Debt Payoff Strategies

What strategies have you used to pay down your debt, and what has been most effective for you?

-Kendra, The SaverLife Team

I have been using a free tool called undebt.it. You can enter in your debts, payment amounts and any extra payments or snowball amounts you would like to add. It will calculate several different payoff methods and show you which one will have you paying the least amount of interest or which one will get you to debt free quicker. I really enjoy it.

I have been using the snowball method when tackling down my debt. I know it is financially smarter to target the highest interest payment because it cost less money in the long run. However, I need that small emotional win to get the ball rolling and get me to tackle my debt. I tackled my student loan debt using this method and will continue using this method for all future debt!

Thanks @SarahB for suggesting undebt it. I love this app.

I have done all kinds of things. What has worked best for me is to have a separate bank account just for bills, that i never access for any other purchases (I don't have a debit card for it). I automated all my payments (I still check each bill monthly and every 3-4 months do a thorough review of each payment amount). This includes debt (credit cards, loans, vehicles, and student loans) as well as bills (rent, phone, internet, sewer, electric, gas, water). I put about 5% more than the bills in each month, which slowly builds up a cushion and covers unexpected increases (I use budget billing for electric and gas to avoid big swings). Then I looked at all my credit card debt, and all my spouses. I quickly realized we have VERY different approaches to money and credit (he's a spend it all now, I'm a save as much as possible– a tough mix!). We made a deal that we were each responsible for our own credit cards, but would split household as close to 50/50 as possible. I've encouraged him to make better choices, but i've also just had to accept that he is NOT going to actually carry a zero balance. He can't. He has to spend it. (NONE of our credit cards are linked, and only three of our bank accounts are. We share the vehicle loan, everything else is individual). I went with the snowball method overall, but also looked at the interest rates of all my cards. I spent a LOT of time on different pay off calculator sites and other debt forums. I finally decided on focusing on the card with the lowest balance (LB) and the second card with the highest interest rate (HI). For the first card, (LB), I figured out what the maximum payment I could handle while still leaving me a little cushion for unexpected expenses, and set it to pay that amount each month, regardless of balance. For the HI card, I started paying minimum + $25. Then I searched zero percent offers. Eventually I found a balance transfer for 22 months with just a 3% fee, and used that to transfer the balance. I was able to lower the interest rate to zero for a fee of about $35. I wasn't able to pay off the entire balance in those 22 months, but I paid off more than enough to make it worth while. Meanwhile, each time I finished paying off (LB) I moved to the next card. I use ALL the free tools from my banks and credit cards– score estimator, payment alerts, fraud alerts, etc. I check my full credit reports twice a year (one free, one paid). I make sure that none of my old paid off accounts close by making one, less than $50 purchase every 6 months– make the purchase, WAIT until it shows up on a bill, THEN pay it off. I might wind up owing some interest this way, but it gives me a paid month on the credit report 2x a year (yes this takes discipline). I've also accepted every balance limit increase I've been offered, since that lowers my % of credit used. 8 years in, I have three cards with a balance still and am under 10K in debt (from over 30K). I have to watch one card, that lowers my payment each month (it doesn't allow for a "set" payment, like $150, but rather, an amount over my minimum, so I have to update it each time my minimum makes a meaningful change– about every quarter). Having multiple bank accounts for multiple reasons (one for bills, one for everyday expenses like gas and food and entertainment, one for emergencies, one for large savings goals (like my annual vacation trip), and one for "fun" (we each have one of these, gets about $150 a month, we can use for whatever we want– eating out, a new pair of shoes, something for one of our two dozen hobbies, etc). I can use what's in the fun account, and when it's out, it's out. Or I can save for something nicer, like a new metal detector or a bike. We don't quibble over how the "fun" money account is used, which makes for a lot less arguments. As long as he can cover it from "his" account, he can buy what he wants. If he starts having to touch the bills or everyday account, then we talk. it works for us, even if it is a lot of work. I prefer to use spreadsheets and be in control rather than use apps on my phone. YMMV. Good luck!

At 30 yo I have NEVER had debt so I do not have any advice, but like learning new things.