Chapter 3: Managing Debt
Some types of debt are more urgent to pay off than others.
High-interest debt (like credit cards or payday loans) is the most problematic and should be tackled first. The longer it sits, the more it costs you.
Medium-interest debt (like student loans or lines of credit) is still important to pay down but isn’t as urgent as high-interest debt.
Low-interest debt (like most mortgages) often isn’t a priority to pay off faster than your original term, since you can often earn more by investing extra money instead.
So, what if you’re feeling overwhelmed by high- or medium-interest debt? First, don’t panic — and don’t feel ashamed. Most of us weren’t taught how debt works, so it’s not unusual to find yourself stuck without a clear plan forward.
Take a deep breath and commit to facing it head-on. The sooner you know exactly what you’re dealing with, the sooner you can start moving in the right direction.
Step 1: List out your debts
Use a spreadsheet or notebook to write down each debt you owe. Include:
The total balance
The interest rate
Whether the rate is fixed or variable
The minimum monthly payment
Who you owe it to
If you’re not sure about the details, check your online account or contact the lender directly. Once you have everything in one place, you’ll have a clear picture of what you’re up against.
Step 2: Choose your payoff method
There are two popular strategies for debt repayment. With both methods, you’ll keep making the minimum payments on all debts, but put all extra money toward one debt at a time until it’s gone.
The Debt Snowball Method: Focus on the smallest debt first. Once it’s paid off, move on to the next smallest.
Why it works: Quick wins keep you motivated.
Example: If you have a $5,000 credit card, $10,000 car loan, and $25,000 student loan, you’d start with the credit card, then the car loan, then the student loan.
The Debt Avalanche Method: Focus on the debt with the highest interest rate first. Once it’s gone, tackle the next highest.
Why it works: Saves you the most money in interest over time.
Example: If your $5,000 credit card has a 22% interest rate, your $25,000 student loan has 6.5%, and your $10,000 car loan has 5%, you’d start with the credit card, then the student loan, then the car loan.
There’s no “right” choice — pick the method that feels most motivating for you.
Step 3: Track your progress
Seeing your debt shrink is powerful motivation. You could:
Cross off each $500 or $1,000 you pay off on a chart or whiteboard
Give yourself a small reward for hitting milestones (Amanda treated herself to a Starbucks latte each time she knocked another $1,000 off her student loan)
Tracking keeps you focused and turns debt repayment into a series of achievable steps instead of one overwhelming task.
Step 4: Find extra money in your budget
Paying off debt faster usually means freeing up more cash. You can:
Increase your income with extra shifts, a side hustle, or freelance work
Cut back on non-essentials (especially “wants” from your budget)
Pause or scale down certain expenses for a set period of time
Amanda sped up her debt payoff by:
Making coffee at home instead of buying Starbucks on weekdays (it tastes better anyways!)
Meal-prepping to save on groceries and avoid waste
Swapping restaurant meals for home dinners or picnics with friends
Sharing family Netflix and Spotify accounts
Selling clothes and household items online
Avoiding aimless shopping trips without a list
Small changes add up, especially when you stick with them over time.
Step 5: Consider negotiating or consolidating
Sometimes you can lower your interest rate — especially on credit cards — just by calling and asking. You can also:
Transfer a high-interest balance to a card with a lower rate (watch for transfer fees)
Consolidate multiple debts into one loan with a lower rate
Use a personal loan or line of credit to pay off expensive credit card debt
Always check the terms before committing, and make sure the new option actually saves you money.
Paying off debt takes time and discipline, but it’s one of the most freeing financial moves you can make. Every payment you make is a step closer to keeping your hard-earned money for yourself instead of handing it over in interest. And once you’re debt-free, you’ll have more room in your budget to save, invest, and focus on the goals that matter most to you.
-
Add a short summary or a list of helpful resources here.