When you have a ton of debt statements coming in every month and are having a hard time keeping track of all your little debts, it can be overwhelming. Pay off debts with the smallest balance first using the Snowball Method: Using this method, you pay off debts from smallest balance to largest balance regardless of interest rate.By doing it this way, and because you are saving more in interest, you will be able to pay off your debt more quickly. Using this method makes mathematical sense because you will pay less interest overall. You tackle the higher interest debt first, regardless of the balance. Pay off high-interest debt first using the Avalanche Method: Using this method, you pay off your debts from highest interest rate to lowest interest rate.Before I tell you what method I prefer, let's look at what the 2 methods are. There are a couple of different methods you can use when determining what debt you want to tackle first. Read: 5 Things That Will Help You Stick to a Grocery Budgetĭeciding on what debt you want to pay off first is the next huge step.These debts will most likely have the highest interest rates as well. This debt includes things like credit cards and small personal loans. Once you have a clear picture of your debt & depending on your priorities, you might decide to really only focus on the “bad” debt.
#WHICH BILLS TO PAY OFF FIRST FREE#
Take out a piece of paper, or use the FREE Debt List worksheet to write down who you owe, the amount you owe, the minimum payment for each debt obligation, the interest rate (list from highest to lowest), and your monthly due date. Make sure to go through past statements from your creditors so you can add these to your list as well. If you are relying only on your credit report to know what debt you have, be aware that it might not list all of your debt. Your credit report will list all of your debt obligations from companies that report to all 3 major credit bureaus. If you don't pay much attention to the debt you have, you can grab your free credit score here. There are a couple of ways you can do this. The first step in creating a plan to pay off debt is to calculate what debt you have, what you owe, and how much you owe. If you feel overwhelmed by your debt, are only making the minimum payments, and are seeing no results, then it's time to create a debt payoff plan. By creating this plan and following these steps, you will create a plan that is not only realistic to your lifestyle, but one that will fit within your personal budget as well. Trying to figure out the best way to pay it off can seem overwhelming when you are overloaded, especially with all the “get out of debt fast” schemes out there.Ī debt payoff plan includes figuring out what debt you have to pay, in what order you need to pay them, and how much you need to pay to eliminate them. If you have a large amount of debt, or have many sources of debt, creating a plan to pay it off is a huge step to living debt free.
If you want to eliminate debt, blindly making the minimum payment because you don't know where to start is one of the worst things you can do.
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