Best strategies for paying off debt

Best strategies for paying off debt
Best strategies for paying off debt

Kelsa Dickey is a financial coach here in the Phoenix area and says now is the time to get yourself out of that holiday debt.

“If we can't prevent people going into debt, this time of year let's at least talk about some of the best strategies for getting out of debt.”

There are different strategies for paying off debt. One Dickey suggests is something called the “The Snowball Approach.” This is where you pay off a debt with the lowest balance first.

“The idea there is by paying off the one with the smallest balance you experience a quick win that’s motivating. You got some validation, some confirmation that you're doing something right so it keeps you accountable and then you tackle the next one from there.”

Another strategy is the “The Avalanche Approach” where you pay off the debt with the highest interest rate first.

“The idea behind this approach is that the one with the highest interest rate is costing you the most money and so you want to get that one out of your life as quickly as possible."

A third tip to getting debt free, is the “Emotional Baggage Approach.” For example, paying off a debt left over from a divorce.

“So the idea is, if you look at your debts and there's one of them that every time you make the payment you sort of relive a past decision that you made that you really regret or a time in your life that brings you some heartache, then you probably want that one out of your life.”

And finally, avoid the “Divide and Conquer Approach.” This is where you spread around an equal amount of money and apply it evenly to different debts. Using this approach, Dickey says, psychologically you'll feel like you're getting nowhere and may give up.

“What you don't want to do is what I call divide and conquer, and when it comes to your money, when you divide your money you end up not conquering anything.”

Dickey says the goal is to get debt-free this year, but to make that happen, you have to get started and it will be well worth it!

"Actually, getting out of debt and conquering it, will likely end up being the thing in your life that you feel most proud of."

Dickey says the best way to keep yourself out of holiday debt is to start planning and budgeting now.