First let me just tell you, that you need to stop beating yourself up for having debt. The fact that you are here means that you are ready to make changes to tackle it, and that my friend is all that matters. So, stop being a dick to yourself about your debt, and let’s get to work on developing a strategy that works for you to pay it off!!

 There are 4 methods that you can use to tackle your debt. You don’t have to exclusively use one of them. You can use one method at first, and then switch it up after you’ve knocked your first debt out. You have to have a plan that works for you and there is not a one-size-fits all plan.

The snowball method – let’s get this one out of the way first because chances are good that if you have done any research into paying off your debt, you have come across Dave Ramsay and this is the method that he exclusively ‘recommends’. I put that in quotes because he and I have VERY different strategies around most things money. We do agree that this can be a very effective way of paying off your debt and staying motivated while you do.

This method has you list all of your debts from smallest balance to largest balance. You pay all of your minimum payments and then any extra money for debt pay-off goes towards your smallest debt. It can be super motivating if you have several debts that are smaller because you can knock them down quickly. Another benefit is that as you knock off smaller debts, your minimum monthly payments decrease. As you pay off each debt, your minimum payment for the first debt snowballs into the next lowest balance debt. If your smallest debt is not even remotely small-ish the benefits of this method will be less effective because you won’t have a quick win.

The avalanche method – the idea behind this method is that it will save you interest. The actual amount saved is obviously based on your specific numbers. With this debt payoff strategy, you pay all of your minimums and then any extra debt payments go toward your highest interest debt. This method can be very effective if you have high interest debts. The downside is that if your highest interest debt is a biggie, it can take you a long time before you pay it off, and therefore your minimum monthly payments don’t decrease for a while.

The emotional method – this method has you pay off the debts based on how emotional they are for you. They could be emotional because they are debts to family or friends, or because they are associated with a very emotional time in your life (divorce, death of loved one, job loss). Like with all the above methods, you cover the minimum payments on all your debts and then extra debt payments go towards your most emotional debt. The benefit of this method is that it can get you very passionate about knocking off your first debt, this can then help you see what is possible and keep you motivated as you tackle all of your debts. From a financial standpoint, this method may make no senses at all. Often times debt that you are very emotional about can be no or low interest, so you may pay more in interest, but having the emotional debt paid off could very well be worth it.

The highest payment method – in this method, you list your debts from highest to lowest monthly payment and start putting all of your extra debt payments toward the largest payment. The benefit with this method is that when you pay your debt off with the highest monthly payment, you free up cash each month, so you get some breathing room. If you have a very tight budget, this method can be helpful to give you some wiggle room.

Building a plan and know which method(s) you will use to pay off your debt is great, but having clear goals, and a support system in place will help you stay motivated and on track. If you have a trusted friend or family member, think about sharing your goals and plan with them. Who knows, you sharing could motivate them to build their own plan to pay off their debt!

An important step to paying off debt is to have a plan for your money each month! You need a budget to really focus on paying off debt. If you don’t have on yet, click HERE to get my free budget template!

If you know you need support and are not comfortable sharing with a loved one, financial coaching with me could be just what you need to tackle your debt quickly. Click HERE to schedule a free 20-minute Zoom call with me to learn more.

-       Sherry