We humans can have a penchant for taking the easy road. We might stare blankly at messy rooms, then go do something entirely not cleaning-related instead.
Or pinpoint all of the healthiest options on the menu, then order the fried everything. And we also might stare down a mountain of bills, debts, and other expenses, then just continue the same spending habits—complete with a lament about how adulting is hard.
So how do we snap ourselves out of it? Committing to reducing debt can be kind of like committing to a healthier lifestyle because if you think about it, it is a healthier lifestyle.
But just like a diet probably won’t reduce your waistline overnight, a debt management plan isn’t likely to work magic on your finances out of the gate. If you tailor your plan to fit your life, however, it’s possible to hang in there for the long haul.
Creating a Debt Management Plan
Laying Out Your Debt
You probably have questions. What is a debt management plan? Simply put, it’s a way to get control over your debt. Does a debt management plan work? That answer is up to you.
The first step toward defeating your debt could be to lay it all out on the table – and we mean ALL of it. The average total household debt in America, including credit cards, mortgages, car payments, and everything else, hovered at just over $50,000 in 2018. For some, that total number could be a real slap in the face. (It’s okay to ugly cry.)
One way to get to your total debt amount is to gather every statement, every bill, and every outstanding balance and input them all in one place, such as a spreadsheet or an app like SoFi Relay. (Pro tip: This might be a good time to gather all your logins and passwords in one safe place, too.)
You might be painfully aware of your major debts, but are there others that could be slipping beneath the radar? Potential one-off or occasional debts can include financed household purchases, medical bills, or quarterly insurance payments.
One helpful way to make sure you’re looking at all your debts could be to scroll through your bank statements to look for recurring payments, especially if they’re set up on auto-pay. Another is to compare your list of debts to your credit report.
Categorizing and Conquering
Next, you may want to break it down even more by categorizing and prioritizing your debts. Generally speaking, there are two types of debt – secured and unsecured.
Secured debt includes things like mortgages and car payments that are tied to a physical asset. Unsecured debt isn’t tied to anything tangible, so it can include most credit cards and other types of loans.
Beyond that, you can group your debt by categories, such as high-interest, low- or zero-interest, fixed-rate, variable-rate, or even large balances and small balances.
As you start to list your debts, you could consider common elements such as each creditor’s name, the total balance, your monthly payment, the interest rate, and the expiration date for any promotional interest rates.
For an added layer of insight, you could use a credit card interest calculator to understand how much total interest each might incur over time.
It might also be a smart move to prioritize your debt, putting those that – if we may be melodramatic – could send you tumbling into the bad-credit abyss if you get behind on payments.
For homeowners, that could be the mortgage. For commuters, car payments and insurance could be high on the list as well. You could ask yourself which of your debts absolutely must, without fail, be paid on time and in full each month, and put them at the top.
Putting Your Debt in Context
The final piece to your financial puzzle could be to look at your debt in context with the rest of your expenses, such as monthly bills, the grocery budget, gas, and retirement contributions, as well as your monthly take-home income.
Seeing everything together can help give you a solid feel for how much you’re spending (or overspending), and how much you can reasonably start to budget toward debt repayment. And remember that even if it’s only a few dollars to start, it’s still a start.
Picking the Right Debt-Management Plan
Financial gurus have developed a number of methods for getting out of debt, and have even given them fun names that can read like the financial version of A Song of Ice and Fire.
The Snowball, the Avalanche, and the Fireball
The snowball method: This strategy calls for paying the minimum on all your debts, but putting extra toward the smallest balance first. When that’s paid off, you could apply that entire payment to the next-smallest balance on top of the minimum. It’s one way to help get some quick wins and start to check balances off your list.
The avalanche method: This one is similar but focuses on interest rates instead of total balances. With the avalanche, you would pay the minimum on all your other debts but put extra toward the highest interest rate first and work your way down. This could work to save money on interest in the long run.
(If you have trouble deciding, this worksheet can help spell out the pros and cons of either the snowball or avalanche method.)
The fireball: This strategy is a mix of the others, and works for some by separating debt into “good”– which is generally considered to be fix-payment, low-interest debt that’s on a set repayment schedule – and “bad” – such as credit cards and other unsecured loans. Then, using either the snowball or the avalanche, you could start burning through the “bad” debt first.
One way to narrow your choice is to research the pros and cons of all three methods, then pick the one that fits your style, your personality, and makes you think, “That sounds doable.”
Or, since we’re talking DIY debt management, you could also pick the parts you like from each one and make it your own.
Once again, it’s kind of like physical fitness: Some people may struggle to lose weight because they haven’t found a diet their body likes. But once they make that connection, they might find it a lot easier to crush their goals.
And speaking of goals, they apply to your debt-management plan, too. You might want to plan a strategy that speaks not only to you but to your endgame. Are you hoping to save enough to afford an electric car?
Will you need to pay for daycare in nine months or so? Or are you hoping to hit the magic 43% debt-to-income ratio that many lenders like to see for mortgages?
At the end of the day, you can think about your debt payoff strategy as a way to get you where you want to go, when you want to get there.
The Snowflake Method
If you’re less disciplined, you might consider the “snowflake method,” a debt-reduction method that works by throwing any additional money that comes your way toward debt, including work bonuses, side-hustle income, or selling things you no longer need or use.
The snowflake’s stricter cousin, the “spending fast,” takes the concept a step further by encouraging users to live as austerely as possible. Instead of eating dinner out, for example, you could cook at home and put aside the money you would’ve spent toward debt payoff. Coffee shop stops? Nope. Make your own and put that $5 toward debt instead.
These two methods could either work on their own or as tactics to complement one of the larger strategies.
Consolidating Your Debt
Paying fees for late payments or overdrafts doesn’t help anything when the goal is reducing debt. If you find it difficult to keep track of what’s due when combining all your separate payments into one credit card consolidation loan could be a way to focus on one monthly payment.
Consolidating your credit card debt might also include a number of other benefits, but it isn’t a magic cure-all. A loan will not erase your debt, but it might help you get to a fixed monthly payment and reduced interest rates.
It’s important to compare rates and understand how a new loan could pay off in the long run. If your monthly payment is lower because the loan term is longer, for example, it might not be a good strategy, because it means you may be making more interest payments and therefore paying more over the life of the loan.
SoFi Personal Loans are one way that could help make your choice easier with low rates, no fees, and easy access to support if you have questions.
Keeping Yourself on Track
The best strategy in the world may not lead to progress if you lose track of it after a few months. One way to stay on the right track could be to set up a bill payment calendar to remind you of what’s due when.
You could write it down with old-fashioned pen and paper, or use something like SoFi Relay for notifications and easy digital payment options.
If willpower is your challenge, you might want to consider enlisting the help of a debt buddy to help get you through the rough spots.
It could be a trusted friend, family member, or even a fellow SoFi member who’s been in your shoes and succeeded. You could schedule regular check-ins, and maybe even challenge each other to a debt-payoff duel to spark a little competition.
Another option is to identify your weaknesses and put barriers in place that could save you from yourself. For example, if you tend to make in-app purchases to level up on phone games, you could block them.
If you can’t help but swing by a drive-thru, you could consider taking another route. “That’s not resisting your urge, it’s planning your environment to support you,” Washington, D.C., psychologist Mary Alvord told U.S. News and World Report in an article about willpower.
Celebrating Even the Little Wins
Reducing debt is a big deal. And even if it takes years to reach your ultimate goal, it’s important to celebrate every milestone along the way.
That doesn’t necessarily mean go on a shopping spree, though. You could treat yourself to a lazy Saturday in front of the TV, or go out with your significant other for a giant, gooey, delicious bowl of ice cream.
Because calories in celebration of paying off debt don’t count, right?
This article originally appeared on SoFi.
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