Make a plan to pay off debt within your YNAB spending plan! Focus initially on the debt with the lowest balance, and establish payoff targets. Resist the temptation to start with high-interest debts—aim instead for quick wins by completely eliminating one debt payment at a time, freeing up cash flow to motivate further debt reduction.

 The Payoff Plan "Big Picture"   

Freeing up cash flow is an important step toward avoiding future debt. If you have enough in savings categories, you don't have to go back into debt when unexpected expenses come up as you follow your plan. Freeing up cash flow will also increase the funds you have available to pay toward your next debt! Talk about future-proofing your spending plan and finances. 🥳

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 How to Get Out of Debt with YNAB   

1. List your debts. Make sure you have an account and a category for each of your debts in YNAB. 
   
   
   1. For credit cards ↗️, YNAB will create a Credit Card Payment category for each account. 
      
      
   2. For loans ↗️, choose an existing category or create a new one when you set up each loan account.
      
      
2. Choose a focus. Select your debt with the lowest remaining balance. This will be your focus, where you direct extra money as you assign to your categories!
   

    What about high interest debts?   

   Paying off the highest interest credit card or loan might seem like the place to start. It's more important to free up cash flow, though. Completely getting rid of one debt payment is the way to do this. The quick win is a nice shot of motivation, too! Want more on handling interest? Check out Paying Down a Credit Card Balance Over Time ↗️!

   
   
3. Set a target ↗️ for your focus debt.
   1. If your focus debt is a credit card, choose a Payoff Balance by Date target, which will tell you exactly how much to assign each month to pay off your credit card debt by a certain date. The target amount will adjust automatically if you are making slower or faster progress than your original plan!
      
      
   2. If your focus debt is a loan, create a Debt Payment target and choose a payoff date. YNAB will automatically calculate the monthly payment for you!
      
      
4. Set targets for your other debts.
   For all other credit cards and loans, you're going to make just your minimum payment while tackling your focus debt.
   
   
   1. For credit cards, set a Pay Specific Amount Each Month target in the Credit Card Payment category to make sure you're prepared for that minimum monthly payment. 
      
      
   2. For loan accounts, enter your minimum payment as the Debt Payment target amount.
      
      
5. Celebrate and choose a new focus.
   When that first debt is paid off, stop and celebrate! You've improved your cash flow significantly! Here's how to close out the initial debt and get started on a new priority payoff focus. 
   
   
   1. You can now hide or delete the category ↗️ of the debt you've paid off. Note for credit cards: If you're still going to be using the card you've paid off, you will want to keep the Credit Card Payment category visible. 
      
      
   2. You can also close the account ↗️ in YNAB, if you'll no longer be using it.
      
      
   3. Now it's time to decide how many of those newly freed funds will go towards your next focus debt (going back to step 2 above!). The more you can afford to send there, the faster you'll be completely out of debt.

For a more in-depth review of this topic, check out our "How to Get Out of Debt" ↗️ guide.

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