How to get out of debt and save money: a step-by-step plan

Where should you start when your debts seem endless?

Start by finding out how much you owe, how much comes in and what you must pay to keep everyday life functioning. Getting out of debt does not mean accepting the first offer or handing money to whoever calls most often. It requires a plan that fits your actual income and avoids creating a new overdue bill to resolve the previous one. Promising an instalment without a budget can turn a negotiation into a second problem.

Sometimes income does not even cover basic needs. In that case, a list of small cutbacks does not solve everything: you need to consider renegotiation, support, changes to fixed expenses and specialist guidance. The following strategies are general and should be adapted, particularly if court enforcement has already begun, your home is at risk or some obligations have a specific legal treatment.

Step 1: make a complete list of your debts

Record the creditor, contract reference, current balance, interest rate, instalment, due date, days overdue, charges and any security. Distinguish money still owed from available credit limits: an authorised overdraft is not income. Include cards, loans, purchase instalments, utility bills, rent and tax obligations, without assuming that all these commitments have the same negotiation mechanisms.

Check contracts and statements instead of relying only on memory. In Brazil, Registrato helps identify commitments to financial institutions. In Portugal, the CRC report shows liabilities reported by participating entities. Neither replaces your own list of all bills. If the amount charged does not match the documents, ask for the calculation and identification of the debt before acknowledging or paying it.

Step 2: calculate the money you can actually use

Use the net income you actually receive, not your gross salary or an uncertain bonus. Add up housing, food, water, energy, healthcare, transport needed for work and other essential family expenses. Then include less frequent expenses, such as annual insurance or school supplies, spreading them across the months. A predictable expense does not cease to exist simply because the bill has not arrived yet.

Your budget should show the balance after basic needs and obligations you have already taken on. If that balance is negative, there is no spare money for extra repayments. With variable income, build the month around a conservative baseline and use better months to strengthen the plan. The public Todos Contam calculator allows you to compare income and expenses over a year.

Step 3: protect essential spending and identify urgent matters

The order of action depends on what happens if a bill is not paid. High-interest debt deserves attention, but a concrete threat to your home or the continuity of an essential service may require a more immediate response. Check notices, deadlines and ways to challenge a demand. If you receive a court notice, do not treat it as just another promotional debt-collection message.

This triage does not mean leaving other debts without any contact. Notify creditors and try to agree suitable solutions. Nor is there a universal ranking that removes the need to examine taxes, maintenance payments, guarantees or ongoing proceedings. Where significant legal consequences are involved, seek qualified support to understand deadlines before committing the little money available.

Step 4: choose between higher interest and smaller balances

If you can meet the agreed payments on all your debts and still have money left, you can direct the extra towards the debt with the highest interest rate. This is often called the avalanche method. Under comparable conditions, it reduces the most expensive debt more quickly. The alternative snowball method starts with the smallest balance and uses the sense of progress to maintain discipline.

With the snowball method, once a debt is cleared, the money freed up moves to the next one. A possible drawback is paying more interest while an expensive debt remains outstanding. The CFPB presents both strategies with these limitations. Neither replaces dealing with urgent arrears or renegotiating when your budget cannot support the minimum payments.

Example: how can you distribute a monthly amount of 250?

Imagine three debts: A has an instalment of 80 and is the most expensive; B has an instalment of 50; C has an instalment of 70 and is the smallest balance. Required payments total 200. If 250 is available, there is 50 to add to one debt. Under the avalanche method, A receives 130; under the snowball method, C receives 120. The other instalments continue to be paid.

These are hypothetical figures in the same currency to show the distribution. They do not estimate rates, discounts or payoff dates. To calculate how long remains, you need balances, interest, fees and the repayment structure. If the available amount falls to 170, the plan can no longer cover the agreed 200: contact the creditors and review the terms instead of pretending the strategy is still viable.

Hypothetical distribution of 250 a month, in a single currency
Debt	Agreed payment	Avalanche	Snowball
A — highest rate	80	130	80
B	50	50	50
C — smallest balance	70	70	120
Total	200	250	250

Step 5: negotiate with a concrete proposal

Contact the creditor with the amount you can regularly afford. Ask for a breakdown of principal, interest and charges, and compare alternatives for the term, rate and any discount. A useful agreement must identify the total amount, upfront payment, due dates and consequences of falling behind again. Before making an upfront payment, confirm who receives it and obtain the terms in writing.

A large discount is not beneficial if it makes you miss rent or take out a more expensive loan. Nor is negotiating each debt separately enough: the sum of the new instalments must fit the same budget. Record contacts, proposals and receipts. After repayment, ask for written confirmation that the debt is settled and monitor updates to the relevant records.

Portugal: when should you use PARI, PERSI and RACE?

If you expect difficulty repaying bank credit, contact the institution before you fall behind. PARI organises prevention procedures. Once there is a default, PERSI is an out-of-court mechanism to assess and negotiate regularisation of covered contracts. Providing income and expense documents is important so that the situation can be assessed.

PERSI does not guarantee debt forgiveness or a proposal in every case. Feasibility depends on financial capacity and the specific circumstances. RACE provides free information, advice and ongoing support, and can help analyse proposals. It does not represent the customer in negotiations or replace legal assistance; its involvement is limited when court proceedings relating to the contract begin. Non-bank bills may require different channels.

Brazil: where can you seek renegotiation and support?

Start with the creditor’s official channels and keep reference numbers. If there is no solution or a dispute arises, you can contact Procon and, where the company participates, the Consumidor.gov.br platform. The availability of negotiation campaigns and programmes changes: confirm dates, eligibility and the application channel. An announcement about a future programme is not the same as negotiations already being open to everyone.

Law 14.181/2021 established rules to prevent and address over-indebtedness among consumers acting in good faith, seeking to preserve the resources needed for basic living costs. Restructuring has requirements and exclusions and does not automatically cover every debt. The Public Defender’s Office or consumer protection bodies can advise on eligibility and the documents required. It is not a mechanism for cancelling all obligations.

Is it worth taking out one loan to repay another?

It can make sense to replace a debt with a less costly one whose instalment is sustainable. But the comparison must include the balance to be settled, overall cost, term, fees, insurance and security. A much longer term can lower the monthly payment while increasing the total. If a card becomes available again, using it without restraint can recreate the problem.

In Brazil, compare the CET; in Portugal, the TAEG and MTIC. Ask for the settlement amount and confirm that the previous debt has been closed or regularised as planned. Do not add money for spending simply because it has been offered. When the breathing space comes from pledging an asset as security, consider the risk of losing that asset as well.

How can you avoid late payments when money is tight?

Create a calendar of income and due dates and, if the creditor permits, try to bring the payment date closer to when you receive your income. A direct debit only helps if there is a sufficient balance: it does not turn a shortage of money into a payment. Set reminders and check that transfers have completed. Keep a list of agreements showing the first instalment, final instalment and current amount.

Set aside a few minutes each week to check statements and the bills due in the coming days. If an unexpected expense makes the next payment unaffordable, contact the institution as soon as you know. Separating money for fixed expenses from spending money can reduce oversights. However, opening several accounts with fees can worsen the budget: organisation should simplify life without adding unnecessary costs.

Is it better to save money or repay all your debts immediately?

The balance depends on the urgency of the debts, interest and the risk of another essential expense arising. A small, accessible reserve can prevent you from using the card again when something unexpected happens. You do not need to wait until you have a huge fund before starting to reduce expensive debt. Nor does it make sense to save for a distant goal while leaving a housing emergency unaddressed.

Set a realistic first target based on an expense that often disrupts your month. The CFPB stresses that even small amounts can offer protection. Keep this reserve separate from money for bills you already know about: an expected annual insurance bill deserves its own provision. Avoid volatile investments or those that lock away money you may need quickly.

How can you cut expenses and create breathing space without an impossible plan?

Review recurring spending first: subscriptions, fees, duplicated services and contracts that can be adjusted. When shopping, compare unit prices and plan meals to reduce waste. Choose changes you can sustain instead of cutting everything for a week and giving up the following month. Protect healthcare spending and resources needed for work.

Consider additional income only at its net value after costs, taxes and the time required. Selling an unused object creates a one-off receipt, not a permanent salary to support monthly instalments. Avoid gambling, speculation or promises of quick returns to recover losses. A predictable improvement of 30 a month can be more useful to the plan than relying on an uncertain gain of 300.

What should you do in the first 30 days, and how can you measure progress?

In the first week, gather documents and make your list. In the second, confirm balances and contact creditors about arrears or expected difficulties. In the third, compare written proposals and build the calendar. In the fourth, check payments, adjust the budget and decide where any extra money should go. This calendar is an organisational suggestion; emergencies and legal deadlines require immediate action.

Monitor the total balance, interest, payments met and money available for the following month. One debt shrinking while another grows is not complete progress. After repayment, keep reviewing and direct part of the freed-up instalment into your reserve. The aim is to regain room to make decisions, with sustainable payments and less reliance on new credit.

Frequently asked questions

Which debt should I pay first?

First check urgent consequences, such as risks to housing, essential services or court deadlines. Then, if you can meet your agreements, you can use extra money on the highest-rate debt to reduce costs. The specific situation may change that order.

How can I get out of debt on a low salary?

Calculate your net budget, protect basic needs and seek affordable instalments. If there is no money left, small cuts may be insufficient: consider renegotiation, support and free guidance without committing to an impossible payment.

Does paying only the minimum on a card solve the problem?

It may avoid some immediate consequences depending on the contract, but leaves a financed balance and charges. You need to understand the cost and build a sustainable repayment or renegotiation plan.

Should I accept any discount to clear an adverse credit record?

No. Check legitimacy, the final cost and whether the upfront payment and instalments fit your budget. A discount that causes new arrears may simply move the problem elsewhere.

Does PERSI forgive debts in Portugal?

Not automatically. It is an assessment and negotiation procedure for covered contracts; the solution depends on the case and financial capacity.

Does Brazil’s Over-indebtedness Law cover every debt?

No. There are legal requirements and exclusions. Contact Procon or the Public Defender’s Office to check whether your circumstances and contracts can be included in a restructuring.

Can I save while repaying debt?

A small reserve for unexpected expenses can prevent new borrowing. The amount should be balanced against urgent arrears, debt costs and basic needs, without a compulsory percentage for everyone.

How long will it take to repay everything?

That depends on the balance, interest, charges and monthly repayment capacity. A timeframe cannot be promised without those details and without considering changes to the budget.

What should I ask for after paying the final instalment?

Ask for written confirmation of settlement, confirm that the contract has been regularised and monitor updates to the relevant records. Keep the agreement and receipts to resolve discrepancies.