To use the worksheet, you’ll need copies of your bills and interest payment information. You can also use this bill calendar to keep all that information in one place as you plan to tackle your debt.
There are two basic strategies that can help you reduce debt: the highest interest rate method and the snowball method.
Highest interest rate method
This approach focuses on your debts like credit card, medical, and student loan debts with the highest rate of interest. The goal is to pay off the highest interest rate debt as quickly as possible, because it is costing you the most. While it may not feel like you’re making progress, this method will help you eliminate your costliest debts first—which can save you money in the long run.
This approach focuses on your smallest debt. The goal is to get rid it as soon as possible. You keep on making the minimum payments on all of your debts, and you put any extra funds you have toward paying off the smallest debt. This will help you pay it off sooner.
Once you’ve paid one smaller debt in full, dedicate that freed up money to the next smallest debt. This way, you create a “snowball” of payments as you eliminate each debt. Unlike the higher interest rate method, you’ll see progress quickly as you pay off smaller debts. However, you may end up paying more in the long run, as you won’t be focusing on the larger or more costly debts.
Ready to get started?
If you are motivated by saving the most money while still paying off your debts, the highest interest rate method might be the right choice for you. However, if you are motivated by seeing progress quickly, then you may want to consider the snowball method. Choose the strategy that’s best for your situation and put it into action.
Take control of your finances
The Get a Handle on Debt series gives you tools to manage your debt by budgeting smarter, paying your bills on time, tracking your spending, paying down existing debts, and earning extra income. You can also get money management strategies sent directly to your inbox by signing up for our Get a Handle on Debt boot camp.