" or to be placed on a current promotional rate.

Internet/phone: Don’t use the maximum bandwidth? Downgrade to a cheaper tier. Most households don't need the fastest available speed.

Streaming/subscriptions: Audit all your subscriptions (Netflix, Hulu, gym memberships, apps). Cancel any service you don't use regularly.

The goal is to reallocate $100 to $300 (or more) in recurring expenses to your priority debt.

Step 4 – “How do I budget when I’m already in debt?”

Traditional budgeting feels restrictive when you’re deep in debt. The key is to adopt a flexible framework that is realistic and accommodates aggressive debt payoff.

Use a percentage-based budgeting framework

This helps you categorize your spending and see where your money is going. You can adapt the 50/30/20 rule for your “debt season”:

Embrace the “debt season”

For 6 to 12 months, treat your budget as though you are in a "debt season." This means temporarily elevating debt payoff above other financial goals.

This takes sacrifice, but remember, it’s only temporary. Every dollar you cut from dining out, entertainment, or subscription services is a dollar that pays down your principal balance faster and saves you interest.

Keep your plan realistic

Sacrifice does not mean perfectionism. It’s more important to be realistic and consistent than it is to try to do everything at once. Focus on sustainability.

A May 2025 Federal Reserve report shows that 27% of adults report they are "just getting by" or "finding it difficult to get by." If you fall into this struggling minority, a plan that demands you throw 60% of your income at debt might lead to burnout. Start small, be consistent, and build in a small allowance for stress reduction to prevent failure.

Step 5 – “When does it make sense to consolidate or refinance debt?”

Pros and cons

Debt consolidation is a powerful tool, but it’s not the right choice for everyone. It involves taking out a new loan to pay off several, high interest debts, resulting in one single payment.

Pros:

• Simpler payments. Only one due date to track, reducing missed payments.
• Potentially lower interest rate. If your credit score is good, you can secure a new loan with an APR much lower than the current average credit card rate.

Cons:

• Fees and costs. New loans have origination or balance transfer fees (typically 1–5%).
• Risk of running cards back up. If you use those zeroed-out cards again, you can end up with the consolidation loan plus new credit card debt, leaving you worse off than when you started.
• Higher total cost. Longer loan terms (5–7 years) can mean more total interest paid over time.

Why you should be cautious

Data from the Federal Reserve Bank of St. Louis indicates that financial distress is increasing. The share of people in credit card delinquency has surpassed levels from the 2008 Global Financial Crisis.

If you’re considering consolidation, you must be sure you can service the new debt and control spending. Discipline is essential to avoid falling into deeper debt.

How Pine Helps You Create Momentum

“Debt is heavy enough without the added stress of managing it. Dealing with creditors, insurers, and service providers is a full-time job that nobody wants. Pine is built to handle the complex, messy, multi-step tasks that humans hate. We handle the administrative nightmare so you can focus on simply living your life.” - Stanley Wei, CEO of Pine

Step 6 – “How do I stay out of the debt cycle for good?”

Getting out of debt is a massive accomplishment. But the real win? Staying out. Replace your old debt habits with new protective financial habits.

Building your financial shields

Emergency Buffer: Before or immediately after paying off debt, create a small "Starter Emergency Fund" of $500 to $1,000. This cash buffer is your first line of defense against minor life shocks, preventing you from reaching for a credit card.

Redirect Your Debt Payments: Once debt is gone, do not absorb the large payment you were making back into your lifestyle. Redirect that cash flow into savings and investing. This is how you build wealth and secure your future using the same discipline.

Make Annual “Bill Checkups” a Habit: Set a calendar reminder once a year to review all your expenses. Cancel anything that doesn’t add value to your life, and renegotiate your monthly bills.

Yearly Money Maintenance Checklist

Use this checklist once a year to keep your financial life on track:

Step 7 – “When should I talk to a credit counselor or financial professional?”

If you’ve tried all the above steps with consistency and still feel stuck, professional help may be necessary. A credit counselor or financial professional is a powerful resource for navigating more complex or overwhelming situations.

Warning signs that you need professional help

Look for these signs:

• You're missing payments and getting collection calls: your situation has moved beyond simple budgeting and requires immediate, structured intervention.
• Minimum payments are too expensive: If paying only the minimum consumes too much of your income, leaving you unable to cover basic needs, you need help restructuring your debt.
• You still feel stuck after trying a payoff method: If the needle still isn't moving after months of disciplined effort, a counselor can provide new strategies or access to programs.

What a nonprofit credit counseling agency does

A good nonprofit credit counseling agency provides confidential guidance and solutions:

• Budget analysis: They perform a thorough review of your finances to craft a realistic budget.
• Debt management plans (DMPs): They may enroll you in a DMP, negotiating with your creditors to lower your interest rates and stop collection calls. You then make one single monthly payment to the agency, and they distribute the funds to your creditors.
• Financial Education: They provide tools and education to help you develop long-term financial habits. Note: stick with nonprofit organizations. Stay away from companies that pressure you into paying large upfront fees or make promises that sound too good to be true.

A final reminder

While Pine can help you find savings, credits, and simplify aspects of your financial life, it isn't a substitute for legal or professional financial advice. If you think you’re in serious financial distress, please seek out a professional.

Sources

• Experian, Average American Debt by Age, US State, Credit Score and Type in 2025 (November 2025)
• Civic Science, More Than 40% of American Households Rely on Credit Cards to Pay the Bills, Leading to a Vicious Debt Cycle (October 2024)
• Federal Reserve Bank of St. Louis, Commercial Bank Interest Rate on Credit Card Plans, All Accounts (October 2025)
• Federal Reserve, Report on the Economic Well-Being of U.S. Households in 2024 - May 2025
• Federal Reserve Bank of St. Louis, The Broad, Continuing Rise in Delinquent U.S. Credit Card Debt Revisited (May 2025)