top of page

3 Approaches to Paying Off “Bad” Debt

Photo by Avery Evans on Unsplash

Not all debt is bad. My last article provides some guidance on determining good vs. bad debt. Regardless of whether it’s good or bad, the goal in life is to get to a place financially where you are truly debt free. This article provides a plan and three approaches that you can actually mix and match to achieve that goal.

Paying off debt requires some planning

As a coach—and someone who is getting certified as a YNAB (aka You Need A Budget) coach—I often find myself doing financial coaching with clients. When they talk about debt, shame behaviors regularly come out like avoidance. Debt can be overcome with a plan and some behaviors. I pulled myself out of thousands of dollars of credit card debt by planning using these strategies. I think you can find a personal approach that works for you using some or all of these tools.


The first step is, as they say, always the hardest. You have to stop taking on more debt. Nowhere is this harder than credit card debt.

The first time I tried to get myself out of credit card debt, my cat fell out of a tree and broke a leg three days after I made my plan. (Note: Yes - I had to get myself out of credit card debt more than once for the lesson to truly stick!) I didn’t have the cash to pay for the surgery and so I immediately “failed” at my plan. Thankfully, I just rolled with life, recalculated now long it would take me to pay things off with this new debt added and kept going.

You may experience the same thing, but wherever you can, stop taking on new debt.


Using whatever tool works best for you - a calendar, a task management system, automatic payments through your bank, etc - set up a way that the minimum payment gets made on time every month. If you can’t do that, you’re going to need to work with a financial coach.


After you’ve made 5 or more minimum payments (or payments over the minimum) on time, call the creditor (e.g. the credit card company) and ask them to lower your interest rate. They may say no and they may say yes. Regardless of the answer, document the call in your conversation log (a tool I teach about in my Facts of Life Book course) and schedule another call to ask the same question in 5 more months. Yes - do this EVEN if they said yes! The script for this is simple. “Hi (use the name they give you when they answer). I’m trying to pay off my credit card a little faster and I’ve been making on time payments at (or above) the minimum. I would like you to help me pay you back faster by reducing my interest rate. Could you please help me with that today?” Always be polite - no matter what the answer.


While it will hurt to look at it all in one place, you need to make a list of your debts, their interest rates, the total amount of the debt, and the payment amount. This will help you decide what debt to tackle when.

After you’ve made your list of debts, it’s time to figure out what order you want to start paying them off. The strategy behind this is simple. One debt gets ALL the extra money you can put towards it each month until it is paid off. Once that debt is paid off you take what you were putting towards its monthly payment and assign it to another debt in your list and so on and so forth. (P.S. I’m a big fan of enjoying a healthy treat for yourself the month after you pay something off. For one month, set some or all of the minimum payment you just paid off aside for something special for you as a reward and treat. Then next month - right back to the plan!).

Here are the three payoff strategies to consider as you decide how to pay off debt. I tend towards an “emotional” strategy by putting the debts in the order of the ones that make me the angriest for my taking them on or having to take them on but you do what’s right for you. And, remember as long as you’re always paying those minimums you can ALWAYS change your strategy if you feel like you need to.

Strategy 1: The Savvy Payoff Strategy (also called Avalanche Strategy in some places)

Mathematically, this is the “smartest” strategy because it basically saves you the most in interest long term. Order the debts from highest interest rate to lowest interest rate and pay off the highest interest rate debt first. Then the next highest. Then the next highest and so on.

Strategy 2: The Quick Wins Strategy (also called the Snowball Strategy in some places)

This strategy lets you feel a “win” the fastest. In this strategy you order debts from lowest total balance to highest total balance. Pay off the lowest balance debt first. Then repeat with the next lowest and so on. You’ll pay more in interest with this strategy over the long run. I actually like to use this any time there is a small debt (a few hundred dollars) that you can pay off in under six months. This strategy is a great place to start. After you’ve gotten that quick win revert to one of the other two strategies for a bit.

Strategy 3: The Emotional Strategy

This strategy doesn’t get NEARLY enough attention from finance experts but those of us who recognize that personal finance is deeply personal recognize that this strategy is critical to success. If one of your debts makes you furious or causes you to relive unhappy emotions, get rid of it as fast as you possibly can. It may not get rid of the emotions but it will let you not have to deal with them when you sit down to make your budget each month!

Are you interested in working with a financial coach?

If figuring out your debt payoff strategy alone is not your thing, then consider working with a financial coach like me. We walk side by side with you through the numbers and the complexity to give you new tools and help you uncover all the good things you already know about making your money work better for you. Schedule a free, no obligation, 30 minute consultation today.


📰 Want to make sure you never miss a story from me? Subscribe to my newsletter - I send out a fresh new article and do a round up of everything I published that week. It releases for free every Monday morning.


bottom of page