The plan: Pay down your largest or smallest amount of debt first
There are several methods for paying down debt, and two of the most common are the avalanche method and snowball method. Luckily, you don’t have to be an avid skier to use them.
With the avalanche method, you pay your most expensive balance first. Start by listing out all your debts from the highest interest rate to the lowest, and determine the total amount of money you can put toward your debt each month. Make the minimum monthly payment on each card, mortgage or other debt, then put your remaining cash toward the highest-interest debt.
This strategy helps reduce the amount of money you’ll spend toward interest, since you’re removing the highest percentage first. The key is to stick with paying down debt on each subsequent card. Once you’ve paid off your first debt, keep your payments going to the next one.
If that strategy seems difficult, consider the snowball method, instead. This strategy goes the opposite route: you pay off your smallest debts first, then work your way up to the larger ones. You’ll still make minimum payments on all cards and bills, you’ll just focus on the smallest one and put your additional cash toward it, then move on to the second-smallest, and so on.
The benefit here is seeing multiple wins unfolding before your eyes. If you achieve paying off any kind of debt, even a small one, that’s a great feeling. Having those accomplishments play out can be highly motivating to get rid of the rest of your debts.