Debt Payoff Methods
How to Prioritize Debt Payoff
Different Strategies for Different Personalities
One of the hardest parts of paying off debt is picking a plan of attack that'll really work for you. There's SO much information online about debt payoff, and it can get pretty overwhelming. But what's right for YOU?
Focus Your Energy
First things first: No matter which strategy you follow, you’ll have the best luck if you focus on one debt item at a time. This can be scary, because we usually try and tackle everything at the same time by splitting payments across all debt. But most of the time, that just results in frustration and shame, because you're not making real progress on any of them.
So whatever strategy you use, whatever debt item is first on the list...make that the target of your energy and your dollars.
Here are my top three debt payoff strategies — and who they’re best suited for
1. Pay the highest interest debt first
This is for you if you are really analytically-minded, and just don't want to pay an extra cent of interest if you can avoid it. So start with the highest APR debt and work your way down.
2. Pay the lowest balance debt first
This is for you if you want some quick wins, will feel better with some things off your plate, and have a bunch of different debt items. Start with the lowest balance debt. Once you get that cleared away you can tackle the higher balances, and by that point you'll have tons of momentum from your early wins.
3. Pay the most hated debt first
This is for you if your debt has come from circumstances or events in your life that you just want to be FINISHED with. This could be divorce, illness, an accident, or so on. You've moved past it, and you don't want the debt hanging around as a reminder. So pay what you hate first, and then get to the rest later.
Which one’s right for you?
You want to pick whichever strategy will motivate you the most - because that's what will work the best. That's what will get your debt paid off the fastest. All of them work out pretty similarly mathematically, so it's just about picking which plan will serve you the best.