What Debt Should I Pay Off First?

Another thing successful warriors do prior to going into battle is making sure they have the correct tools and weapons to be successful in their mission.

Now that we have our Battle Plan in place we need to decide what our weapon of choice is going be. There are 2 things you want to keep in mind when looking at these options:

  • What’s going to work best for me and my situation?
  • What’s going to get me out of debt the fastest?

Keep in mind, it’s not about the get rich quick scam here. It’s about taking the offensive stance against the traps and landmines we’ve set for ourselves and finding victory. However, we certainly don’t want to be in the war zone a second longer than we have to be.Debate What Debt Should I Pay Off First

Financial experts will argue and debate until they are blue in the face on why their preferred method works better and why you should ignore the other one. You will find pages and arguments that will support both claims.  At that point, you will start to get frustrated and overthink it and your battle will be lost before it even began.

IMPORTANT NOTE: Regardless of the method you choose, you need to keep making the minimum payments on all of your debts, otherwise you will be introduced to a brand new type of person…Debt Collectors.

What we are looking for at this point is what to do with all of the extra money that we have created within our budget. If you haven’t done so already, check out our pages on Budget Balancing, Money Saving Tips, and Maximize Your Income section to help you create those extra dollars.

So let’s examine the 2 go-to payoff strategies and see what how they work.



This is the most common method you will hear about. It’s very simple in principle. Basically, you take your list of debts and arrange them from the one with the lowest balance up to the one with the highest balance. Then, while keeping up with your minimum payments, take every extra dollar you have created and add it to the payment of the debt with the lowest balance. Continue doing this until it’s paid in full. Once it’s paid in full you move to the next one on the list. You now have even more extra dollars to attack that one each month, so it’s usually paid off a little bit faster. So on and so forth. Keep doing this until all debts are paid off.


  • Usually gets the first few debts paid off really fast.
  • Helps to build some momentum early on.
  • Simple and easy to setup your list without too much overthinking.
  • Sometimes referred to as the “psychological” method because it motivates you to keep going by seeing early results.


  • Depending on the interest on your larger debts you usually end up paying a lot more money in the long run.
  • Once the first few debts are paid off the motivation and momentum tend to die out.
  • Often keeps you in debt longer.



This is similar to the Snowball Method in the fact that you start by creating a list. However, here you are looking strictly at the interest rate on each account.

When you look into this method you will most likely be shocked when you find out exactly how much interest your creditors are charging you each month. They usually don’t go over that when they are promising you the world and all your free perks when you sign up.

Currently the national average is 15.07% for credit cards, and that’s actually low compared to some of the one’s I used to carry a balance on.

This list will go from highest interest to the lowest, making sure that you take every extra dollar that you have created and attack the highest interest debt first. After the first debt is paid off you drop down the next highest interest debt. So on and so forth.


  • Ultimately saves you money because you are knocking out the highest interest debts first and saving on what the interest you would be paying.
  • By the time you’ve gotten the first couple of debts paid off some of the other smaller ones are almost paid off as well simply by keeping up with the minimum payments.


  • Can take A LOT longer getting that first one paid off depending on the balance.
  • Harder to build/keep motivation and momentum going.
  • Easier to get discouraged from your ultimate goal.


It’s in your best interest to do some homework and fully understand your own situation. Just like you did in the Pre-Budget Reality Check you need to gather all of your statements on every debt that you have. Remember, we are looking at all of our DEBTS here. So make sure you gather info on all of them:

  • Credit Cards
  • Car Loans/Leases
  • Lines of Credit
  • Personal Loans (even if they are from family/friends)**
  • Medical Bills**
  • Collections**
  • 401(k)/403(b) Loans
  • Tax Liens
  • Student Loans
  • Payday/Title Loans
  • Home Equity Loans
  • Debt Consolidation Loans
  • Mortgage*

* Many people like to include the mortgage here since it’s technically a debt. Just make sure it’s on the bottom of the list regardless of the interest for now.

** A note on medical bills, collections, and personal loans from a friend or family member:  In most cases, these debts are either interest-free or the total interest has already been calculated into the total (collections). Regardless of whether you are choosing the Snowball method or the Avalanche method, these should be near the bottom of your list. Just make sure you remain caught up on the payments. If your personal loan is straining your relationship with your friend/family member you may need to knock it out first. Make the judgment call based on your own situation.

Write them all down.  Be sure to include:

  • Total amount owed
  • Minimum monthly payment
  • Interest rate
  • Most credit cards will have a section that tells you low long it will take to pay off your debt if you only make the minimum payment. Write that information down as well if it’s included.
  • Is there an early payoff penalty? (Auto Loans, Debt Consolidation, Home Equity, etc.) Sometimes it’s buried deep within the fine print but this is critical that you know this information so that you can make some informed planning choices. Because it can save you some serious headaches and a lot of money.

MY PERSONAL OPINIONAvalanche What Debt Should I Pay Off First

Everybody’s situation is going to look a little bit different. I personally prefer the Avalanche Method because it saves me the most money. I can’t help it. I’m a numbers guy. Plus avalanche just sounds way cooler than snowball!

Nevertheless, if your list has a couple of small debts that you can knock out in the first few months it could benefit you by knocking them out quickly. This will help jump start your path to victory and give you the edge of both motivation and momentum early on. Then you take that extra money from paying off the first few and knock out that highest interest debt more quickly.

I know of people who have been able to knock out “one debt a month” for the first few months and free up over $120! Now they are taking on that high-interest debt with a lot more firepower!

Ultimately, it’s your plan. It’s your battle. Think about it. Pray about it. Talk with your spouse/significant other about it. Do what makes the most sense for YOUR situation. Most of the time, it’s obvious. Don’t second guess it. Just go with it.

The method isn’t what matters here. You have your battle plan. You have your weapons ready. Now it’s time to actually parachute into the war zone. Get in there and get your hands dirty. Don’t hold yourself back another day! You are the only one stopping yourself from taking that first step to breaking free.

What method is working best for you? I’d love to hear it in the comments below.


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