Do you feel like you’re never going to pay off your debt? No matter how hard you try, it seems like the balance never gets smaller?

About two years ago, just my credit card debt totaled over $16,000! Even though I was paying more than the minimums, the total never seemed to budge.

Already having a car loan and a hefty mortgage (gotta love property taxes), the credit card debt started feeling pretty uncomfortable at the $10k mark.

By the time it had ballooned to $16K, I was feeling desperate. I needed to get out of debt.

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1. Focus on one debt at a time.

When you have extra money to pay off your debt, it’s tempting pay a little extra on each of your debts.

Instead of setting a (seemingly impossible) goal of paying off all your debt, try breaking your overall goal into smaller, more attainable goals.

For me, that big goal of $16K was too overwhelming, so I broke it down by card. The first goal was to pay off a card with a $1k balance. The smaller goal was easier to reach and didn’t feel as unattainable as the total goal did.

When you spread out extra payments, the results are hard to see. An extra $20 or $50 on each debt isn’t as noticeable as $500 paid on one debt. You’ll be motivated when you see real progress happening on your goals. And when you’re motivated, you’ll want to keep the progress going!

Choose only one debt to apply any extra payments to. While you are focusing on one debt, pay only the minimum for all other debts.

I had been applying little extra payments to several different cards. It was no wonder the balances never seemed to change. Once I started applying all the extra money to the same card, I saw the balance of that card drop significantly each month. Yeah for progress!

Debt Snowball vs. Debt Avalanche

When it comes to focusing on debt at a time, there are two schools of thought in the personal finance community. One group of people are avid fans of a method known as the “Debt Snowball.” Another group of people would say that the “Debt Avalanche” method is far superior.

Let’s quickly explain both strategies and then we’ll discuss the pros and cons of both.

The Debt Snowball

When using the Debt Snowball strategy, you focus on the debt with the smallest dollar amount first, regardless of interest rate. For example, let’s say your debt situation looks like this:

Credit Card #1 – $5,300 (19% interest rate)

Credit Card #2 – $2,700 (14% interest rate)

Credit Card #4 – $350 (12% interest rate)

Car Loan – $7,000 (2% interest rate)

Hospital Bill – $1,800 (5% interest)

With the Debt Snowball, if you have 500 extra dollars to pay towards debt, you put all $500 towards the smallest debt — in this case, Credit Card #4, and then continue on in ascending order. As you pay off a debt, you can take the minimum payment you were previously making towards it each and month and apply that amount to your next debt.

In our example above, you would pay off Credit Card #4 in one month. If Credit Card #4 had a minimum payment of $50, you could then begin paying $550 each month towards Credit Card $2.

At that rate, Credit Card $2 would be paid off in 5 months. So in 6 months, you would have paid off 2 of your credit cards. That would feel pretty good, right?

And therein lies the secret behind the Debt Snowball — it’s psychologically encouraging to experience quick wins. When you see real, tangible early progress, it gives you momentum to keep kicking your debt in the butt.

The Debt Avalanche.

With the Debt Avalanche, instead of working from smallest to largest, you start with the debt that has the highest interest rate and you work your way down.

If the Debt Snowball people are all about momentum, the Debt Avalanche people are all about math. They want everyone to know that you will pay off your debt sooner and you will spend less in interest by using the Debt Avalanche method.

With the Debt Avalanche method, you would start with Credit Card #1, since it has the highest interest rate (19%), before moving to Credit Card #2 (14%), and so on.

Which Method Should You Use?

Despite the passionate appeals from supporters of either side, for most situations, the actual difference in your results using one method over the other is slight. I tend to lean towards the Debt Snowball method, despite the fact that the math lies in favor of the Debt Avalanche.

Why? Because let’s be honest — if you are needing a plan to get out of debt in the first place, there’s a good chance your primary problem is motivation.

Many of the people that I hear supporting the Debt Avalanche are personal finance nerds like me who shop savings account interest rates and get all excited about shaving the expense ratio on their investment accounts by .25%.

But most people who are drowning in debt didn’t get there because they were that detail-oriented about their finances. For most people, the key to getting out of debt is to just find a method that you won’t get discouraged about and give up on.

Is that to say you shouldn’t use the Debt Avalanche? Not at all!

If the idea of saving some money on interest gets you stoked and would help keep you motivated, then, by all means, use it!

2. Speed up your debt payoff by making extra cash.

One of the easiest ways to start seeing real progress on your debt payoff is to find extra income.

One day of the biggest reasons I was so successful in paying off our credit card debt was I went back to work full time. While I’m not saying you need to quit being a stay-at-home mom, you may want to think about how badly you want to get out of your current situation.

Need some ideas? Check out these ways you can make money. There are ideas for every situation: from making money at home to how to get extra cash when you’re already employed.

3. Put any extra cash toward debt.

In addition to whatever you have budgeted to your debt payoff goal, put any extra or unexpected income towards debt.

Some examples:

  • Rebates or refund checks
  • Mileage reimbursements from your employer
  • Bonuses
  • Tax refunds

If you are paid weekly or biweekly, there will be months where you get an extra check. You can quickly pay off debt when you are applying an entire paycheck towards your debt!

If you pay cash for purchases, don’t spend the change. Instead, accumulate any pocket change then deposit it in your bank every month or two.

When you make the deposit, turn around and send that amount as a payment to your debt.

Twice a year, I got an extra paycheck thanks to the timing of paydays. Those months with the extra paycheck are a great (sneaky) way to boost your debt payoff.

I won’t lie, it was hard to not want to treat myself when I got a big tax refund check after eFiling. Watching the credit card balance go down by several thousand in one statement period? Totally worth it!

4. Make it automatic.

If you are making extra budgeted payments toward debt, set it up on auto-pay. You’ll be less likely to forget a payment or worry about the money getting spent elsewhere just because you have it.

When I first started paying off debt, I wasn’t as diligent about sending in those extra payments. Once I set up the additional payments through my bill pay,  those payments started happening every month. No more forgetting!

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Paying off debt is not easy.

Over the course of a year, I managed to pay off all my credit card debt. All $16,000 worth. It wasn’t easy but it was totally worth it!

You can do it too!

Focus on one debt at a time and set small goals so you can be motivated with your progress. To really speed up your repayment, consider additional ways to earn money and apply any extra cash to your debts.

With these tips, you will start to see your balances decrease and your debts paid off sooner.

How soon would you like to be out of debt? Let me know how you are going to make that happen on Facebook or Twitter!