Step 4—Start from the top
Next, review your budget and determine beyond the minimum payments owed on each debt, how much more can you allocate per month for additional debt payments? Even if it’s just starting with an additional $100, this is a great start.
Now take a look at your list and work your way down. Add the entire additional amount to the debt with the highest interest rate, while paying the minimum amount on the rest. This debt reduction strategy — also known as the debt avalanche method — will save you the most money in interest payments over time.
Step 5—Celebrate your wins
Stay motivated and on track by taking time to celebrate milestones in paying off your debt. For example, treat yourself to a special “debt dinner” when you reach a debt payment goal. Set benchmarks for your plan, like quarterly goals, and then crush them!
Step 6—Budget and track your financial decisions
Continue to budget and review it regularly to ensure you are living within your means. This is where behavior management comes in and why it is important to address the root cause of your debts. More often than not, people focus their energy on paying off their debts but never address the root cause, and therefore find themselves right back in the same debt cycle they worked so hard to get out of.
Earning, saving, spending, and debt — your personal finances are emotional so it’s important to address your debt reduction with a holistic point of view.
Money is just as much an art as a science. By having a game plan in place to attack your debt, you can better navigate that fine line.
Financial advice for real people, by real people. You shouldn't need a degree to understand your money. Join Head of Education, Brittney Castro and Altruist mentors as they break down financial tips and strategies in a real way to help you finally understand how to achieve your financial goals faster.
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