The holiday season is wrapping up and some of y’all are scared to even look at your credit card statements because you might have done a little too much shopping or you just have debt that has been lingering and you’ve never attempted to pay it. Well today I want to talk about some strategies you can use to pay down that debt. Depending on how much debt you have this is not going to be an overnight process. It’s going to take patience and discipline but if you stick to it you’ll be able to say ALL of your debts are paid in full.

First, you’ll want to take a serious look at your monthly income and expenses so that you can make a budget. I know a lot of times people don’t open the mail and ignore their debt but guess what? It’s not going to go away just because you ignore it. If this applies to you, you’re going to have to bite the bullet and just do it. Don’t get overwhelmed. The hardest part is facing the debt but once you start budgeting and planning how you are going to attack it you’ll feel much more at ease. Budgeting may be boring to some and a lot of people think they can just do the math in their heads but when you write down your monthly income and expenses you get to see all the little things you spend on that you wouldn’t consider otherwise. Things like the $2 you spend on a snack and a soda at the vending machine every day at work or the $3 breakfast sandwich you buy every morning. If you add up those two things that’s $100/month right there. It will help you see what things you can cut out and put towards paying down your debt.

Next, you should determine which debt to focus on first. There are two trains of thought when it comes to this.

Method A – Focus on paying off your debt with the highest interest rate first. Every month make a large payment towards your highest interest debt while paying slightly more than the minimum due on your other accounts. Then once the highest interest rate account is paid off, focus on the next highest interest rate debt the same way and continue until all your debt is paid.

Method B – Focus on paying off your debt with the lowest balance first. Every month make a large payment towards your lowest balance debt while paying slightly more than the minimum due on your other accounts. Then once the lowest balance account is paid off, focus on the next lowest balance debt the same way and continue until all your debt is paid.

If you go with Method A, over the long run you will pay less in interest payments but it may feel like you are not making any progress because it might take a while to pay off the first couple of accounts. If you go with method B you get a feeling of progress and it can give you some momentum to keep going as you start paying off balances in full quicker but you will likely pay more in interest over the long run.

So which is better? Technically speaking, method A is better but some people may prefer method B because they like seeing the results quicker and it keeps them going. With that being said, pick the method that works best for you and be aggressive with it. Check out the post on Ways to Make Extra Money