Debt paydown strategies from a CPFC®
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Fast facts about debt:
Americans owe $986 billion on credit cards, $12 trillion on mortgages, almost $2 trillion on vehicles and $1.6 trillion on student loans
The average american has over 100K in debt, with credit cards accounting for most of that
Currently, the average APR on credit cards is over 22%
So, when it comes to debt, how do you decide what to pay first, and in what order? Plenty of experts will tell you the exact right way to strategically pay off your debt, but as a Certified Personal Finance Counselor®, this is what I have to say on the subject:
The right strategy is the one that makes the most sense for YOUR life and the way YOUR brain works. Paying off debt is a long process, so if you can stick with it, then that is the right choice.
Here are some things to consider, depending on how your brain is wired:
If you are all about the math, start with the highest interest rate first. You will pay less in interest overall, but it may take you longer.
If you need to see progress quickly to keep from being discouraged, start with the smallest debt first. The overall number will shift slowly, but being able to cross debts off the list may help you gain momentum and feel more motivated to stick with it.
There’s no crime in switching back and forth between approaches if you want to see what feels best to you!
Exception: tax debt. Take care of that shit FIRST. I don’t need to tell you how absolutely miserable the government can make your life if you owe them money.
Secured debt (like your car payment or mortgage) should take priority over unsecured debt if you are having trouble covering the payments and you are at risk of default. Losing your home or car creates a whole new set of problems and jeopardizes your whole life structure.
Debt may feel like a big scarlet letter, but you don’t have to be ashamed and overwhelmed. You DON’T have to go it alone! If you need guidance dealing with your business or personal debt, click the link in our bio and reach out. We are here to be your partner in achieving your financial goals!
