My 2017 has started with a looming debt and the means to pay it off. I’ve read about debt payoff challenges and different methods of paying your debt down but what works the best?
The Debt Payoff Challenge
Taking on a debt payoff challenge or joining a group of people who are trying to pay off debt could be beneficial. I know that I always like a good challenge and it oftentimes motivates me to reach my goals sooner. This is why I’ve taken on a debt payoff challenge for myself. You can see the details and print a 12-week debt payoff challenge worksheet here.
Pay the Small Debt First
If you aren’t interested in taking part in a debt payoff challenge but still want to pay your debt off you can also try tackling all your small debt first. According to Smart Cookies, this is one of the best ways to pay off your debt. I am doing this within my debt payoff challenge. I aim to pay all of my small debts first before tackling huge debts (like student loans).
Paying High Interest Debts
The next step in my debt payoff challenge is to tackle the high interest debts. For example, once I’m done paying off my small debts, like medicals bills, I can focus on my credit card (which has 15% interest). It is the only debt I have that is accruing interest currently and will be paid off in full.
Pay The Debt That’s Holding You Back
Next I’ll be paying off the debt that is truly holding me back. I have an item on my credit that is holding me back from being able to rent an apartment. Once that is paid I can move out of the hotel I’m currently living in and get into something a little more home-y. I’ll also be paying off a car loan that I co-signed for a friend a few years go (huge lesson learned there, folks).
While I have a rather step-by-step approach to paying off my debt I will also be snow flaking my debt to reach my debt payoff challenge goals. My overall goal is to pay off 35% of my debt in 12 weeks (doable with the small amount of debt I have).
That being said, any “windfall” money or gift money I receive within that 12 weeks will be put towards paying off my debt. Normally I would put this cash into savings or spend it on something for myself, however, I’ll be putting my debt payoff challenge ahead of everything else for 12 weeks.
After the 12 weeks is over I’ll place my focus on saving and paying down the larger debts that I have (i.e. the car and student loans). First I’ll establish an emergency fund where I will save six months worth of expenses. Once I’ve gotten that set up I will be looking into investing opportunities and high-yield savings accounts.
I’m hoping that my debt payoff challenge for 2017 will truly pay off for me in the end. Will you try the challenge?
Photo: Alan Cleaver
Enjoy Plunged in Debt?
Subscribe to get our latest content by email.