How To Pay Off More Than One Debt: Poorer Than You

by Stephanie

If you’ve only got one debt hanging over your head, paying it off isn’t rocket science: you pay as much as you can every month until the sucker is gone. But if you’ve got more than one debt to worry on, how do you prioritize them?

Before you even think about how to pull yourself out of a debt hole, you’ve got to stop digging the hole! Stop acquiring debt. Don’t use your credit cards if you’re carrying a balance on them from month to month. Use a debit card instead. If you’ve got some fancy home equity line of credit, don’t draw anymore from it. If you can’t stop acquiring new debt, you won’t be debt free. If you’re having trouble making ends meet without using debt, you need to drastically change something in your life.

What can you drastically change to stop acquiring debt? That’s something you have to figure out for yourself, but I can tell you what I did: I had to drop out of college for nine months vow not to buy anything unless it was used (except food). Hopefully you won’t need to take as drastic of measures, but I’ll tell you something: it worked! I’m debt free now, except for my low-interest student loans.

No matter what theory of debt pay-off works for you (see below), each of them starts off the same way: making a list of all of your debts, including the total balance of each debt, the interest rate, the minimum payment, and a little something I like to call the “annoyance factor” of each debt. The annoyance factor should be a number, and it doesn’t matter on what scale (1-5, 1-10, 1-100, whatever!). Just as long as a bigger annoyance factor means the debt is more “annoying” to you than a debt with a lower annoyance factor.

There’s a spreadsheet below for entering all of this information into. First, here’s a quick explanation of the debt repayment theories.

Lowest Balance theory:

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