Personal Finance: Winning Strategies for Minimizing Debt


If you have considerable outstanding debt, you might feel like you’re drowning. How can you get out from under what you owe while it keeps gathering interest and threatening to overtake you? While everyone’s financial situation is different, some debt strategies work better than others. No matter what you owe, following one of these repayment plans can help you organize your finances and get out from under your bills.

Debt Avalanche

The first strategy is called the debt avalanche. This technique involves paying back the minimum required amounts on each of your debts, then setting aside your remaining money for the bill with the highest interest rate. For this tactic to work, you first need to make a budget. That way, you know how much extra you can afford to funnel into the high-interest debt.

The reasoning behind this plan is that your highest-interest bill is doing the most long-term damage to your finances. Every month that passes results in this bill costing you even more in the future. Intercepting it before it gets out of hand can help you get back in front of your finances.

Once you’ve paid off the debt with the steepest interest rate, you can designate that extra money to the next-highest bill. Keep this up until your debts are all behind you!

Debt Snowball 

The debt snowball strategy is very similar to the debt avalanche. Like the avalanche, you still make the minimum payments on all but one of your outstanding bills. However, instead of focusing your extra money on the debt with the highest interest rate, you start with the outstanding loan with the lowest balance.

This plan allows you to make more noticeable progress on your debts more quickly. Once you knock out one debt, you can move to the next with even more money. As the name suggests, this results in a financial snowball that efficiently clears your debts.


A third strategy is called debt consolidation. This plan is different, as it involves taking out a separate loan to pay back all of your debts. Employ this tactic if you can get a personal loan with a lower interest rate than the average of all of your debts. It’s often easier to use consolidation to handle a small number of high-interest bills. A large volume of outstanding debt is usually easier to manage with the debt snowball or avalanche technique.

No matter what strategy you pick, it’s vital to stick to it. Pay as much back as your budget allows every month to keep your interest rates in check. This way, you’ll reclaim your financial future that much faster.