With total outstanding consumer debt at $3.34 trillion, excluding mortgages, according to the Federal Reserve, it's clear borrowers aren't taking debt seriously enough. My method for upping the urgency: treat debt the same way you would if your house was on fire – extinguish it as soon as possible.
Debt costs you money every day. Interest charges add up and financial goals like building emergency savings, retirement investing, and more suffer as a result. I'm not saying you need to panic, but there should be a strong sense of urgency when it comes to paying off debt. You have to do more than coast along, paying the minimum.
One powerful repayment strategy I like is the "debt avalanche" method. It works like this:
- Order your student loans from highest interest rate to lowest interest rate.
- Pay the minimum on all your debt except for the one with the highest interest rate.
- Put anything extra you can afford towards that high-interest account.
- Once it's paid off, repeat the process with the second-highest rate loan, and so on.
This puts out the "fire" that is high-interest debt and helps you pay off all your loans faster. In fact, in 2015, I paid off $48,000 in student loan debt using this method.