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Part 4: Paying Off Debt

Now that you are working toward getting a better handle on your expenses, we can focus on debt. That’s why we’re here, right?

There are two paths that I recommend: snowball or avalanche. Which one is better? It depends upon your financial situation and what suits you best. By now, you’ve spent some time thinking about the way you deal with money. What feels best to you?

The Snowball Method

The snowball method is popular because it provides more immediate gratification. You pay off the debt that has the smaller balance, while making the minimum payment on larger bills. The snowball gathers momentum as you eliminate one debt, then put the additional money toward the next. As you move from the smaller bills to the larger ones, your payments become more substantial. From a psychological standpoint, it’s rewarding to quickly see a reduction in the total number of bills.

The Avalanche Method

Using the avalanche method, you make the minimum payment on all your bills. Then, you pay more on the one with the highest interest rate. This makes economic sense because you are whittling down the balance that costs the most. When most of your monthly payment goes to interest, you can’t make much progress toward reducing your balance.

The avalanche method will save both time and money. However, your high interest bill could be your largest. This means that it may take some time before you see progress. You need to be patient when using this strategy

Stick With the One Your Love

There you have it. Select the one that works for you. Personally, I favor the snowball method. There is something very gratifying about knocking off your targets one by one. But you do you. Just stick with it. 

Now would be a good time to revisit the beliefs you listed for Worksheet 1B. Your personal financial goals will make it easier to pay off your debt, follow a budget, and pay attention to the amount that goes to interest. 

So, what is your financial intention? What drives you to want to improve your financial picture? You’re the only person who can answer these questions. If you believe you deserve the best financial life possible, you’ll want to stand on top of that mountain and launch that snowball… or avalanche… whatever your preference. Ready, set…GO! See you in two days…


1 action item, Reading List

Action Item 4: Potential Savings

Review your spending and determine ways to cut your expenses. There are literally thousands of ways to save, but here are a few ideas for places to look. Once you read over the list, get together with your partner, family members, or insightful friend to figure out where you can save. If you don’t have a buddy to vet your ideas, tackle it solo. 

By now, you should have a good idea of where your money is hiding. Find it and give it a job. Remember, you don’t have to do everything… every little bit helps.

Recurring Bills

  • Ask your utility, phone, cable, internet service provider, insurance company etc. for a better rate.
  • Cut out cable television and find an alternative, like Netflix.
  • Examine your bank statements and iTunes for auto payments and subscriptions. 

Credit Cards

  • Use a cash back credit card and pay it off in full every month.
  • Look for 0% APR credit cards and transfer high rate balances to them.
  • Ask your credit card company for a lower rate.

Purchasing Habits

  • Wait two weeks to 30 days before you buy.
  • Use thrift stores and consignment shops. 
  • Have a clothing exchange party with friends.  
  • Shop with a list and only buy what’s on your list.
  • Pay with cash only and make a game of how much money you can keep.
  • Borrow or buy used. 
  • Go on a strict spending hiatus for a month twice a year. 

Menu Planning and the Supermarket

  • Eat everything in your kitchen and take a break from grocery shopping. 
  • Make large meals you can freeze to avoid leftovers…and leftover ingredients.
  • Eat vegan or vegetarian all the time, or at least more frequently.
  • Buy minimally processed foods minus the name-brand labels and prepare it yourself.
  • Buy in bulk at warehouse clubs like Costco. (Stick to your list!)
  • Don’t buy bottled water.
  • Go online to discover some of the inexpensive do-it-yourself options for household cleaners and toiletries.


  • Find alternatives to expensive hobbies and sports. 
  • Find low- or no-cost activities at the library, church, or local community center. 
  • Get rid of your gym membership, particularly if you rarely go. 
  • Take your own snacks to the movies. 
  • Enjoy movie night at home or go during off-peak times. 
  • Stop eating out or go out for lunch, rather than dinner.
  • Pack snacks for road trips and outings. 
  •  Host friends at home potluck style.
  • Cancel magazine subscriptions before they auto-renew. 


  • Make gifts or re-gift things you don’t want.
  • Make your own greeting cards.

Personal Care

  • Eliminate habits that are costly or unhealthy, like smoking.  
  • Cut your own hair; do your own manicure/pedicure.


  • Don’t drive when you can walk, bike or take public transportation. 
  • Consider whether you really need one car or two.
  • Shop around for auto insurance.
  • Don’t drive so much.
  • Change your oil according to the owner’s manual, modern cars don’t require every 3,000 miles.


  • Move to a more affordable place.
  • Get a roommate.

Reading List: Take Charge of Your Finances