How Much Money Should I Allocate To Paying Down Debt?

If your goal is to get out of debt – whether it’s this year or sometime far into the future – you might have wondered how much money you should allocate to paying down debt each month. Well, you’re in the right place. Today we’re chatting about this very topic and I’m walking you through the five steps to take to get on track with your debt payoff goals. Sound like something you need? Well then, let’s get started.

How Much Money Should I Allocate to Paying Down Debt

Well hey there and welcome to the Financial Fix Up Podcast. I’m your host, Sarah Brumley, and today we’re chatting about everyone’s favorite subject: paying off debt.


Okay…well I’m pretty sure that it might more of a least favorite subject, but it’s definitely something that we need to address. And one of the questions I get a lot around the topic of debt, especially from those new to budgeting, is “how much money should I allocate to paying down debt?”.

And honestly I wish I had the exact right answer for you, but the truth of the matter is that your financial situation is unique to you and your family. Your income, necessities, etc. – those are all unique to you.

So, while I’m not going to give you an exact amount or a blanket percentage, I am going to walk us through a few things to consider as you make the best decision for you. And I believe that when we put this kind of thought into our budget and really make it specific for our own situations – that’s how we are able to stick with it long-term and achieve those really big goals.

Sound good? Well then let’s jump into it.

Step #1: Know Your Numbers

No matter what financial situation you are considering, you have to start by understanding your numbers. That means that you’ve put the time in to understand exactly how much income you have, the total cost of all of your necessities – like housing, utilities, transportation, food, etc., and how much you have left over after all of that.

In the case of paying off debt, you also need to be clear about how much you owe – that’s the total of all of your debt – and the minimum payments associated with each debt.

It might not seem like fun at first, but it’s important to know these things so you can plan accordingly AND see the progress as you begin to pay those debts off. I like to think of it like getting started with a diet. It’s not fun to step on that scale on Day 1 when you already know the situation isn’t good. It’s also not fun to take that “before” picture wearing those too-small yoga pants or to measure each part of your body. It’s not fun then, but what is fun is celebrating the differences as the diet or weight loss challenge goes on. When you’ve lost two pant sizes and the scale is smiling back at you.

The same is true for debt payoff. It might not look pretty to start with, but you’ll be celebrating the success in the future and be happy to know where you started and how far you’ve come.

Plus it’s going to make it so much easier to know where to start and with how much.

So, step 1 is to know your numbers.

Note: If you need help with this step, head to or follow the link in the show notes to grab your FREE copy of my Monthly Family Budget Worksheet. You’ll be able to quickly and thoroughly pull these numbers together so that there’s no guessing as to what your numbers are. Once again that’s

Step #2: Pay the Minimums

And I feel like this should go without saying, but unless you are dealing with a severe financial hardship and can’t afford to pay your necessities – if that’s the case, then you’ll definitely want to stop this episode right here and go listen to my episode on How to Cope When Your Income Doesn’t Cover Your Necessities – I’ll link to that in the show notes. But unless that’s the case, you should AT A MINIMUM be paying your minimum monthly payment for each debt you have. That’s why it’s called a minimum – it’s the least amount of money you can pay each month without your debt going into default or collections. So, make that payment no matter what.

Everything we talk about going forward is ABOVE AND BEYOND that non-negotiable minimum payment, okay? Hopefully that’s clear.

Pay the minimums. That’s step 2.

Step #3: Consider Your Emergency Reserves

And I know – you’re wondering what this has to do with figuring out how much to allocate toward debt payoff, but trust me, this is an important piece. Here’s the deal: when your emergency fund is fully funded, that means that if something happens, like a pipe breaks in your basement or your kiddo lands in the emergency room or you have any other kind of unexpected and challenging financial situation, you won’t feel tempted to go back to the credit cards.

So, before you allocate more than the minimum payment to any debt you currently have, make sure you have your emergency reserves funded in a way that protects your financial plan in the case of the unexpected.

Personally, I recommend having at least enough to cover your largest deductible – whether that’s your house or a medical deductible or something else – OR somewhere around the $1000 to $2000-range. By having that in place you’ll be less likely to turn to the credit cards or other forms of debt in order to manage the cost of the unexpected.

So, step 3 is to consider and fully fund your emergency reserves.

Step #4: Determine Your Desired Outcome

This is the goal you have for debt payoff. It could include certain forms of debt you’d like to pay off, like student loans or credit cards or a car payment. It could also include a time frame you’d like to accomplish paying off a certain debt or your debt as a whole. When you know this, you’ll be able to more accurately determine how much you need or want to pay off and in what time frame you’d like to achieve your goal.

For example, let’s say that you have two credit card debts and a medical debt. Because you know that the medical debt has no interest attached to it, it’s not a high priority for you and you’re simply going to keep up with the minimum payments for the time being. The credit card debt with it’s high interest rates is your priority and you want to be out from under it within two years. If you know your numbers (and you should if you complete step 1), then you’re already aware that you have $20,000 to pay off during that time. Divide $20,000 by 24 months and you’ll know that in order to achieve that goal, you’ll need to pay somewhere around $850 per month, give or take depending on your interest rate.

If you want a more accurate number, you can grab my Debt Snowball Worksheet to help you calculate your payoff date based on your total amount owed, interest rate, and including your minimum payments as well. You can find that at

Step #5: Assess and Reassess

Once you know your desired outcome and what it’s going to take to get there, it’s important to assess your budget to determine whether or not it’s actually financially possible. Do you have enough “extra” money above and beyond your normal monthly expenses to allow you to reach that goal within the time frame you’ve set?

If so, then if you want to reach your goal, then you know the amount you should allocate toward that debt each month.

If you don’t have enough bandwidth to put that amount toward debt payoff each month then it’s time to reassess what it’s going to take to get you there.

Do you need to change your debt payoff time frame? For many that’s the step they take.

You might also decide that you’re going to focus on other savings within your budget to make up the difference – for example, you might cut subscription costs, internet, television, the gym, whatever it might be in order to make your goal happen within the given time frame.

There’s no right or wrong here – make the decision that works for you. Because the truth is that if it doesn’t work for you, then you won’t stick with it in the long-term. Personally, I believe that if it takes you a little longer to pay off a debt, that matters a lot more than starting off strong and never getting the end result you wanted.

And know that no matter what you choose right now, a budget isn’t a one and done. It’s likely you’ll have to assess and reassess multiple times between now and your debt payoff finish line – as you add additional income, deal with unexpected expenses, etc. So, take the time to assess and reassess as often as necessary.

How Much Money Will You Allocate to Paying Down Debt?

Let’s take a moment for a quick recap. In order to determine how much to allocate to debt payoff, there are five steps to follow:

  1. Know Your Numbers
  2. Pay the Minimums
  3. Consider Your Emergency Reserves
  4. Determine Your Desired Outcome
  5. Assess and Reassess

Last and finally, it’s time to start making those payments and get out from under that debt. Once again, if you want my debt snowball worksheet to help you do just that, you can follow the link in the show notes OR head to

What you choose, just know that I’m cheering you on! You’ve got this!

Have an amazing day and I’ll chat with you again next time!