Debt Management 101: Core Tips and Tricks to Pay Down Your Debt

Published on May 22, 2023

Debt Management 101: Core Tips and Tricks to Pay Down Your Debt

Debt management can seem like a complicated topic. Luckily, there are relatively straightforward approaches to paying down debt that can point you in the right direction, and help you get a jump on healthier finances. Learning the basics of two core methods to pay down debt, plus key foundational tips, can help you get on track to paying off your debt and building healthier finances.

The importance of paying down debt — strategically

It’s easy to keep paying down debt on the back burner, but it’s important to prioritize it.

First, focusing on addressing your debt quickly can reduce the overall amount you’ll spend to pay it off, as you won’t continue to accrue interest with an outstanding balance. Additionally, once you have fewer debt obligations — or none at all — you’ll gain the ability to pay for things you may want as well as prepare for unexpected expenses. Paying down debt can also help you improve your credit score and strengthen your credit report, both of which are important to creditors.

Approaching debt payment with a plan

A savvy way to pay down debt — such as a mortgage, personal loan, credit card debt, auto loan, small business loan, etc. — is to approach it with a concrete strategy. Doing so can help you pay off your obligations faster and more methodically, so you have a pulse on your monthly finances and a pathway to be debt-free.

Choosing a strategy: Snowball Method or Avalanche Method

There are two core methods to paying down debt strategically: the snowball method and the avalanche method. Each have different advantages, and give you an opportunity to plan a debt-payment strategy that makes sense for your finances.

The Snowball Method Defined

The snowball method is a debt-repayment strategy in which you pay down your smallest debt first, and then move on to addressing larger debts. Along with ultimately leading to faster debt repayment, this method can enable you to build momentum when paying down debt, and also provide a sense of accomplishment.

The Avalanche Method

The avalanche method is a debt-repayment strategy in which you prioritize paying off debts with the highest interest rates first. This method can save you money on interest payments in the long run, and can help you become debt-free faster. One drawback, however, is it may take longer to see progress on smaller debts.

5 key tips to paying down debt

Along with understanding the two strategic approaches to paying off your obligations, there are also foundational strategies to chip away at debt overall.

1. Debt consolidation

Debt consolidation is a financial strategy in which you combine multiple debts into a single payment, typically with a lower interest rate. For instance, may be able to consolidate credit card or personal loan debt. This simplifies the payment process, and can help you pay down your debt faster by reducing the overall amount of interest you owe.

2. Budgeting

Creating a budget can help you see where your money is going each month, and subsequently enable you to control your spending. Once you have a sense of where you are directing your income, and how much you are spending in each category, you can see how much money you have available to pay down debt monthly.

A budget will show you how adjusting your spending in each category can enable you to dedicate more money to debt payments, and help ensure you make consistent payments.

3. Building an emergency fund

Putting aside money for unexpected expenses — such a medical bills or home repairs, for instance — can help you avoid taking on additional debt in an emergency. If you have liquid savings available specifically earmarked for crisis moments, you can pay off emergency expenses without charging a credit card or taking out a personal loan.

4. Reducing spending and increasing income

If you are able to decrease your spending, you can have more money available to dedicate to debt payments. One area to look at within your budget is your discretionary spending — your wants instead of your needs — and see if you can cut back.

On the flip side, increasing your income can enable you to pay off more debt each month.

5. Debt relief

Debt relief refers to debt management programs and strategies aimed at helping individuals and families reduce or eliminate their debt. You may find it helpful for paying down debts by providing a path to financial stability, and potentially lowering the amount owed.

You can find debt relief programs through government agencies, non-profit organizations, and private companies.

Ultimately, even paying down a little debt through monthly payments can be the first step toward building financial health. It can help you boost bad credit and, in extreme circumstances, avoid bankruptcy. If you are looking for guidance, it can be helpful to seek out the expertise of a financial advisor to find a personal best debt management plan for you.


For informational/educational purposes only.  The information in this content is not advice on legal, tax, investment, accounting, regulatory, technology or other matters.  You should always consult your own financial, legal, tax, accounting or similar advisors before making any financial or investment decisions, or entering into any agreement for Valley products or services.  Copyright © 2023 Valley National Bank. All Rights Reserved.

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