Once you’ve convinced yourself to pay off your debt – you’ve cut spending and you’ve reviewed your budget, which debt do you begin with?
It’s always best to focus on one debt at a time. Plan to pay the minimum amount due on all forms of debt. And, always pay those minimum amounts on time. Paying even one day late will, in most cases, will subject you to late fees, which is just more debt that you’ll need to pay back.
Now, decide on which ONE debt you’ll pay off first.
This can vary from one situation to another, depending upon your specific needs. If you have a car that’s about to be repossessed, for example, or electricity which is about to be shut off, those will be your first priorities.
However, once you’ve moved beyond the “urgent” debts, credit cards are the most common choice for pay offs, due to their higher interest rates.
The choice of which credit card to pay off first is up to you. There are two common choices, and either can be the “right” choice.
First, you might choose to pay off the card with the highest interest rate. This makes sense because, in the long run, you’ll save the most money.
However, many choose to pay off their small balances first – regardless of the interest rates. This is a favorite method since it provides the positive feedback of actually seeing accounts being paid off. This not only will free up more money to pay other debts with, but further motivates you because each paid off account is one less that you’ll need to focus on.