Challenge Overview
Why 2026 Is Your Debt-Free Year
Every year, millions of Americans make the same New Year's resolution: "This is the year I'll get out of debt." And every year, 78% of them fail by February.
Not because they lack willpower. Not because they don't want it badly enough. But because they don't have a system.
That changes today. The 2026 Debt Payoff Challenge gives you exactly what other "debt-free" programs lack:
- Specific monthly milestones — Know exactly what to do each month
- Accountability checkpoints — Built-in progress reviews to keep you on track
- Obstacle solutions — Pre-planned responses to common setbacks
- Free calculator tools — See your exact payoff date and interest savings
The Average American Household Has:
- $7,951 in credit card debt
- $28,950 in auto loans
- $37,693 in student loans
Source: Federal Reserve, Experian (2024)
Whatever your debt number is, this challenge will help you make serious progress. Some participants will be completely debt-free by December 2026. Others will have paid off 30-50% of their balances. Either outcome puts you miles ahead of where you'd be without a plan.
Ready to commit? Let's look at the rules.
The Challenge Rules
This challenge works because it has structure. Follow these five rules for the next 12 months:
The 5 Challenge Rules
Use the Calculator First
Start by entering all your debts into our Debt Payoff Calculator. This gives you your baseline: total debt, projected payoff date, and total interest you'll pay.
No New Debt
For 12 months, commit to zero new debt. No new credit cards, no financing purchases, no personal loans. Emergencies use your emergency fund, not credit.
Pay More Than Minimum
Every month, pay at least something extra toward your target debt. Even $25-50 makes a difference. The goal is consistent extra payments, not huge ones.
Monthly Check-In
On the 1st of each month, log into our calculator and update your balances. Track your progress. Celebrate wins. Adjust your plan if needed.
Share Your Wins (Optional)
Studies show people who share their financial goals are 33% more likely to achieve them. Consider telling a friend, partner, or posting your progress.
That's it. Five simple rules. The magic is in the monthly action plan below.
Month-by-Month Action Plan
Here's your complete roadmap for the next 12 months. Each month has a theme, specific tasks, and a milestone to hit.
Month 1: Know Your Numbers (January)
Theme: Awareness & Foundation
Tasks:
- List ALL debts (credit cards, car loans, student loans, medical bills, personal loans)
- Enter debts into Debt Payoff Calculator
- Choose your strategy: Avalanche vs. Snowball
- Set up a starter emergency fund ($500-1,000)
- Write down your "why" (motivation for becoming debt-free)
Milestone: Know your exact total debt and projected payoff date
Month 2: First Extra Payment (February)
Theme: Building Momentum
Tasks:
- Make your first extra payment of $100+ toward your target debt
- Review last month's spending for potential cuts
- Set up autopay for ALL minimum payments (never miss one again)
- Call one creditor to negotiate lower interest rate
Milestone: Complete first extra payment
Month 3: Cut the Subscriptions (March)
Theme: Expense Audit
Tasks:
- Audit ALL subscriptions (streaming, apps, memberships, subscriptions boxes)
- Cancel at least 2-3 subscriptions you don't actively use
- Redirect that money directly to debt payment
- Review car insurance — shop for better rate
Milestone: Increase extra payment by $50+ from subscription savings
Month 4: Tax Refund Strategy (April)
Theme: Windfall Allocation
Tasks:
- If receiving tax refund: allocate 50-70% to debt
- Re-run calculator with current balances to see progress
- Adjust W-4 if getting large refund (keep more money monthly instead)
- Update your "why" document — is motivation still strong?
Milestone: Make largest single payment of the year (tax refund + regular extra)
Month 5: Side Hustle Launch (May)
Theme: Increase Income
Tasks:
- Start one side hustle from our guide
- Options: Freelancing, rideshare, tutoring, selling items, pet sitting
- Goal: Earn $200-500 extra this month
- 100% of side hustle income goes to debt
Milestone: Earn at least $200 from side income
Month 6: Mid-Year Review (June)
Theme: Celebrate & Adjust
Tasks:
- Calculate total debt paid off so far
- Calculate total interest saved vs. minimum payments only
- Celebrate your progress! Small reward (within budget)
- Adjust strategy if needed (switch from snowball to avalanche or vice versa)
- Set specific goal for months 7-12
Check-In Questions:
- How much debt have I paid off?
- Am I on track for my year-end goal?
- What's working? What isn't?
- Do I need to increase income or cut more expenses?
Milestone: Be at least 25% closer to debt-free than January 1st
Month 7: Increase by 10% (July)
Theme: Acceleration
Tasks:
- Increase your extra payment amount by 10%
- Negotiate one bill (internet, phone, insurance)
- Look into balance transfer options (0% APR cards)
- If applicable: ask for a raise at work
Milestone: Extra payment is at least 10% higher than Month 1
Month 8: Accountability Partner (August)
Theme: Community & Support
Tasks:
- Find an accountability partner (friend, spouse, online community)
- Schedule weekly or bi-weekly check-ins
- Share your progress (numbers don't have to be specific, just direction)
- Join r/personalfinance or r/debtfree communities
Milestone: Have at least one accountability check-in conversation
Month 9: Cash Injection (September)
Theme: Sell & Declutter
Tasks:
- Sell 10+ items you don't need (Facebook Marketplace, eBay, Poshmark)
- Target: $300-500 from selling unused items
- All proceeds go directly to debt
- Bonus: Decluttering reduces desire to buy more stuff
Milestone: Make a lump-sum payment from sales
Month 10: Holiday Budget Planning (October)
Theme: Prevent Backslide
Tasks:
- Set a specific holiday spending budget (gifts, travel, food)
- Start saving NOW for November/December expenses
- Plan to pay cash ONLY for holiday spending — no credit cards
- Consider alternative gift ideas (experiences, homemade, Secret Santa limits)
Milestone: Have written holiday budget and savings plan
Month 11: Final Push (November)
Theme: Maximum Effort
Tasks:
- Calculate exactly how much more you can pay this month
- Make the largest extra payment you can afford
- Consider debt consolidation if it improves your numbers
- No unnecessary spending — bare bones month
Milestone: Make your second-largest payment of the year
Month 12: Victory Lap (December)
Theme: Celebrate & Plan Ahead
Tasks:
- Calculate total debt paid off this year
- Calculate total interest saved
- Celebrate appropriately! You earned it.
- Set goals for 2027: Continue debt payoff OR start investing/saving
- Share your story to inspire others
Year-End Reflection:
- Total debt paid off: $______
- Interest saved: $______
- Months ahead of schedule: ______
- Biggest lesson learned: ______
Milestone: Be significantly closer to debt-free than January 1st
Tools You'll Need
Success in this challenge requires the right tools. Here's what we recommend:
Debt Payoff Calculator
Our free calculator shows your exact payoff date, total interest, and compares avalanche vs. snowball methods.
Use Calculator →Emergency Fund Calculator
Build your safety net alongside debt payoff. Prevents going back into debt for emergencies.
Use Calculator →Net Worth Calculator
Track your overall financial picture. Watch your net worth grow as debt shrinks.
Use Calculator →Freelancer Budget Calculator
Managing side hustle income? This calculator helps you budget irregular income.
Use Calculator →Recommended Budget Apps
Track your spending automatically with one of these apps (see our full comparison):
- YNAB — Best for zero-based budgeting ($14.99/month, worth every penny)
- Copilot — Best for Apple users ($8.99/month or $69.99/year)
- EveryDollar — Best free option (Dave Ramsey's app)
- Empower — Best for tracking net worth (100% free)
High-Yield Savings for Emergency Fund
Park your emergency fund in a high-yield savings account (see our HYSA comparison):
- Wealthfront — 4.5% APY, no fees
- SoFi — 4.5% APY with direct deposit
- Marcus by Goldman Sachs — 4.4% APY, established bank
What Success Looks Like
Here's what's possible when you follow this challenge:
Example 1: The Credit Card Crusher
Starting point: $18,000 credit card debt at 22% APR
Monthly extra payment: $400 (started at $200, increased to $600 by Month 6)
Result: Debt reduced to $6,200 in 12 months. On track for complete payoff by Month 18.
Interest saved vs. minimum payments: $4,800
Example 2: The Student Loan Strategist
Starting point: $45,000 student loans at 6.5% average
Monthly extra payment: $300 (plus $3,000 tax refund)
Result: Debt reduced to $36,500 in 12 months. Knocked 3 years off the payoff timeline.
Interest saved over loan lifetime: $7,200
Example 3: The Mixed Debt Manager
Starting point: $8,000 credit cards + $15,000 car loan + $5,000 medical bills = $28,000 total
Monthly extra payment: $250 average (fluctuated with side hustle income)
Result: Credit cards paid off ($8K), medical bills paid off ($5K), car loan reduced to $11K. Total debt: $11,000 (down from $28K)
Debt eliminated: $17,000 in 12 months
Your results will vary based on your starting debt, income, and commitment level. But everyone who sticks with the challenge makes meaningful progress.
Frequently Asked Questions
What if I miss a month in the debt payoff challenge?
Missing a month doesn't mean you've failed. Simply pick up where you left off the next month. The key is to not let one slip-up derail your entire year. Many successful challenge completers missed 1-2 months and still achieved their goals by catching up in later months.
Should I use debt avalanche or snowball for this challenge?
Either method works for this challenge. Choose avalanche (highest interest first) if you want to save the most money. Choose snowball (smallest balance first) if you need quick wins to stay motivated. Use our Debt Payoff Calculator to see exactly how much each method saves you.
Can I do the debt payoff challenge with student loans?
Absolutely! Student loans are perfect for this challenge. The 12-month structure helps you make consistent progress on large balances. Focus on paying more than the minimum each month, and consider refinancing if you can get a lower rate.
How much should I pay extra each month?
Start with whatever extra you can afford, even if it's just $50-100. The challenge helps you find more money as you go. Most successful participants increase their extra payments by 10-20% every quarter as they cut expenses and find side income.
Should I build an emergency fund before paying off debt?
Yes, but start small. We recommend having at least $1,000-2,000 in emergency savings before aggressively attacking debt. This prevents you from going back into debt when unexpected expenses arise. Use our Emergency Fund Calculator to find your target. Once your debt is paid off, build your full 3-6 month emergency fund.
What if I get laid off during the challenge?
If you lose your job, immediately switch to minimum payments only and focus on finding new income. Your emergency fund (built in Month 1) should cover essentials. Once employed again, resume extra payments. This is a temporary pause, not the end of your challenge.
Can I start the debt payoff challenge mid-year?
Yes! While January is the most popular start date, you can begin this 12-month challenge any time. Many people start in September (back-to-school motivation), their birthday month, or simply whenever they're ready to commit.
Should I consolidate my debt during this challenge?
Debt consolidation can help if you qualify for a lower interest rate than your current debts. It simplifies payments to one monthly bill. However, don't consolidate just to feel like you're making progress — the math needs to work in your favor. Read our consolidation vs. settlement guide to compare options.
Ready to Start the 2026 Debt Payoff Challenge?
Get your baseline numbers with our free calculator. See your exact payoff date and total interest savings.
No signup required. Results in under 2 minutes.