Getting out of debt starts with three things: building a small emergency fund, choosing one of two proven repayment methods (the snowball or avalanche method), and sticking to your plan.

Many people view all debt as a financial mistake. However, there's a big difference between good debt and bad debt, and understanding that difference can completely change the way you approach repayment.

Good debt helps you build wealth or increase your earning potential over time. A well-chosen mortgage is a classic example. In some cases, student loans or business loans can also be considered good debt, depending on how they're used and whether they provide a meaningful long-term return. One characteristic of good debt is that it doesn't place excessive strain on your budget. A common rule of thumb is to keep your total housing costs at around 30% of your gross monthly income, although the right amount depends on your overall financial situation. Bad debt has the opposite effect. It often comes with high interest rates, can damage your credit score, and finances purchases that lose value instead of helping you build wealth.

So what is the difference between assets and liabilities? Assets are things that increase in value or generate income, such as rental properties, stocks, ETFs, bonds, or a business that generates growing revenue. Investing in your education or learning valuable skills can also be considered an investment because it can increase your earning potential.

Liabilities and consumer purchases, on the other hand, take money out of your pocket without generating income or increasing in value. Clothes, electronics, and other everyday purchases usually fall into this category. When those purchases are financed with high-interest debt, they become an even greater financial burden.

Before you start making extra debt payments, take a moment to build an emergency fund. This financial cushion protects you from falling deeper into debt when unexpected expenses arise, such as a car repair, an emergency dental bill, or a broken appliance.

Your emergency fund doesn't have to be large. Even setting aside around $1,000 can provide a buffer for life's most common emergencies while you're paying off debt. Keep this money in a separate savings account rather than your everyday checking account to reduce the temptation to spend it. Once you've built this safety net, you can decide whether to focus on paying down debt more aggressively or balance debt repayment with investing.

Once your emergency fund is in place and you're ready to tackle your debt, it's time to choose a repayment strategy. There are two proven methods.

The snowball method involves listing your debts from the smallest balance to the largest. Make the minimum payment on every debt while putting any extra money toward the smallest balance. Once that debt is paid off, roll its monthly payment into the next debt on the list. As each balance disappears, the amount you can put toward the next debt grows - just like a snowball rolling downhill.

The avalanche method works differently. Instead of focusing on balances, you rank your debts by interest rate, from highest to lowest. You make the minimum payment on each debt while putting any extra money toward the one with the highest interest rate. Mathematically, this approach saves you the most money because you'll pay less interest over time.

One thing I've learned is that the best financial plan is the one you can stick with. A strategy that's impossible to maintain won't help, no matter how good it looks on paper. That's why the snowball method works so well for many people. Paying off a debt early creates quick, visible wins that keep you motivated. If you're someone who struggles to stay motivated when the reward is far away, the snowball method may be a better fit - even if it costs slightly more in interest than the avalanche method.

Are all your monthly payments, due dates, and bills starting to blur together? That's a common problem, no matter how organized you are. Instead of relying on memory, build a simple system that works even on your busiest days.

First, decide the order in which you'll pay off your debts. Choose either the snowball or avalanche method and stick with it so you don't have to rethink your strategy every month.

Next, determine how much you can realistically put toward debt each month. Review your bank and credit card statements to identify unnecessary spending or subscriptions you've forgotten about.

Then, set up automatic payments whenever possible. Think of it as a quick challenge and see if you can get everything set up in less than five minutes.

Finally, choose one day each month to review your budget and track your progress. Add it to your calendar as a recurring reminder. Once this system is in place, you won't have to rely on willpower or memory. Your automatic payments and monthly review will help keep you on track.

Getting out of debt requires a plan. Build a small emergency fund, choose the repayment method that best fits your personality, and stay consistent.