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How to Prioritize Debt and Reach Your Financial Goals

By Liv

This post may contain affiliate links. Please read my disclosure policy here.

Check out these steps you need to take to prioritize and pay off your debt today!

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Find out the steps you need to take to prioritize and pay off your debt today!

Whether you have credit card debt, medical debt, car loans, student loans, or a fun combination of them all, you need to come up with a plan to pay it off.

Your plan must prioritize the debt so you know when and how much money to put towards each debt every month.

If you don’t have a prioritized list and a plan to pay your debts off, you’ll be running around like a chicken with its head cut off. You won’t know where to put your money and you’ll feel buried in debt without a way to escape. This is what happened to me when I was trying to pay off my six figure student loan debt. In the first few years after graduating college, I didn’t know how to prioritize my debt…all I knew was that I had to pay the bill each month (minimum payments), so that’s what I did. Finally, after reading tons of financial blogs, I discovered prioritizing my debt was the secret to becoming debt free. My debt melted away once I figured this out.

Step 1: Make paying off debt a priority

You need to truly commit to paying off debt, and make this a top priority in your life. You need to acknowledge that you’ll have to make sacrifices to achieve the ultimate goal of debt freedom.

Step 2: Make a list of all your debt

You need to know your starting point.

At a minimum, your list should include the name of your debt (could be your loan # or nickname for the debt), type of debt (student loan, credit card, car loan, etc), balance, interest rate, and payment due date (i.e. 14th of every month). You can also include the company that owns the debt and your username/password to log into the site.

I suggest getting a free credit report (from any/all of the three agencies: Experian, Transunion, or Equifax) to make sure that your list is complete and you haven’t forgotten about a debt. That wouldn’t be a fun surprise when your halfway into your journey!

Step 3: If you have a “high-stress” debt, pay it off first

If you have one debt that is causing you an immense amount of stress and anxiety, just pay it off first. There is no need for this to be hanging over your head throughout the rest of your debt payoff journey.

You might have a personal loan that is ruining your relationship with your family or friends. Maybe you have lingering medical debt and are getting calls 3 times a day causing you anxiety.

My high-stress debt was a small student loan that I didn’t realize I took out. I felt so stupid for not realizing I owed this money and I just wanted the loan to disappear and my mistake to be in the past. I worked overtime for three months to pay off this debt. When I was free and clear of the debt, I felt so good!

Step 4: Order your debt using the Debt Snowball Method or the Debt Avalanche Method

You have two choice here: the Debt Snowball Method or the Debt Avalanche Method. I suggest the Debt Snowball Method, but first let me explain both strategies.

Using the Debt Snowball Method, you list your debts from smallest balance to largest balance. You start putting all your extra money towards the lowest balance loan until it’s paid off. Then, you take you start paying off the second lowest balance (using any extra money, and using the minimum payment that used to go to the lowest balance loan). Then you pay your third lowest balance, fourth lowest…and so on until you’ve paid off your highest balance loan.

Using the Debt Avalanche Method, you list your debts form largest interest rate to smallest interest rate. You start putting all your extra money towards the debt with the largest interest rate. Once that is paid off, you pay of the next largest interest rate, and so on.

I suggest using the Snowball Method because you pay off those smaller debts fast, and those quick wins are very encouraging. Seeing entire loans disappear will give you a sense of accomplishment and you’ll stay motivated. You also get to use the minimum payments from the loans you just paid off to tackle your next debt.

If you are using the Debt Snowball Method, I created helpful printables to jump-start your debt-free journey! Just enter your information in the box below and you’ll receive the first printable (which will help you prioritize your debt) in your inbox immediately.

3 Printables over 3 Days!

Conquer your debt with these free printables. There is no day like today to get your debt snowball rolling...

Success! Check your email for your first printable.

Next, pay off debt!

Now that you have prioritized your debt, start paying it off! Make sure to pay the minimum due on all debts. Then, any extra money you have put towards your lowest balance debt (if using the Snowball Method) or lowest interest rate debt (if using the Avalanche Method).

How did you prioritize your debt? Did you have a debt that you hated so much you prioritized it first?

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Tips to Ditch Debt

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Welcome, I'm Liv!

Wife. Engineer. Blogger.
Passionate about personal finance.
Your cheerleader for paying off debt.
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