How To Repay Debt [2 Strategies To Change The Game]

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Ahh debt… that super annoying pesky little thing that you can’t seem to get rid of. Every month goes by and you seem to pay it off, but somehow pick up more at the same time?! You know repaying debt and getting your credit score up are essential, because if you don't it can seriously affect so many areas of your life, but where do you start?!? Here are 2 strategies that change the game when it comes to how to repay debt today!

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Well today I wanted to answer a highly requested reader Q:

How the heck do you pay off debt?

What’s the best way to tackle debt repayment?

Where the F should you start when getting rid of your debt?

Today we are going to tackle two debt repayment methods:

The Snowball Method and The Debt Avalanche Method

Debt Avalanche Method:

You list out all of your debts by highest interest rate to lowest:

Store #2 credit card $300 — 25% interest rate
Different regular credit card $2,000 — 18% interest rate
Store #1 credit card $225 — 20% interest rate
Regular credit card $1,800 — 15% interest rate
Student loans $20,000 — 5% interest rate
Dentist $25 — No interest rate, just pay before it hits collections!

Again, you’re going to look at the monthly minimum payment on all of these accounts and that amount becomes a fixed expense in your budget. From there, you may want to put any excess money from your paycheck to the debt with the highest interest. This allows you to get to the principal (original debt) quicker rather than throwing money at interest – meaning you’ll pay less money over time. Sound great, right?

Well the issue with the Debt Avalanche Method is that it doesn’t take into account our emotions and motivation levels as human beings!

Stick with me – have you ever been to the gym for two weeks and felt great… but then you weren’t really seeing the results you thought you should? And people weren’t noticing like you hoped? So you start skipping the gym… and before you know it you’re not going at all!
Yeah – that tends to happen with the Debt Avalanche Method. Which is why so many people have flocked to The Snowball Method.

The Snowball Method:

Coined by Dave Ramsey, basically it has you list out you debts in order of smallest outstanding balance to largest. This does not take into account interest fees, type of credit (different types of credit have different impacts on your credit score) or anything else other than the total outstanding dollar amount.

List your debts from smallest balance to largest:

Dentist $25
Store #1 credit card $225
Store #2 credit card $300
Regular credit card $1,800
Different regular credit card $2,000
Student loans $20,000

So the pros of this method mean that you will be able to start crossing things off this list fairly quickly. Meaning you’ll see your progress, and in turn the internal rewards system (you know the one, like when you go to the gym and someone tells you you look amaze so you want to keep going to the gym) keeps you motivated to keep on going with your debt repayment! The biggest con is that you will pay more money over time.

It should also be noted with this method, that the minimum payment due on any of the above accounts is a fixed cost non-negotiable. Meaning we don’t ignore the minimum monthly payment of the regular credit cards in order to pay off Store #1 just because it’s higher on the list.

Which do I recommend?

Well, I’m not a financial advisor (here’s some insight from Lexington Law on Credit Card Payoff Strategies), and every person has a different financial situation, so what I typically tell people who ask me this, is to be really honest with yourself and your spending habits. If you’re someone who can easily stick to a long term goal without seeing progress, then the Avalanche method 100%. If you’re someone who tends to splurge on a new pair of shoes when you’re having a bad day, probably do The Snowball Method.

If you’re feeling up for it – and it isn’t too complicated for you – you can always try a hybrid! For example, start with your smallest outstanding balance first (Snowball) then jump to your highest interest rate (Avalanche) then maybe you tackle two of your smallest payments (Snowball), and then your next highest interest rate. Again, try to keep it simple and just know what works for you. Ultimately you'll pay less overtime with the Avalanche method, but you may loose motivation along the since it may take a little longer to finally cross one of your debts off the list (which is why people love the Debt Snowball, they can cross things off faster). If you’re still feeling stuck, talk to a financial professional like my friends over at Lexington Law who specialize in credit repair!

Final Note on Debt Repayment:

Alright, so like I mentioned above, the monthly minimum payment for each of your outstanding debts should be a fixed cost in your budget. From there, you’ll also want to automate those minimum payments so you never miss one!

These are just two debt repayment strategies. If you're looking for more tips on eliminating credit card debt, check out this article from Lexington LawAnd remember, as scary as it is to get started repairing your financial situation, paying off debt feels good!

Looking for more ways to up your money game? Grab TCM's Saving On A Budget Tips NOW!


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40 thoughts on “How To Repay Debt [2 Strategies To Change The Game]”

  1. Courtney Heathcock

    I LOVE this! So helpful and relevant! My husband and I have made our payment on credit cards, etc, a fixed cost in our budget and that has helped a LOT. And for us, it helps to keep in mind that debt only lasts as long as we let it. So it motivates us to make sure we’re paying it off so that we can get to a place where we don’t have any more.

  2. I’m glad you mentioned combining the methods. TBH the only thing that really made a difference in my debt was doubling and tripling my payments. I didn’t want to be paying debt off years from now so I sucked it up for 18 months and eliminated it all. It was mostly from school loans but I’ve taken the steps to ensure that I won’t ever be in that position again. ??

  3. These are such great tips! My hubby and I have been working super hard to pay down our debts–student debt is slowing starting to decrease (yay!) and we have just a tiny bit left of our wedding to pay off. I definitely want to write a list and get in gear to really get rid of this debt fast!!

  4. thesophiadiaries

    thanks so much for sharing these tips!!!! i will be needing it in the future for sure <3

  5. I totally needed this today as I’m trying to figure out how to repay my CC debt all while paying regular bills and saving for a house haha. Ugh finances drive me cray.

    1. Happy it was helpful Jenny! I have a follow up post on budgeting coming that may help with that! but this is a great place to start – make your minimum payments fixed costs in your budget, and then put any money left over towards either the snowball or avalanche method!

  6. I loved this so so much! It’s so helpful! Having debt is so scary and feels like SUCH a black hole. The gifs made me smile too.

    I love that you specifically listed out how to handle your debt payment, with two amazing strategies! Thank you!

  7. So good, Rachel! I always love your financial posts. My husband used Lexington Law before, but to fight off things that weren’t ours. (He’s the financial one in the relationship, haha) We’ve also used the Dave Ramsey’s method before in starting to conquer our student loan debt.

  8. My Veteran Woman Life

    These are really great tips! We started working down our debt by paying on the higher interest bills first. So far, so good!

  9. I started freelancing last year, so one of my goals for 2018 was to attend Financial Peace just to make sure I’m more intentional with budgeting now that I have multiple income streams coming in. We were just talking about the Snowball Method in class tonight. That’s definitely what I’d do if I were in a situation like that. I love checking things off a list and that keeps me more motivated to move forward. I like to start with smaller items on my to-do list, too, so that I start crossing things off my list right away.

  10. This is so relevant to my life right now haha. I just finished college and am now working full time, so I am really doing my best to pay off all the credit card debt I collected! Luckily I don’t have much, but I think if I did have a lot, the snowball method is definitely what I would be doing. I never really thought about different methods of tackling debt, so this is really interesting!

  11. These are great tips! When I was paying off all of my debt, I started with the smallest balance first (I needed some instant gratification-ha). Once it was paid off, I added that payment amount to the next smallest.

  12. These are all such great tips and strategies! I just try not to get into debt as much as possible. I only have two credit cards – one I don’t really touch ever and the other I only use to buy groceries and pay bills and pay it off right away so I can get the points 🙂

  13. Tiffany Stein Staples

    These tips are super helpful – especially if you know your personality and spending type. I like to put things on the list just to cross them off, so the snowball approach is the best for me. My husband, however, would err toward the avalanche method. Everyone is different and you have to find what works for all involved.

  14. These are such great tips! I have been doing the snowball method, but the interest charges have been killing me – definitely going to look into switching to the avalanche method instead!

  15. I am fortunate that aside from the mortgage, my only real debt is student loans. I try to pay off more than the minimum each month to speed things up! And while it doesn’t look like a lot month to month, I remember when I started and it was $50k, now down to $18k… so it’s there!

  16. Lyndsey Piccolino

    these are such great tips!! the debt snowball was super helpful for us to pay off all of our debt except for our house!

  17. It’s so important to know yourself well enough to know which payoff strategy will work best for you! It’s well-worth it to pursue the debt-free lifestyle!

  18. This was such awesome advice! And I absolutely love how detailed you are when you write and share this type of content because it helps A TON when you break it down. I love your suggestion on a hybrid method for paying off debt and think it would work well for people who have a lot of student loans. Thanks for sharing, girl!

  19. These are great tips!! I have student loans that I’ve been paying down and it’s such a good feeling – it’s hard to keep up with credit cards too LOL!

  20. Messy Cutting Board

    Great post love the great tips and both strategies!! I think I will start with the snow ball until I find out when and where I am moving too then once settled I will switch to the Avalanche, I am totally ready to be almost debt free, house, cars, I can deal with.

  21. We use the avalanche method and I agree that it is slow going. We have been using it for my car payment and then we are taking that and sending it to our mortgage. We don’t see the benefits very quickly, but we’d lucky we don’t have a lot of debt. I think if we did, I would choose the snowball method.

  22. This post should go into every college graduate’s inbox the day they graduate! Lol (you know, when you officially feel like you’re supposed to be an adult). I think writing everything out is the most important thing to do first. As such a visual person, it really puts things into perspective. I recently paid off my car (it was one of the last big things on our list) and it’s such a great feeling to have that accomplished. 🙂

  23. We used the Snowball method back in college and were able to pay off 6K in credit card debt in a few months! It was hard, but it was so worth it to not have that hanging over our heads!

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