By Dr Dave Schalow, PhD, CLU, ChFC, CFA, CFP

Financial Success | April 16, 2026

Getting rid of expensive debt can create breathing room in your financial life. Money that goes toward interest is money you can't use for other goals. When several payments arrive each month, it can be hard to see where to begin.

The first step is to put the whole picture on paper.

KNOW WHAT YOU OWE

Make a list of each debt, its balance, interest rate, minimum payment, and due date. Include credit cards, vehicle loans, student loans, and other obligations. Read the actual statements instead of relying on memory.

Then compare your required payments with your take-home income and essential expenses. Food, housing, utilities, insurance, and transportation still need to be covered. A plan that ignores those expenses won't last.

UNDERSTAND THE COST OF INTEREST

For a simple illustration, a $10,000 balance at 18% annual interest represents roughly $1,800 in interest over a year if the balance stays unchanged. Actual charges depend on how interest is calculated and how the balance changes.

That example helps explain why reducing a high-interest balance can be valuable. It doesn't mean every debt is the same or that borrowing to invest is automatically a good idea. Investment returns are uncertain; loan payments still come due.

CHOOSE A REPAYMENT APPROACH

The Consumer Financial Protection Bureau describes two basic approaches.

With the highest-interest-rate method, make the required minimum payments on all accounts and direct available extra money toward the debt charging the highest interest rate. Under comparable conditions, this approach can reduce interest costs.

With the snowball method, make the required minimum payments on all accounts and direct extra money toward the smallest balance first. Eliminating an account can provide a visible win that helps you stay motivated.

When one debt is paid off, redirect the payment toward the next target rather than treating it as new spending money. Choose a method you understand and can follow consistently.

Source: Consumer Financial Protection Bureau, “How to reduce your debt” — https://www.consumerfinance.gov/archive/blog/how-reduce-your-debt/

MAKE THE PLAN REALISTIC

Choose a specific extra payment that fits your budget. Review discretionary spending and look for ways to increase income, but don't build the plan around money you aren't reasonably sure will arrive.

Keep some room for unexpected expenses so that every surprise doesn't force you back onto a credit card. If required payments are already beyond your ability to pay, contact your creditors promptly and consider help from a reputable nonprofit credit counselor.

CONNECT DEBT REDUCTION TO YOUR GOALS

In another article, I discussed the difference that setting aside money each month can make. For many households, the route toward that goal starts with organizing debt and releasing cash flow.

​Start with your statements. Choose a target. Set the next payment date. Review your progress each month. Financial progress becomes easier to manage when you can see the numbers and the next step.