How to Pay off Debt the Smart Way

Debt isn’t always a bad thing but having a lot of it can be burdensome and it can hurt your financial future.

If debt is getting you down, know you’re not alone. 80% of Americans are in debt and the average consumer owes $12,687 to creditors as of January 2020, according to the Federal Reserve.

So, are you looking for smart ways to pay down your debt? Check out the steps in this post.

Step #1: Figure Out How Much You Owe

The first step is to make a complete assessment of your debt. Gather all your latest account statements and then make a spreadsheet with columns for creditor, amount owed, due date, interest rate and minimum payments.

Once you gain clarity on how much you owe, you can move on to deciding how you’ll repay the debt.

Step #2: Decide Which Repayment Method You’ll Use

There are two popular methods for paying off debt and either one can be effective if you stick to it.

  • Debt Avalanche Method: This way involves arranging your debt from highest interest to lowest. To do this method, pay the most money toward your highest interest debt while making minimum payments on the other accounts.

When you pay off the highest interest account, apply the payment to the next creditor on the list.

This method is ideal for the disciplined, detail-oriented person.

  • Debt Snowball Method: Personal finance expert, Dave Ramsey, popularized the Debt Snowball repayment plan for people who need small wins along the way.

With this method, you pay off the smallest amount of debt first, while making minimum payments on all other accounts. After you pay the smallest debt off, you can remove it from you list and start focusing on the next account on the list.

The Debt Snowball method can be highly motivating, taking one small win at a time. Choose this plan if you think you’ll need motivation along your debt repayment journey.

Step #3: Stick to the Plan

This step is crucial. In order to keep paying down your debt, you must stick to whichever repayment plan you decided above.

Make a budget for yourself that includes all of your income, expenses and debt amounts. Then stick to your plan to pay off all your debt.

Always apply payments to the next creditor on your list as you pay off each account and never “pocket” the money.

Keep going and don’t stop until you repay all debt. Then pop open the bubbly (or a soda, sparkling cider, if that’s your preference) and celebrate.


Debt can be burdensome, and it can make it hard to get ahead financially. To pay down debt the smart way, first assess all the money you owe and make a spreadsheet. Then, choose a repayment plan. After that, stick to your chosen financial plan until the debt is paid in full. Want more personal finance tips and wisdom to get ahead?  Click here.


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1 Comment

  • Anita Toliver Reply

    Interesting! Thank you!!

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