Debt.com’s Favorite Methods

28 minute read

Paying off credit card debt without a plan is like signing up for a marathon without knowing how you’ll train. It’s a venture bound to fail.

At Debt.com, we’ve heard too many stories about consumers attempting to pay off their credit card debt but not following through. That’s why we’ve compiled our favorite methods of paying off credit card debt—and a few more—in this article.

Table of contents:

The Snowball Method

This encourages paying off your debts from smallest to largest balance. It’s like rolling up a snowball—first you start small, but as you keep rolling you get enough power to knock down your largest debts.

To use the snowball method, you first list all your debts from smallest to largest. Next, you pay as much as you can toward the card with the smallest balance. On the other cards, you only pay the minimum payment.

Once you pay off the first card, pay as much as you can toward the second-smallest balance and make minimum payments on the remaining card. Keep doing this until all your cards are paid off!

The Avalanche Method

This process measures by interest rate rather than balance. To use the avalanche method, you must first list all your credit card debts from largest interest rate to smallest interest rate. You effectively start at the top and work your way down.

Don’t let credit card debt get in the way.

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Then, you do the same thing as the snowball method, but in a different order. Pay as much as you can toward the card with the highest interest rate and pay the minimum required payments on the rest.

Once you pay off the highest-interest card, move on to the second-highest, and so on. This can prevent you from racking up interest charges as you’re trying to dig your way out of debt.

The Debt Lasso Method

The Debt Free Guys, John Schneider and David Auten, call their method of paying off credit card debt the “Debt Lasso” method. It’s a unique combo of strategies that changes to fit your needs.

To start out, you pay off a few low balances for some quick wins. Then you use debt consolidation to lasso your debt into a single monthly payment at the lowest interest rate possible.

There’s even a community you can join to help keep you going. Learn more about the Debt Free Guys and Debt Lasso in this interview:

David Alton and John Schneider are husbands who worked hard to pay off $51,000 in debt, also known as the Debt-Free Guys. They say their debt lasso method is the fastest and cheapest way to get out of debt.

There are five steps to the process:

No. 1: Commit to incurring no more credit card debt and making the same payment each month.
No. 2: Trim your debt down by paying some low balances for quick wins.
No. 3: Lasso your debt by using debt consolidation and balance transfer methods.
No. 4: Automate all your payments so you don’t miss anything.
No. 5: Monitor payments and debt balances.

We talked to the Debt-Free Guys to learn more about this debt repayment method and how their own journey led them here.

When it comes to the snowball or avalanche method, how do you describe the main differences? And why this could work better for some?

People like the snowball method. It has a psychological benefit to it. What you’re doing there is you’re paying off your smaller credit balances first and increasing to the larger balances that can feel really fast especially toward the beginning.

So you’re getting a lot of quick wins there. The problem there though is that you’re not necessarily focused on the –whatever the high-interest rate credit cards are.

So, mathematically it could be more expensive for you in the long-run.

The avalanche method where you’re focused on paying the high-interest rate credit cards off first makes the most sense but it does.

So for some people seem to take a long time and not a lot of people have that kind of patience to stick with paying off their credit card debt and they fall off the wagons spend their money again all of a sudden.

They’ve accumulated the debt again or they’ve got more debt than they had before. That’s the fear that we had with ourselves we knew that we wouldn’t have the patience to stick with either method.

That’s why we thought, “well the problem is the high-interest rate if we can remove that or at least lower than considerably then we can expedite paying off our credit card debt.

So that’s really the big difference if you’re someone who needs really really needs quick wins. The snowball method might make sense for you if you’re someone who’s fine focusing on the mathematical value then the avalanche makes the most sense for you.

If you’re someone who wants to take advantage of essentially both of those strategies then the debt lasso method is the strategy that you want to follow. For most people, I would argue that’s probably the best method.

When I was reading about the debt lasso method, I noticed that you make it very clear that it’s not refinancing.

So how do you explain lowering those interest rates to someone and the way that it’s different from refinancing your credit card debt?

I think one of the biggest things to remember about refinancing is like the engine of a car, the better engine you have the faster you can go but you cannot drive anywhere if you just have an engine, right?

So that’s why refinancing is just of the overall package. That’s why there are five steps to the debt lasso method. And the actual refinancing or lasso portion of it is just one of those steps another thing on your site is of course living fabulously.

So in your own words what does that mean, and what does it mean to do that while you’re still paying off debt?

As soon as david itemize all of our expenses for the previous year we were sort of blown away with some of the categories that were clear outliers that no humans should be spending relative to the income that we had at the time.

What was ironic was that when we looked at how we were spending our money prior to that had you asked us if we had an amazing life we would be like.

Yeah you know it’s decent it could be better but on paper when you looked at how we were spending our money. We were like wow this is crazy. We are living like rock stars on a beer budget.

And we thought well we’re clearly not getting the ROI out of our spending that we should be getting we should have. We should be having a much better feeling of quality of life than we were at the time.

We thought well why is that so that kind of started a conversation for the two of us about what is it we really want in life. What actually makes us happy. What do we want to achieve? What do we want our legacy to be? And we realized it came down to three things:

  • We wanted to be able to get back to the LGBT community.
  • We wanted to save for a comfortable retirement.
  • And we wanted to be able to uh what was the third one and travel as much as we can without using credit cards.

So we looked at our expenses all the clubbing; all the designer clothing; all the happy hours; all the expensive dinners; all of the expensive wine; lots and lots of expensive wine.

We thought well that’s really clearly not giving us the quality of life that we want but we sort of felt like we had to live that lifestyle because that’s what our friends were doing.

And in hindsight we were spending that way for two reasons:

One we were trying to make up for the past because we both came from times and places when it wasn’t okay to be gay.

So we were trying to make up for sort of that pain that we had not dealt with up until that point. But then simultaneously we were part of a new community and we thought if we didn’t sort of live up to their expectations we might be ostracized from another community and we were afraid of that.

But we realized that that wasn’t really providing us happiness and we weren’t having the quality of life that we wanted what would happen if we would spend according to our values.

That’s sort of when everything changed when we figured out what our why was. Then whatever strategy we were going to implement we had more of a commitment to pay off our credit card debt. So we would actually become debt-free and then start living a much more authentic life.

I would also say that for you kind of said it yourself very well when you’re asking the question in your own words what does fabulous mean and that’s what really it is: A fabulous life is what it means in your own words.

To you, what does fabulous need mean to you?

You know a lot of us to spend a lot of money to be able to post pictures on Instagram or Facebook or share stories with our friends at cocktail parties or virtual cocktail parties today.

You know we want to be able to share these kinds of stories because it gives us some momentary satisfaction or excitement.

But that eventually goes away and we know that what really makes people feel fabulous is when they feel happy long-term and that happiness long-term takes a little bit of time to figure out what should I be spending on to make my life long-term happy for other people different.

Maybe it’s having a family. Maybe you love animals and want to have a pet farm or something like that. Whatever it is for you those things that will bring you long-term happiness those are the things that make you feel fabulous.

That’s where it’s important to spend not on the things that are superficial or momentary do the steps of the debt lasso method help people build that life.

How John mentioned earlier when we removed that credit those credit card balances and having to spend $10,000 a year to pay towards high interest on our credit cards we basically gave ourselves a $10,000 raise.

That’s when we are able to implement the more fabulous life obviously we try to trickle it in while we were paying our debt off but the steps are really designed to have the mindset and the process to pay your debt off as fast as you can.

Speaking of the people that you have helped um you’ve helped people including yourselves pay off 300 000 in credit card debt um so tell me a little bit about how that worked and how you’ve worked with people so far we have uh our debt lasso calculator which is available and free on our debt lasso site.

But our real driver at helping people pay their off as fast as possible involves them going through a class or basically a course that hits all of the points as that are what helps people pay their debt off it’s the mindset. It’s the habits it’s the lassoing your debt.

It’s trying to figure out how you can make a little bit more money, especially in the short term so to put towards that so all of that is kind of wrapped up in our credit card payoff plan that plan is available in basically a couple of methods you can do it all on your own.

You can do it with group coaching and you can do it with one-on-one coaching with us and it’s the individuals especially in the group coaching who have gotten probably the most value because the group coaching they now.

I guess in an endearing term refer to it as their money therapy.

So we get together on a weekly basis.

We talk about challenges and wins and questions that people have while they’re going through the course.

And the nice thing is is that it gives people a little bit of accountability.

Because they see other people who are doing it other people we have had this happen a number of times where people will call each other.

You know what I did exactly what you’re doing I know what you’re trying to get away with which is kind of good sometimes to have somebody who’s not your coach saying I have already gone through that process and I know where what path you’re headed.

down be careful thanks so much for joining us today. And be sure to check out the Debt-Free Guys on their Queer Money podcast, as well as on debt lasso.

Interested in lassoing your debt? Sign up for Debt Lasso here.

The Debt Volcano Method

Christine Luken, also known as The Financial Lifeguard, has a story about how she coined “Debt Volcano.” When she was dealing with debt after her divorce, her dad asked her which debt pissed her off the most.

This struck a chord with Luken, who later wrote a book called “Money is Emotional.” Her name for the strategy her father helped inspire—pay off the debt that pisses you off the most first—become “Debt Volcano.”

Learn more about Christine Luken’s philosophy on money and debt in this interview:

Lexi: Over the past 12 years, Christine Luken has coached hundreds of high-earning professionals to pay off staggering amounts of debt and massively increase their net worth. You may know her as the Financial Lifeguard, the founder of the Financial Dignity Movement, and the author of Money is Emotional: Prevent Your Heart from Hijacking Your Wallet.

We’re here with Christine today to talk more about the emotional side of money.

Lexi: Hi christine, thanks for joining us!

Christine: Hi, thanks for having me! I’m so excited to be here.

Lexi: Can you tell us a little bit more about your story and your past money experiences?

Christine: When I was in my mid-20s, I crashed and burned financially despite having an accounting degree, and a lot of it was due to an unhealthy relationship that I was in at the time. So I won’t go into all those juicy details, but you know, I found myself at age 26, you know, owing three different payday lenders money, being behind on my car payment… my credit was completely shot and I didn’t even have any money to move out. So I wanted to break off my engagement and, you know, it was it was really a low point for me personally and financially, and because I was someone who had all this formal training and actually was working in the accounting field, the amount of shame and embarrassment around my money mess

was even higher than what it would be for the average person because I was

someone who should have known better.

Lexi: I love that you do dig deeper with your clients to help them get out of the cycle of shame and embarrassment they feel around money. Something that stood out to me that you help your clients with is how you help them recognize what has happened to me rather than what is wrong with me. Can you expand a little bit on that?

Christine: Yes, yes. That’s a question that I hear from a lot of people. Usually what happens in this cycle of money shame is that people make a mistake and then they feel bad about  themselves because they’ve made this mistake. And they feel that shame and then because they feel that shame it makes them want to hide and it makes them want to avoid the

problem, and so when you do that, then you avoid getting the help that you need to break the cycle, right? So if we can say okay, you know, even though I am feeling this way, I’m going to reach out and get help or I’m going to go and seek some information to help me fix my credit or to get out of debt or whatever the case may be. That’s the way we break that and I do want to just give a little distinction between guilt and shame because sometimes we lump those two things together. But when we feel guilty or remorseful, basically what we are doing is we’re

acknowledging that we’ve done something wrong and maybe we’ve even hurt somebody else by, you know, by our actions. But when we transition to shame, rather than saying “I did a bad thing” we’re now saying “I’m a bad person,” and so that’s a really important distinction. You know, we can have healthy guilt and remorse over our mistakes that we’ve made and we can learn from them, but we don’t want to internalize those and say “I’m a bad person because I did this.”

Lexi: Yeah, and you talk a lot about the subconscious mind and how it directly correlates with our financial decision making. I think that part of money is really important but not talked about enough. Can you tell us a little more about how we can’t take emotions out of financial decision making?

Christine: Most of our actions are governed by the subconscious mind, and you know, scientists disagree on the exact percentage, but they usually agree that only about five percent of the actions that we take on a daily basis are coming from our conscious mind. The rest of it’s on autopilot, and that’s not necessarily a bad thing because if you really had to think about how to tie your shoes how to drive your car, you know… How to turn on the stove to make dinner, like all that stuff, it’s running in the background, right, because you’ve done it so many times you

don’t really have to consciously think about it. But the problem is we also have programs like that relative to our money that are running in the background and if we don’t uncover those, then we’re going to continue operating out of this same paradigm. And the way I like to explain it

is the blueprint. So everything that’s stored in your subconscious mind relative to money, you know, your thoughts, your words, your emotions around money, your early experiences, the things your parents said around money, that’s like your blueprint, right? And so anytime you interact with money, your subconscious mind accesses this blueprint and says this is how we do money. And so if i handed you a blueprint for a ranch house, like, you can only build a ranch house with that blueprint. It doesn’t matter how hard you work or how fast you work or

what building materials you buy, you’re only going to get a ranch house with that blueprint. The only way that we can get that two-story house is we have to go back and we have to fix the blueprint, and then once we actually fix the blueprint then the external part of it is so much easier. And so I find that a lot of people who have had these struggles where they’re like, “I don’t understand,” like “I should be doing better, I’m making good money,” you know… I see other people doing this, like that whole question what’s wrong with me. Well, it’s not really what’s wrong with them, it’s like, you know, what happened to you that has caused your blueprint to be written in this way?

Lexi: You help people envision their financial future. One of the things you talk about is reprogramming the subconscious mind to focus on the things we want. How can someone start the reprogramming process on their own?

Christine: We can’t really like delete what’s in our money blueprint, all we can do is overwrite it. So first, we have to figure out like what’s even in there, and so one of the exercises I have my

clients do is I have them write down all the negative things they think or say about money. So I’ll have them, you know, start a note in their phone or keep a pad of paper, and anytime they catch themselves thinking something about money or saying something about money, especially if it is in opposition with what they say they really want. So once we uncover some of those negative things that you’re saying, then we can rewrite those as positives, right? So we can say, you know, “I’m the kind of person who always has plenty of money in the bank to pay for the things that I need and want.” Repetition is really the key to overwriting, so if you think about like when you listen to a song 10 times in a row, like you know the lyrics right? You’ll find yourself like waking up the next day and the song’s playing in your head, right? That’s because you’ve listened to it over and over and over again. And one of the tricks that I’ll have my clients do is once they’ve written out these positive money affirmations, is i will have them record them in their own voice and then i will have them play that recording to themselves a couple times a day, because you trust your own voice more than you trust anybody else’s voice because you hear it all the time. So that’s a little bonus trick for our audience today.

Lexi: And then another thing that I love that you talk about is the “Volcano Method” you use. Can you tell us a little bit more about how it’s helped you?

Christine: You know, I’m not sure if I invented that term or not, but that’s what I call it. Probably a lot of people out there have heard, you know like the avalanche method or, you know the snowball method, where you know it’s like oh you’re paying off the one with the highest interest rate first or you’re paying off the one with the lowest balance first. So you feel like, you know,

you have that quick win. Because I had a lot of baggage from my previous relationship, there was one bill in particular that just really pissed me off, and it was a department store credit card bill that my ex-fiance was an authorized user on and he had bought my Valentine’s Day present on the card a month before we broke up. And now I was stuck paying for it. So every time I saw that bill come in, like, I was really pissed. I was really upset. And so there are times when my clients have something similar, like you know if they are coming out of a divorce or maybe it was just a stupid mistake that they made, right? You know, maybe they bought some furniture, you know, that was like 36 months no interest and they missed the deadline, right, and then they got smacked with all this interest. And so every time they see that bill, it just like really ticks them off

because it reminds them of that dumb mistake that they made. Well, I would prioritize that bill first, because it gives the most emotional satisfaction once it’s paid off.

Lexi: And then what advice can you give to our audience, to someone that is watching this that

would like to better understand their own emotional relationship with money?

Christine: Our emotions don’t just happen in our head, they happen in our body. And so our emotions are physically stored in our body when we experience a strong emotion. There are actually chemicals and hormones that are released and it helps to cement that memory in there. So even though, like you said, it might not seem like anything important from an adult perspective, you know, if there was a lot of strong emotions around that in your body as a child, then that’s part of your programming around money.

Lexi: Well, thank you so much for joining us today, Christine! I think the tools and the advice that you’ve shared is going to be extremely useful to our audience.

Christine: Hey, thanks for having me!

Using your budget to pay off debt

You know how much debt you owe. But how much can you actually afford to pay toward your debt each month?

Without a budget, you may never know. The apps and methods below can help you go from pen-and-paper budgeting to something easier and more sustainable.

Tiller Money

Tiller gives you a way to step up your spreadsheet budgeting game by automatically connecting your financial accounts to Google Sheets or Excel.

The provided templates make it easy to start tracking expenses and making your budget, but you can also design your own sheets if you’d prefer. There is a yearly fee of $79, but you can get started with a 30-day free trial.

YNAB (You Need a Budget)

You can use YNAB through a smartphone app or on your personal computer. It can help teach you about money management and categorize your expenses. It will even learn to automatically categorize transactions.

It costs around $7 per month, and you can try it free for two months.

Mint

This app is owned by Intuit, the same company that owns TurboTax and QuickBooks. It’s completely free.

You can use Mint to track spending and even check your credit score. It’s more basic than some of the paid tools, but it works if you want something free, simple, and effective.

Cash envelopes

Besides the simple pen-and-paper method of budgeting, using cash envelopes is one of the most old-fashioned strategies. Basically, you take out your whole paycheck in cash and divide it into envelopes labeled by spending category.

The Budget Mom is a major proponent of this method. She even offers brightly-colored, professionally designed envelopes to make the process more fun.

If you prefer to manage your money digitally, a service like Mvelopes offers a digital variation of this method. The cost ranges from $5.97 to $19.97 per month.

Ask the Expert: What’s the secret to getting out of debt?

Question: My husband and I have been just breaking even for some time now,  trying to dig ourselves out of debt and save money. We’ve cut everything to the minimum and constantly tell our kids to do without. I can’t even afford for them to go to a friend’s birthday party or participate in a school event.

I feel like such a failure because I can’t do more for my kids. My husband and I seem to be fighting more about money these days. What is the secret to getting out of debt?

— Susan

Steve Rhode answers…

Dear Susan,

I can certainly understand how the struggle to deal with debt can feel like a long, grinding journey in your life.

The reality is that getting out of debt doesn’t follow textbook advice. The formula is quite simple — just adjust your life to spend less than you make after your expenses. It would also be wise to include regular savings and retirement savings as part of those mandatory expenses.

Creditors won’t often let you pay what you can realistically afford. I’ve seen far too many people tumble back into money troubles because they used all available funds to pay down debt but had to use credit again to pay for an unexpected emergency, like car trouble or an unexpected home repair, because they had no savings.

Dealing with debt is complicated because it is more about perceptions and emotions than it is about math. In fact there is an entire intellectual field of study about the illogical actions we take when it comes to dealing with money. It’s called behavioral economics.

I have always found it interesting that tactics like leaving a faint cookie smell in dressing rooms causes stores to sell more sweaters in the fall. However, a more perplexing group mentality is why people in financial trouble spend so much time trying to repair the past rather than addressing the real demands of making sure they are prepared for tomorrow.

There are entire industries that exist to persuade people that getting angry about their debt, and spending the next few years repaying it, is the moral thing to do. While repayment works for some people, for countless others, it just does not make mathematical sense and leaves them significantly more exposed to a worse financial future. Keep reading; just because that statement seems counter-intuitive does not make it wrong.

Paying off credit card debt is easier with Debt.com.

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So Susan, ultimately the best way for you to get out of debt is going to be for you and your husband to take a deep breath and spend some time in contemplative introspection. Ask yourselves if you have a greater financial responsibility to your future old, unemployed, and potentially sick 80-year-old selves, or to abandon logic and set yourself up for significant risk by just breaking even each month on your current path without getting ahead or saving for the future.

If you decide your financial future is more important than the past then we need to look at altering your current equation. You will either need to reliably and consistently increase your income, reduce your expenses, or do a combination of both.

If you can increase your income to a point where you can take advantage of the maximum retirement and matching contribution your employer may provide, save money each month in an emergency fund and reduce your debt, then maybe that’s worth considering.

If that’s not a realistic option then maybe it is time to look at debt intervention through the only solution that gives you legal power over your creditors: bankruptcy.

Sometimes the decision for people really comes down to whether they feel doing without and living a dangerous financial life for years is more moral than setting themselves up for future financial success. Often math and logic are at odds with emotional comfort and assumptions.

Only you can decide how you want to tackle your debt. I hope that you make that choice based on reality, not assumptions about what makes the most sense as told to you by others.

Steve Rhode is the Get Out of Debt Guy. He’s been helping people with personal finance troubles through advice and education since 1994. If you would like to ask a question, visit Get Out of Debt and let Steve help you for free.

What if…?

At Debt.com, our slogan is this: When life happens.

When you’re in debt, life changes can have a big impact on your ability to make payments. A few of these changes may include having a variable income or going through a period of unemployment.

Variable income

For those who work as independent contractors or freelancers, having a different income level each month is normal. However, it can be difficult to budget when you’re not sure how much you will make.

Laura Adams of Money Girl podcast suggests knowing your spending baseline and setting up a holding account in her article “6 Steps to Help You Budget with Variable Income.”

She also wrote a book specifically for solopreneurs. Read about it here and watch her interview below:

Laura Adams is a personal finance expert author and speaker who makes understanding complex financial topics simple.  She’s hosted the money girl podcast since 2008, and we’re always happy to have her answer our readers questions on Debt.com’s Ask the Expert section.

So I just wanted to start if you could maybe give us a little intro. of yourself i have been a personal finance expert writer speaker podcaster since about 2007.  I started podcasting in 2008 and that opportunity kind of led to a lot of other things including writing books and doing PR as well.

It’s funny when you write a book, people expect you to go out and talk about the book and really promote it and realize i really liked it and kind of got into doing more PR.

What is it about and why is it important right now?

Yeah this is the new book “Moneysmart Solopreneur.”

It is really something that I created out of a lot of requests. I was noticing that a lot of people have been very interested in working for themselves. They’ve been asking a lot of questions about starting a business right now independent contractor doing a side gig in the on-demand economy.

It’s great for you. But it’s also great for anyone who also has aspirations to grow and maybe hire employees and answer questions like you know do I need to incorporate before I begin making money.

You know do I need a business bank account? What are all of the kind of administrative tasks that I need to be doing? When I talk about personal finance and business I like to keep it you know on a kind of a real basic level and kind of just lay it out for people in a kind of a tips based process of tip space format so they can know exactly what they need to do when they finish the chapter.

There are a lot of like important tips for solopreneurs. But I was wondering what you think the biggest money mistake a new solopreneur could make if you only had to pick one?

There’s so many mistakes. A one that i see often is people will get very excited about new revenue they’re they’re doing a new a new business. Maybe it’s you know something in the on-demand economy and a new opportunity that they started and they are not thinking about taxes.

This is something that will catch up with you you’re going to figure out pretty soon. When the next tax day comes along that you know you owe taxes that you may not have expected.

So this can catch a lot of new entrepreneurs. By surprise talking to an accountant a friend or family member may have somebody that they recommend that you use.

Figuring out what are my estimated taxes going to be for this year. What’s so tricky about it is that you have to estimate. You have to really guess you know what that income is going to be for your first year.

You may completely overestimate. You may underestimate. But the IRS does require that you make your best guess. At that the idea of focusing uh on your OMO your One Money Objective.

So could you talk a little bit more about that and how it fits in not only to people’s entrepreneurial plans but their debt plans?

Right so your one money objective is this overarching idea or concept that you are trying to achieve with your money. I think that we really can get confused. Because there’s so many things we’re supposed to be doing with our money. We’re supposed to be saving. We’re supposed to be looking at potential emergencies retirement saving for kids education.

But your one money objective is something that you want to focus on right now. So what it helps you do is make decisions. For instance, my objective is retirement.

That’s my one word. When I think about making a financial decision, I ask myself is it going to help me build my retirement? Is it going to help me build not only the income that i want to have in retirement, but help me retire on time when i want?

If the answer is no, that decision would not help you with your retirement. I know I’m not going to do it so it really does help you center and say okay let’s remove all the distractions and focus on this one objective at a time.

Yeah I like the idea of it. Bringing in your decisions because you have to be reminded every time: Does this fit with my goal? Or does it not?

I’ve seen all these one-off articles online about starting a freelance career or handling your side gig. But I’ve never seen all of this stuff in one place. So I’m always left with more questions than were answered in that article.

As I started doing a research for the book I was a little shocked that 85 percent of small businesses are what they call non-employee businesses. That means they’re like me: They don’t have employees they may use other freelancers or independent contractors.

But that’s about 25 26 million people who have solo businesses that’s a whole lot of people and I think that number is growing. As we’re dealing with the challenges with the pandemic. I know so many people have been turning to the idea of working in the on-demand economy or creating freelance work as either a brand new career or a way to make extra money.

You’re allowing yourself the opportunity to go after opportunities. See if they make sense and pivot make a change if they don’. But never really leaving yourself vulnerable at or at financial risk, right? That can be a lot of pressure.

You’re in the perfect situation to begin creating that safety net. To also have a side business or also make that leap eventually from the nine to five to the business.

So things like you’re talking about paying down debt at least down to reasonable levels, building up your emergency savings, you know thinking about setting up your retirement plans – there may be a little bit of credit card debt that you might you might leverage to you know buy some supplies or get started.

But in general i think paying down debt and not going into debt for business is a really stress-free way to begin a business and sustain it.

You also mentioned that putting debt into your budget before you even start is very important, which is something that we like to emphasize on Debt.com, as well.

Before you start anything, when you’re making any budget you should definitely put your debt payments in it. First, I really do believe in prioritizing debt from high risk down to low risk.

So when i talk about high risk debt I’m talking about typically consumer debt credit cards. Maybe you’ve got some very high interest payday loans, dangerous types of debts with very high interest rates.

Those you need to be aggressive to make sure that those are paid down aggressively. Other debts that are low interest lower risk such as a low rate fixed mortgage. Even a low rate student loan that you may have.

So there’s definitely a lot of strategy with debt as you know at Debt.com. That’s what you do. So I definitely encourage folks if you’ve got debt that you’re dealing with you know create a plan have a strategy first.

That may also make you feel more confident about starting a business. And starting a business and making extra money may also be a strategy to pay off your debt.

So it can they can really work hand. The final thing that I wanted to ask you was who is this book really for who did you write it for and could it benefit Debt.com’s audience?

How I think anyone who is interested in sort of stepping into the entrepreneurial world thinking about ways to earn extra income or they’ve already started  a business but they’re feeling like they’re really not handling it efficiently or they are not.

Let’s say using all the tools that they could. To be the best money manager possible. I think it’s for them I think it’s also for people who are worried about their future.

If you’re thinking gosh I don’t have a retirement set up you know I’ve got debt. Maybe I’m struggling with not having the insurance that I want to have because I left a nine-to-five job.

So I think there’s a lot of folks in your audience that could benefit and I hope you’ll check it out and it’s available for pre-order right now. It is so if folks go to my website at lauradeadams.com or to moneysmartsolarpreneur.com.

Then it’ll be for sale everywhere that finance books are available as of Sept. 22. So if you are looking for some additional resources, you can pre-order the book and also get my most recent book “Debt-Free Blueprint” maybe of interest to you if debt is a topic on your mind.

Giving away that ebook for free is part of the bonus package.

Thank you, Laura, for being with us today and talking about your new book.

Kira, this was great thank you so much. We really recommend that our audience gets a hold of it especially before just Sept. 22 for the pre-order.

Unemployment

Though a variable income can make it tough to know how much you can pay toward your debt each month, being unemployed can make you wonder if you will be able to pay at all.

Although it’s very stressful, you must take steps to prevent your debt situation from getting worse. Start by reading “What to Do When You’re Broke, Unemployed and in Debt” and watching our “Surviving a Layoff” webinar.

Methods to pay off debt in full

Method 1: Balance transfer credit card

Interest-free payments are the fastest way to pay off credit card debt.

If 100% of every payment you make goes to eliminating principal, you can pay off credit card debt fast. The easiest way to get interest-free payments is to use a balance transfer credit card.

This will give you 0% APR for 6 to 18 months after you open the card. However, once the promotion period ends, regular interest charges will apply to whatever balance you have left. Only transfer as much debt as you can afford to pay off during the interest-free period.

Ideal for: $5,000 or less in credit card debt

Balance transfers are usually the best option in this situation. As long as you have good credit, you can qualify for a card that offers 0% APR for at least 12 months. That gives you six months to pay off your debt interest free.

To eliminate a $5,000 transferred balance in full before the regular APR for balance transfers kicks in, you’d need payments of about $417.

Method 2: Credit card debt consolidation

If the minimum payment requirements for your credit card debts are too high, consolidate!

Debt consolidation loans often lower your monthly payments. However, since it also reduces your interest rates, you can get out of debt faster even though you pay less.

If you use a debt consolidation loan, then the term you choose determines the monthly payment requirement. Choosing a longer term will lower the monthly payment.

Most lenders will let you go up to a 48- or 60-month term on a consolidation loan. This can significantly cut your monthly payment requirements.

Ideal for: Up to $25,000 in credit card debt

If your total monthly credit card payments are too high prior to consolidation, you may need to opt for a personal loan with a longer term.

In this case, a 3 or 4-year term may be the best solution to give you lower monthly payments, while still allowing you to get out of debt faster. It’s also worth noting that this is only the best solution if you have good credit (670 FICO or higher).

Method 3: Debt Management Program

For huge credit card debt balances, you need some help to reach zero.

If you want to pay back everything you owe to avoid credit score damage, you should use a debt management program.

With a debt management program, a certified credit counselor will help you negotiate with creditors and consolidate your monthly payments into one payment that goes to the credit counseling agency. Each month, they distribute the payment to your creditors on your behalf. Once everything is paid off in full, the program ends and your accounts may be closed.

Ideal for: Over $25,000 in credit card debt OR if you have bad credit

If you owe more than $25,000 or you have a bad credit score, then do-it-yourself debt consolidation solutions probably won’t work. That means you can skip balance transfers and debt consolidation loans because they won’t be effective.

Debt management can help you eliminate high volumes of debt within four to five years. In fact, it can often help with huge credit card debt balances—$100,000 or more. Although some credit counseling agencies cap their programs at $100,000, there are companies that have no cap.

Smart tips to boost your debt repayment strategy

Tip #1: Never rely on minimum payments

If you think you can pay off credit card debt making only minimum payments, think again. Minimum payment schedules are not designed to get you out of debt.

Interest charges are one of the main ways that credit card companies make their money. It’s in their best interest for you to stay in debt for as long as possible. That’s more revenue for them!

You always want to pay as much as you can afford so you pay off your debt as quickly as possible. Using the solutions above will usually make it faster and easier to pay off your debt.

Tip #2: Stop charging!

The biggest mistake that most people make when they pay off credit card debt is that they don’t stop charging on their cards. If you’re dumping water into the boat at the same time you try to bail it out, you’ll never get anywhere.

This may sound like common sense but avoiding the use of your cards can be hard to do in practice.

Tip #3: If one solution isn’t working, try another

If one option for repayment isn’t working, you should move onto the next. Don’t wait for the first solution you try to fail.

As soon as you feel like there’s trouble on the horizon, adjust your strategy. The goal is to avoid missing payments or falling behind.

Once your creditor writes off a debt due to nonpayment, it limits the options you have for relief. No matter what, if your debts are current, you have options for eliminating them quickly without damaging your credit.

Tip #4: You may be able to eliminate other types of debt, too

Many solutions to pay off credit card debt can be used to pay off other types of debt, too. This is particularly true with a debt consolidation loan or debt management program. In both cases, you may be able to include:

  • Unpaid medical bills
  • Payday loans
  • Store credit accounts for furniture or electronics
  • Other unsecured personal loans

Debt consolidation loans can also include things like unpaid federal or state back taxes. In some cases, you may also be able to consolidate student loans with your other unsecured debts. The more debts you include in your elimination strategy, the better.

Ideally, the only thing left after you use one of these repayment strategies should be your mortgage and auto loans.  If you couldn’t consolidate your student loans with your other debts, you can use a separate repayment strategy to eliminate those debts faster.

When you can’t pay off debt in full

Sometimes, debt balances are so high that it’s just not realistic to pay it all back. Debt settlement and bankruptcy get you out of debt for less than what you owe but both solutions can damage your credit significantly.

Debt Settlement

If you don’t care about credit damage and simply want a fast exit to avoid bankruptcy, go for debt settlement.

Debt settlement allows you to negotiate with creditors to pay back less than what you owe.

If you are only dealing with one account, you may be able to handle a settlement negotiation on your own. Multiple accounts will be easier to tackle with a debt settlement program that will negotiate on your behalf.

NOTE: Each debt you settle will remain as a negative item on your credit report for the next seven years. Only take this route if you have to.

Declare Bankruptcy

If you have absolutely no money to pay off credit card debt you legitimately owe, then you can declare bankruptcy.

Let’s be honest. Nobody wants to declare bankruptcy, but sometimes it’s the best option. Unfortunately, most people wait too long to pull the plug. Our resident expert, Steve Rhode—the Get Out of Debt Guy—is a huge proponent of filing for bankruptcy so you can turn the page and get a fresh financial start.

“Whether it’s out of pride or shame or fear, most people wait too long to file for bankruptcy, and it’s usually for emotional reasons instead of practical, financial ones,” Rhode explains. “The truth is, you can actually damage your credit worse by trying debt solutions that don’t work, than the damage you would have had if you just filed for bankruptcy. Bankruptcy can also help you get to a fresh start sooner. Instead of two to five years spent struggling to get out of debt, if you qualify for Chapter 7, you could be debt free this year. That gets you to rebuilding much faster than if you muddle along because you don’t want to file.”

Debt.com can connect you to the best debt relief solution for your situation.

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Published by Debt.com, LLC