60. The How: Debt Pay-Off Strategies

Are you paralyzed by credit card debt and not sure where to start with paying it off? In our first episode on debt, diet and alcohol, Kimberlee explored the psychology of debt. Today, she’s sharing an actionable plan you can use to start paying off your debt today, and avoid falling back into it in the future. She also breaks down some key financial concepts like debt consolidation, good versus bad debt, and two common debt payoff methods. Episode Recap:Today we’re continuing our conversation on debt, diet and alcohol (01:31)Take a deep breath; then it’s time to create a budget (03:27)Understanding the debt avalanche method (0:04:30)Pros and cons of the debt snowball method (07:48)Should you consolidate your credit card debt? (10:14)Good debt versus bad debt (20:02)Once you’ve started paying off your debt, do these things (23:07)Resources:Visit the Fiscal Feminist WebsiteFind every episode of the Fiscal Feminist podcast“The Fiscal Feminist” book“Debt, Diet and Alcohol Part 1” episode“Psychology of the Budget” episodeCalculators for debt payoffQuotes:“So, I want to just make a quick note here about good debt versus bad debt. Is there good debt? Yes, there is good debt. All debt is not created equal, right? Debt used to build wealth is generally viewed as good debt: taking out a mortgage, investing in yourself by borrowing for more education so you can get a good job, small business loans, or debt consolidation. These are all forms of good debt that are going to help you build you net worth, either by getting an asset like a house or getting an education so that you can go get a better job, or eliminating high-interest rate credit cards so you can lower your interest rate and pay one payment and get all this debt eradicated over a certain, finite period of time.”“The first thing I recommend to everybody, because I know this works, is take a very deep breath. This is a doable strategy. You can do it. I know it’s overwhelming, and when you look at your credit card statements, sometimes you think ‘OMG, how did I get myself into this big mess. So take a deep breath. Anything can be accomplished if we put our minds to it.”