The Best Way to Get Rid of Debt (This is How You Do It!)

Confused by debt payoff strategies? Not anymore!

Author: Kari Lorz, Certified Financial Education Instructor

Author: Kari Lorz – Certified Financial Education Instructor

Tell me, how would you feel if you were able to get out of debt?

Relieved? You bet! Damn proud of yourself? I’ll be cheering you on too!

Let’s go through the two main debt payoff strategies and figure out the best way to get rid of debt for you! After reading this post, you’ll know which method to choose and have the tools to get started today!

which is the best debt payoff strategy for me?

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Top two debt repayment strategies

There are many ways to get out of debt, but we’re going to focus on the two best ways to get rid of debt; the debt avalanche method and the debt snowball method. You may be thinking, “Don’t I just pay my debts? Why do I need a strategy?”

Yes, you pay your debts, but you absolutely need a strategy so you pay your debts off effectively (aka fast & furious). Without a debt repayment plan, you may flounder, lose traction, and ultimately give up. That’s precisely what we don’t want!

With whatever strategy you choose, you need to keep track of everything. This printable debt payoff tracker works for both of the debt payoff strategies.

Using the debt avalanche method for debt payoff

This strategy makes the most sense logically; in a nutshell, you pay your debts off according to which has the highest interest rate. This method saves you the most money overall (compared to the debt snowball). Yet, even though this saves you the most money, it may not be right for you.

Who is the debt avalanche strategy best for?

This debt repayment plan is best for someone who has medical debt or a few large loans not related to overzealous spending habits. What I mean is that if you are in debt due to unfortunate experiences and not due to bad spending habits, this method would work well. As you are less likely to get yourself back into debt. (This sounds weird, I do realize, but it will make more sense once we go through the debt snowball method).

Debt avalanche example

I love’s online debt payoff calculator, so easy to use! Let’s say that someone has $2,500 a month to put towards their debt, and they have the following debt amounts…

  • credit card bill #1: $6,750 balance at 19% interest
  • credit card bill #2: $4,250 balance at 24% interest
  • credit card bill #3: $11,600 balance at 27% interest
  • car loan: $13,500 at 5.15% for a 36 month used car loan
  • personal loan of $8,400 balance at 18% interest rate
  • *credit card minimum payment calculated at a 3.5% of total balance (the national average is 2-5%). Car loan minimum payment is $530 for new vehicles and $381 for a used car – 2018 figures, according to NerdWallet.

Here’s how it plays out with the debt avalanche method if you start this month (February 2021). Remember you’re paying the high interest debt first, then work down to the accounts with lower interest rates.

Debt Avalanche example

As you can see, you’ll end up paying $8,457 in interest, and you’ll be done in 25 months (that is if you don’t put any more charges on the accounts). Also, take a look at the figures if you only pay the minimum payments (left column), you’ll end up paying $14,523 in interest, and it will take you 42 months!

Shut. The. Front. Door!

Yeah, that stinks! It’s the interest that really traps people into this vicious cycle of not being able to dig themselves out from under your debt. That’s why the debt avalanche method makes the most sense for you.

If you want to dig deeper into interest rates, check out my post here on how interest rates could be crushing you (and how to get out from under it!).

BUT the debt avalanche may not be right for you! Let’s take a look at the other debt payoff plan, the debt snowball method.

Using the debt snowball method for debt payoff

This is the method that I recommend, as handling your money is a mental game, an emotional game, so to speak. If you have an emotional situation, you need to come at it from an equally emotional solution (while debt avalanche is a logical solution).

You are probably familiar with this method in Baby Step 2, from getting out of debt guru; Dave Ramsey recommends this debt payoff plan. (Now I know D.R. might not be your cup of tea, he’s outspoken, condescending, and kind of a jerk.) Yet, his success rates cannot be argued with. He’s taken tens of thousands of people and turned their lives around, for which they will forever be changed and grateful).

Getting out of debt with this method focuses on quick wins and momentum to carry you through the entire process. Because let’s face it if we make this significant change, and then we don’t see results fairly quickly, we get discouraged and give up. It’s human nature. So with this method for getting out of debt, you pay off the smallest debt balance first, and then work your way up to the next lowest credit card balance (with no regard to interest rates).

Yes, you will spend more money on interest overall, yet you are much more likely to stick with the plan and finish off the debt! Because you get quicker wins, and it gains momentum quickly. This is why I recommend it! I also recommend checking out some of Dave Ramsey’s books, he has quite a few that will help on your personal finance journey.

Who is the debt snowball method good for?

This method for getting out of debt is best for those who have lots of smaller loans/bills due to overspending with their shopping habits. Now, don’t twist my words and think that those with this type of debt are “better” or “worse” than those with medical debt.

Everyone is an individual; we all have our own struggles, problems, attitudes, skills, and talents. No one (and I repeat no one) is better; we’re just different. My skill set could be your downfall and vice versa.

Debt snowball example

Let’s take the same debts as the debt avalanche example above and use them with the snowball method and see where we end up.

Debt Snowball example

As you can see, you’ll end up paying $9,048 in interest ($591 more in interest than the avalanche method), and you’ll be done in 25 months (that is if you don’t put any more charges on the accounts). Also, take a look at the figures if you only pay the minimum payments(left column), you’ll end up paying $14,519 in interest, and it will take you 42 months! 

As you can see, the difference in the amount paid is negligible ($621 in total). BUT where the magic is in the time that you pay off your first debt. 17 months with debt avalanche and then nine months with the debt snowball!

What would motivate you more? I bet it would be the weight of completely shedding your first debt!

My favorite quote is DR talking to himself about if debt avalanche is the smarter way to go…

Person 1: Well, Dave, would it not be mathematically proper to pay off the highest interest rate first?
Dave: Yes, it would. And if we were doing math, we wouldn’t have credit card debt. This is about behavior modification.

Dave Ramsey

Whichever way you choose just make sure you stick to that one method (no bouncing around) and that you keep track of each dollar you pay off! You need to stay focused and motivated! If you’re a visual person then here are some debt payoff trackers to help keep you going strong!

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America the great (debt pit)

If you’ve heard that everyone is in debt, and believed it, you’d be mostly right. A lot of people are in debt, and the figure is rising (almost) every year.

The Balance reported from a Federal Reserve report on consumer debt that “In November 2019, U.S. consumer debt rose 3.6% to $4.17 trillion. That surpassed last month’s record of $4.16 trillion. Of this, $3.09 trillion was non-revolving debt (education, auto loans), and it rose 5.8%. In September 2019, school debt totaled $1.635 trillion, and auto loans were $1.189 trillion. Credit card debt totaled $1.086 trillion, actually a decrease from 2008’s $1.02 record-setting figure.”

Why are American’s in so much debt?

1. Credit cards are easy to get

You probably get tons of junk mail with credit card offers every day! Hurrah! You’ve been pre-approved! Ugh! Firstly, you should opt out of these offers, filling this out won’t get rid of all junk mail, but it will get rid of a significant amount. Yet, online offers are easy to get as well.

Some credit card issuers aren’t picky with your credit rating; they’ll give you a card, but with a crazy high interest! Be sure that you have a full grasp of how your credit card interest is calculated. Getting caught in paying only the minimum payment could have drastic consequences in the long run.

That’s why it’s important to pick the right way to spend money (for you). If you’re great with cash then do that. If credit makes it easier for you to stay on budget then do that!

If you’re looking to dump your credit card debt then grab this fun printable credit card payoff tracker!

Consumer debt is one of the most prevalent in society, mostly because it’s so easy to swipe. If you’re trying to nix the spending then be sure to check out How to Actually Stop Overspending (Once and For All)

2. Bankruptcy is harder to file

Due to the Bankruptcy Protection Act of 2005, it made it harder for Americans to file for Chapter 7 bankruptcy. So people either filed for Chapter 13 (debt schedule reorganization), aka, they carried their debt for longer. To see a full distinction between these two types of bankruptcy, see Nolo, which does a great job of walking you through the process and requirements.

3. Formal financial education is limited or nonexistent in the U.S.

Tell me, did you take a personal finance class in H.S.? Probably not, as it isn’t a requirement in our school system. The closest schools get to understanding financial practices is in economics class.

Now, some headway is being made in our schools, but not the sweeping reform that we need. Tell me, do you think it would be more beneficial for kids to learn algebra or how to balance their bank account? I think you know my answer.

If you want to learn more about how to better manage your money, read my post on financial literacy and you can how I started learning with just one hour a day!

4. Ever rising cost of medical care

Ask anyone you know, and they will all say that the cost of their medical insurance is crazy high! Yet, the cost of going without is much worse if something terrible should happen to you or someone in your family.

In looking online for the average cost of healthcare, the amounts varied wildly, so much so that I’m not confident in putting up a dollar figure. I looked at nine different (well respected) sites; costs ranged from $5,000 per person to $20,000 per person. Crazy huh!

So let’s just take it that we spend a lot, and medical debt is now the leading cause of bankruptcies. According to CNBC, “A study from academic researchers found that 66.5% of all bankruptcies were tied to medical issues -either because of high costs for care or time out of work.”

5. Life expenses have surpassed income levels

Things are more expensive now, and incomes haven’t risen comparatively. Think of the cost of college. According to U.S. News, the average price of in-state tuition is $10,116 for the 2019-2020 school year. Go ahead and add on books and supplies to that amount too! That amount will increase an average of 3-4% each year as well. (Let’s not forget that student loans are not dismissable in bankruptcy court.)

price of college

Why should I get out of debt?

With so many of us being in debt, and it being the unspoken normal; why should we work so hard to get out of debt? Honestly, it’s a fair question. So many of us have given into the idea that they will always be in debt, it’s just the way things are. They’ve realized that they will be working until the day they die, with no relief in sight.

People’s resignation to this honestly breaks my heart. It’s so sad that they’re essentially hopeless. If this is you, then just let me hug you. However, know that after that, we are getting to work on a plan of action for you!

The weight of debt is the hardest on our stress levels. Yes, there are many more seemingly “important” factors, like being denied a home loan due to your credit score, or not getting into college because you cannot afford it. Yet, I feel that debt causes the most damage to our mental and physical health and wellbeing.

How does your debt make you feel? I bet not happy, and I bet you think of it often. The weight of it. How would you feel if it was gone? Knowing that no one could take your car/house/possessions away from you. Relief flooding through your veins until your fingers tingled.

With that being said, dumping your debt is our #1 SMART financial goal that we laid in your “must do” list of adulting!

Another important factor for parents to consider is the emotional and developmental toll on their children. If money is either feast or famine your kids will absolutely pick up on the stress, not to mention any arguing between parents. I wrote a whole piece about the developmental effects that happen when kids are in a financially unstable household.

If you need some wise words to help clinch it for you then check out the 50 top quotes on debt, and you’ll be surprised with how long people have rallied against debt (Ben Franklin and Shakespeare are both quoted)! Or if you need a way to reframe your debt then check out 250+ wealth affirmations to help you gain a new perspective!

How does this credit reporting work?

Your credit record is a very important piece of your financial health. What happens is that you open a credit account, you pay it or you don’t pay it. Then that action impacts your credit report, and then that influences your credit score.

Then other possible lenders use your credit score and your credit report to decide if they will loan you money. It’s a financial circle, where everything influences everything else down the line.

For example, your credit report will get pulled if you want to buy a new iPhone with a monthly payment, or if you want to move into a new apartment building, or if you need to get a car (with payments). If your credit report and score are low enough you could be denied or be charged a crazy high-interest rate.

How to get out of debt with debt consolidation

Debt consolidation is a form of a debt relief program, also called a debt management plan, which is a plan that makes repayments more manageable. A “debt consolidation loan rolls high-interest debts, such as credit card bills, into a single, lower-interest payment. It can reduce your total debt and reorganize it so you pay it off faster”.

Nerdwallet recommends that “If you’re dealing with a manageable amount of debt and just want to reorganize multiple bills with different interest rates, payments, and due dates, debt consolidation is a sound approach you can tackle on your own.”

People usually do this by getting a single personal loan or transferring the debt to a lower interest rate, such as a 0% interest credit card (which is 0% for a limited time).

This is a strategic debt payoff strategy that I have used, but I do so with lots of calculations and double & triple checking. I used the magic of a 0% interest credit card to rack up debt! Say what? Yup, I used it to get married.

When you get married, you have to make quite a few large deposits to secure a venue, caterer, florist, photographer, and more. If you don’t “buy” in now, you risk their availability later on. So I knew that we could “afford it” but not all at once. I do believe it was an 18 month 0% introductory period, and we did pay it all off within that period.

If you don’t pay off the entire balance within the introductory period, you risk paying a whole helluva lot more! You need to be very careful when picking a 0% card, as there is an important fine print line you NEED TO pay attention to.

If you don’t pay off the balance in full, then paying interest goes in one of two ways…

  • pay interest on the balance left over after the intro period
  • pay interest on the average daily balance over the entire period

Usually, these after promo period interest rates are much higher than your average rate. You absolutely don’t want to be stuck paying for your average daily balance! (I’m too scared to do the math on it for you, but trust me, it’s not pretty!).

Also be sure to check out and balance transfer fees (if applicable to you), and any annual fees.

What is loan forgiveness?

When people talk about loan forgiveness they are most likely talking about student loan debt. Loan “forgiveness, cancellation, or discharge of your loan means that you are no longer required to repay some or all of your loan. This is language from the Federal Student Loan Aid site.

“The terms forgiveness, cancellation, and discharge mean nearly the same thing, but they’re used in different ways. If you’re no longer required to make payments on your loans due to your job, this is generally called forgiveness or cancellation.

If you’re no longer required to make payments on your loans due to other circumstances, such as a total and permanent disability or the closure of the school where you received your loans, this is generally called discharge.”

How to get out of debt with debt settlement (it’s the worst way possible!)

Many of you have heard about the process of debt settlement. Some businesses will do all of this for you; they’re called a credit counseling agency They’ll negotiate your total balance and payments due with your creditors. For example, they’ll offer the creditor $.60 (or whatever amount) on the dollar if you pay it now. (taking a large balance and making it a much smaller one for immediate payment). This sounds great!


Debt settlement is quite possibly the worst way (besides bankruptcy) for you to pay off your debt! Why? Because you are paying someone a decent-sized fee to do this when you can do it for free! Yes, you may not know how to, but you can absolutely learn! Check out these resources…

The major reason why you shouldn’t go the route of paying someone is that you are basically paying someone to clean up your mess. (This is where the straight talk gets a little rough). Don’t pay someone to clean up your own pile of sh*t!

You need to go through this process to better understand and more fully comprehend the significance of your previous behavior and go through the trouble & pain of fixing your own mistakes. This is how we learn! You know this, you’re a Mom, picking up our kid’s toys for them is faster and easier, but they will never learn to do it on their own if you do it for them. Right?!

Whew! I apologize for getting a bit heated.

At the end of the day

Getting out of debt is a hard process. Not only for the sacrifices you must make now but for the time, energy and toll it takes on your mental & emotional health. Yet, it is absolutely worth it! You just need to take the first step with figuring out the best way to get rid of debt for you!

Once this period is over, you will feel the weight of the world lifted from your shoulders! You will feel the pride of accomplishment and the satisfaction and comfort, knowing you will never go back to the way it was before!

You did it! Lizzo, can you tell me one more time, how you feeling?

Feeling good as hell!

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  1. I’m also a huge fan of Dave Ramsey. I followed his methods to pay off about $20k in credit card debt. Thanks for this, and for pointing out debt consolidation is basically a scam.

  2. So, so good. My husband and I completed Financial Peace years ago and the debt snowball method totally works. Thanks for sharing and championing this message.

  3. Getting out of debt is definitely the way to go. I was able to become a stay at home mom because I released so much debt before having a baby. Great Article.

  4. Great tips! I need to do this with my cards and loans. I just need some time to sit down and sort out which strategy is best for me!

  5. As always, you take a comprehensive topic and break it down into easily digestible chunks! Already clicked on the opt-out link… I don’t enroll in the offers but the annoyance of the junk mail and waste never stops. Thanks for all the useful info!

  6. Thanks for the rundown on the different strategies. I hadn’t heard of the debt snowball method, but I’m checking out to see how it works. I’d love to save some interest payments!

  7. Love your blog site and “Money for the Mamas” yes! I love Dave Ramsey too and all he offers those needing money strategies. Did you take any of his courses or conferences?

  8. I can totally relate to this. My medical history made me stop working a 9-5 job and I since struggle financially. On the process of going back to work to pay my debt.

    1. So sorry about your health issues, it can be so hard, physically and mentally when you body is keeping you from doing what you want & need to do. I have my fingers crossed for you!

  9. It’s so true that financial education classes simply aren’t out there for high school students!
    I enjoyed reading about the American debt stats…although they made me REALLY sad to read them!! Thanks for sharing and inspiring others to get out of debt!

  10. Getting out of debt is definitely a challenge! I think this information and your tips will definitely help many! Thanks for sharing.