Get My Debt Under Control

Before deciding what to pay first, get all of the debt in front of you.

Credit cards.

Personal loans.

Car loans.

Student loans.

Medical debt.

Buy now, pay later balances.

Money borrowed from family or friends.

Anything else you owe.

For each debt, know:

When you’re determined to get rid of debt, it can be tempting to throw every available dollar at it.

But you still need somewhere to live.

You still need food.

Utilities need to stay on.

You may need transportation to earn your income.

Insurance and other essential obligations still matter.

Paying down yesterday’s debt while creating a brand-new crisis today doesn’t necessarily move you forward.

There isn’t only one way to attack debt.

Two commonly discussed approaches are:

Highest Interest First: After making all required payments, you direct extra money toward the debt with the highest interest rate. This approach will generally reduce the interest you pay compared with prioritizing lower-interest debts, assuming you continue making all required payments.

Smallest Balance First: After making all required payments, you focus extra money on the smallest debt first. Paying one balance off may give you a quicker win and one less debt to manage. Then you move to the next one.

One approach emphasizes reducing interest costs. The other may emphasize momentum.

The important thing is understanding the tradeoff and choosing a strategy you can actually stick with.

Making the required payments can help keep a current account from becoming past due.

But required payments aren’t necessarily designed to get you out of debt quickly.

When interest is being charged, carrying a balance longer can mean paying more over time.

Even when you can’t make a giant extra payment, additional money directed toward debt can matter.

But don’t promise money to debt that you actually need for rent, groceries or another essential obligation.

Sometimes the answer is both.

Putting every spare dollar toward debt while keeping nothing available for an unexpected expense can leave you vulnerable.

Then the car breaks.

The refrigerator dies.

A medical expense appears.

And right back to the credit card you go.

A smaller emergency cushion may help keep an unexpected expense from immediately becoming new debt while you’re paying old debt down.

That doesn’t mean ignoring expensive debt while building a giant pile of cash.

It means recognizing that getting out of debt and staying out of debt aren’t always exactly the same job.

Related Bixli Lesson: Build an Emergency Cushion

Debt consolidation can sound wonderful: One payment instead of five.

And sometimes simplifying several debts into one can be useful.

But one payment doesn’t automatically mean less debt.

Before consolidating, look beyond the new monthly payment.

Ask: What is the new interest rate? Are there fees? How long will I be paying? What will I pay overall? Am I turning unsecured debt into debt secured by something I could lose? What happens to the old accounts?

And perhaps most importantly: What caused the debt in the first place?

If you consolidate several credit cards and then run those cards back up, you haven’t solved the problem. You’ve potentially created a bigger one.

When you’re overwhelmed by debt, promises of fast relief can sound especially good: Lower your payments! Slash what you owe! One easy payment! Debt gone!

Slow down.

Debt consolidation, credit counseling, debt management, debt settlement, refinancing and bankruptcy are not all the same thing.

They can have very different costs, requirements, risks and consequences.

Before signing up for a debt solution, understand what the company is actually proposing to do.

Ask: What am I paying the company? What will happen to my accounts? Am I expected to stop paying my creditors? Could interest or fees continue? What happens if the plan doesn’t work? What other options do I have?

A reputable nonprofit credit counselor may be able to help you review your finances and understand your options.

But “nonprofit” does not automatically mean free, trustworthy or right for you.

Before working with any organization, find out exactly what it will do, what it charges and how your accounts may be affected.

That’s different from simply wanting to pay debt off faster.

If there isn’t enough money to cover required payments along with basic living expenses, the problem needs attention now.

Waiting can sometimes reduce the options available, so it’s worth learning what choices you have as early as you can.

Find out what you’re dealing with. Review your Blueprint.

If you think you may miss a payment, consider contacting the creditor or loan servicer as early as possible to ask what options may be available.

And if the situation is beyond what you can reasonably sort through yourself, qualified outside help may be appropriate.

Needing help understanding your options isn’t the same thing as failing.

The goal is to make the next decision with as much information as possible.

Debt isn’t always created by emergencies.

Sometimes it’s created by lifestyle:

The car. The clothes. The trips. The gadgets. The dinners. The wedding. The house.

None of those things is automatically irresponsible.

Someone can spend $200,000 on a wedding and be financially fine. Someone else may need to say no to a $20,000 wedding.

The difference isn’t whether the wedding is “too expensive.” The question is whether your finances can carry your choices.

Imagine you’ve been sending $400 every month toward a debt. Then one day: Paid off. 🎉

That $400 doesn’t automatically need a new place to disappear.

Before your lifestyle quietly absorbs it, decide what you’d like that money to do next. Maybe you: