You’ve decided to pay off your debt. But, you don’t know where to start. Debt can be so daunting and that is why you are stuck. This is your year to start paying off your debt. Don’t be overwhelmed by people that have paid off a lot of debt in a small amount of time. Once you start, you might be able to gain momentum and pay off your debt faster than you planned. But, you need to start where you are.
- Know where you are. How much is the total amount of your minimum debt payments? Minimum payments are the first thing you pay each month. Collect all of your debt information. What is your balance on each loan, interest rate, payment and payoff time? How much extra each month could you make in debt payments? This doesn’t need to be a lot of money. You start where you are and stay realistic about how much you can afford. https://www.nerdwallet.com/blog/finance/debt-snowball-calculator/
- Make a plan. I added a link to a great debt snowball calculator. Let’s talk about debt snowball and debt avalanche. A debt snowball means that you start with your debt with the current lowest balance and pay all extra amounts towards that debt included with your monthly minimum. A debt avalanche means that you start with your debt with the highest interest rate and pay the extra amounts toward that debt included with your monthly minimum. After you pay off your first debt, you add the payment amount to the next debt. If you’re doing the debt snowball, you will move to the next lowest balance. If you’re doing the debt avalanche, you will move to the next highest interest rate. Which one is right for you? The debt snowball and debt avalanche generally only make a difference of a few months. I calculated that if I start with snowball, I would pay off debt in 26 months and save $5,432 in interest. If I start with the avalanche, I would pay off debt in 25 months and save $5,474 in interest. On nerd wallet, you can calculate both once you have all of your debt in, you can see what would be the difference for you. So, the point is it doesn’t really matter. But, the snowball can fill amazing because you could pay off one or two debts within a year. That motivates you because you are paying it off.
- Track. Track your debts. It feels so good to mark it off on a schedule. There are many debt snowball trackers. If you search for one, you will find one that works for you. I simply print off something similar to this and highlight the box as I pay off each set of $500. Then, I mark the date when I finish paying off each loan.
You can do this. Paying off debt feels so great. Each debt that we paid off, felt amazing. And, this last debt we are paying a large amount of money towards each month doesn’t feel nearly as overwhelming as before we started. It is so important to start where you are and just start.
I will help you evaluate your debts and budget. I can help you make a plan to get started and moving forward on your debt journey. Click on my contact page today.