Is There A Best Way To Pay Down Debt?

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Many of the people that know me are aware that I write personal finance and debt reduction material on a regular basis. One common question inevitably comes up: “is there a single best way to pay down my debt?” Fortunately, the answer is clear as mud: yes and no. No, there is no one way that is best because everyone’s situation is different. Yes, there is one way to get started on the right path.


Before you start on any journey you need a specific destination. A broad goal like paying down your debt lacks direction, but paying off a particular debt, no matter what it is, is specific enough to be achievable. It is also important to be able to visualize your goal. Write it down on a piece of paper and tape it up so that you will be able to read it at least once a day. We humans are visual creatures, so reading a goal can help cement it in our heads.

Expense Tracking

If you have read anything I have ever written there has probably been a section related to tracking your expenses. There is a good reason for that and it is not that I run out of new ideas. I expound on it repeatedly because it works for everyone. There are dozens of ways to track where and how much you are spending. Something as simple as a pocket notebook or as modern as a smartphone app. How you track your cash outlay is not as important as doing so.

You will need to track all of your expenditures for three months to insure that you have accurate data. That data will help you recognize areas where you cut back and other areas where you will have to hold fast.

Form A Budget

There has to be a reason for all of that expense tracking, right? The data that you accumulate is going to be used to form your budget. You will want to account for everything from your rent/mortgage to the amount of money that you plan to spend each month for entertainment. At first start with a monthly budget broken down into the number of pay periods that you have per month. You will find that you have forgotten something the first month, maybe even the first two months, but you will work it out. Once you are sure that you have the monthly budget worked out, try to expand out and form a yearly budget that includes goals like new tires, a down payment on a different car, a short vacation, etc.

Paying Down That Debt

In order to effectively pay down your debt, you will want to wait until you are comfortable with your monthly budget. If you jump the gun, you may find yourself frustrated with the whole process and give up. Once you are ready to pay down your debt, things become a bit murky. After identifying which debt you want to go after, the question becomes how to do it. Since everyone’s circumstances are different, there are any number of ways to go about paying debt down. If the chosen debt is an installment loan you can pay an extra payment once a year or divide that payment by twelve and pay that amount each month on top of your regular payment. If the targeted debt is a revolving credit line (read credit card), you could pay the minimum plus all of the interest at one time, pay the minimum one week then the interest the next, or the minimum one week and $20 on each of your other paydays per month. See how it gets a bit confusing. There just isn’t a single best way to pay down debt.

I wish I could give you a concrete plan of attack for your debt, but you need to tailor your plan to your personal needs. The key steps are the expense tracking and budget. Once you have a handle on those, your plan of attack will nearly form itself. All you will have to do is follow through.

Author Bio: In just over two years, author Jerry Coffey paid off more than $10,000 in credit card debt.