Now that you’ve done the first five steps to improve your financial situation, you may be wondering, what’s next?
You have this gorgeous spreadsheet, and you’re ready to begin paying down (no! paying off!) your debt.
Here are five different debt payoff strategies, spelled out in plain English, that will help you decide the right plan for you.
Remember, these are simply options. Try one for a while, and if it doesn’t work, go ahead and try another. Or, combine two different strategies! Make a plan that will work for you.
The Highest Shame Method
How it Works: List all your debts, along with their interest rates. In a third column, list how they make you feel. Your answer should either be neutral or ashamed. Did you write ashamed in more than one line? If so, rank the debts that made you feel ashamed from most ashamed to least ashamed. Ignore the neutrals for now. The debt that makes you feel most ashamed is your debt of highest pain. Pay this one off first. Do not pay attention to interest rates or balances. Pay attention to your feelings. Once you pay off all the debts that make you feel bad, you can focus on the neutrals and use either the logical method or the debt snowball to get those paid off.
Pros: This method will make you feel better about yourself and your situation almost immediately. We carry negative feelings about our debt, and those feelings have weight.
When I was paying off my debt, my internal dialogue kept saying, "only losers have credit card debt" over and over again. I couldn't shake it. All I wanted was to stop being a loser. I prioritized my 0% balance transfer credit card and paid that one first. The mathematics didn't matter.
I swear, after the last credit card payment, I was a new woman.
Cons: This is a highly touchy feely way to get out of debt. It's definitely not for everyone. If you like numbers more than you like hugs, it's probably not for you. Or, if you tried this method, and every debt came back neutral, you'll need to use math or snowballs.
Best for: People who have "baggage" about one or more of their debts. People who have mean and negative internal dialogues. People who need more than just numbers to get motivated.
Not recommended for: Mathematicians.