Let’s NOT sugar coat this! You have some debt and I get the feeling that you are tired of it, right? But where do you start? If you’re wondering which debt do I pay first or am I paying my debt off the best way, you are in the right place because I have an amazing tool that will help you!
FIND YOUR NUMBERS
The first thing you have to do is write down your debt, ALL of them! If you have a loan from a family member or something without interest, write it down because it’s included.
Make sure to name the debt, write down the current balance, the interest rate, and the minimum payment. But to help you with this part, I have created a debt form that you can use to keep all the numbers organized.
SIDE NOTE: To access, the file plus the FREE debt calculator (talking about that soon), you must be an email subscriber.
Here’s what the debt form looks like:
HAVE A METHOD
There are many different ways to pay off debt but the method we will use will build upon the next. It’s commonly known as the “debt snowball” or “debt avalanche”. The idea is like building a snowball or how an avalanche grows. Every time a snowball rolls in the snow it picks up more and more snow, getting bigger with every roll. This is what your debt payment will do, it will get bigger and bigger each time you pay off a debt.
So every month you will pay the minimum payment on all your debts. Any extra dollars you have will go to your first debt you want to pay off until that debt is paid in full. Once that happens you roll to the next debt, paying the minimum payment plus the other debts payment and the extra dollars; until again the debt is paid in full too. The cycle keeps going until all of your debts are paid in full.
This is the method you will USE.
Now let’s answer that question which debt do I pay first? Is it the lowest balance or maybe the highest interest rate? Maybe your own thing is the right answer?
Let’s see which one works best for you, aka: saves you the most money in interest! Here are the different strategies you need to pick from.
- the lowest amount first (also know as “the snowball method”)
- the highest amount first
- the highest interest first (also know as “the avalanche method”)
- your own thing
But you probably now these strategies and that’s the problem, which one? To make the deciding factor easier how about you use a debt calculator?
With this calculator, you can enter all your debts, pick a strategy, and see how long and what amount of interest you will pay.
Here’s a video on how to use this debt calculator.
PS. There are two different files one for PC & one for MAC, so make sure you download the right one! Also, you can use Google Drive to upload any of the files to use.
Now that you have the tool to help you know what debt to pay first, I want to talk about two other tips:
- USE A BUDGET – If you want to really pay off your debt you will need to create a budget and stick with it. This is the best way to manage your money plus there is a budget workbook to help you out with that.
- HAVE A RAINY DAY FUND – Life happens and sometimes things don’t happen our way. You should have a small fund to help with those things.
WHICH DEBT DO I PAY FIRST?
Well, I hope this helped you answer this question and you can start paying off your debt with the strategy that works best for you. Plus if your questions can I really pay off all my debt, be sure to read this article to help you answer that question.
Best of luck to you and remember YOU CAN DO THIS!!!