How to Pay Off Your Debt

By | 2018-06-04T11:45:49+00:00 June 24th, 2016|Strategize|0 Comments

How to pay off your debt the Fiscal Fitness Phoenix Budgeting Method

Once you learn how to budget, especially when you use the Fiscal Fitness Phoenix Budgeting Method, you tend to notice you have a lot of extra money at the end of the month.  This is because we are planning ahead with our money, not looking at what we did in the past without a clear plan on how to move forward and make changes.  Your budget should show you exactly how you should be paying our expenses on payday (not on the due date), using cash (check out our podcast episode on using cash here) to pay for day-to-day spending, and saving for random and non-recurring expenses like home repairs, auto repairs, gifts and vacations. When you are budgeting for all of these expenses you actually have real extra money in hand.

Our challenge to our clients is to set a goal to direct you on what you do with that extra money.  It could be extra towards retirement and investments, vacations or your kids’ college funds.  But for a lot of people their first goal is to pay off debt.  Student loans, credit cards, car loans, high interest title loans and mortgages are all types of debt that people want to get rid of quickly.  (Contrary to popular belief, student loans are not really “good debt”, but we will talk about that another time).

First things first, if you are getting out of debt you are doing it right.  We are going to give you four different debt payoff strategies that are all correct.  The difference between them all depend on the people that are using them.  Some people are very motivated and want to get rid of their debt as fast as possible no matter the sacrifice.  Other people need a quick win to stay motivated throughout the process and need a different strategy.

Click the link below to schedule for a free 15 minute debt pay-off mini-session with expert financial coach, Jill Emanuel, to learn which debt payoff strategy is right for you:

 Schedule Appointment


Before we go over our four debt payoff strategies here are some common errors people make when paying off debt.

Divide and Conquer

If you have multiple debts the worst thing you can do is try to pay more towards all of the credit cards.  When you do this you divide your money and don’t conquer anything.  The best option is to pick one debt to pay off, pay the minimums on the rest and throw every extra on the one debt that you chose.

Not saving for random and non-recurring expenses

A tenant of our budgeting system is setting aside money monthly to go to different expenses that don’t happen monthly.  Some examples of non-recurring and random expenses are subscriptions, clothing, vacations, house repairs, car repairs, taxes, licenses and registrations or semiannual insurance premiums.  Basically anything that can happen unexpectedly (like your car breaking down) or anything that doesn’t happen monthly.  The idea is that these are expenses that ARE going to happen but are never budgeted.  When these expenses come up you typically have to put them on a credit card.

You may say, “but how can you say save for clothes or vacations before you pay off debt?”  Let me pose this question to you.  Say you cleared out your checking account of that extra money at the end of the month to pay off a debt and didn’t put it towards your random/ non-recurring expenses and you end up having to have your car repaired.  How are you going to pay for that?  Yup, with your credit card.  Thus starting the credit card debt cycle all over again.

It’s important to set aside money monthly for these expenses and the best way to do that is come up with a yearly average for each expense then divide by 12.  This is the amount to set aside each month.

Changing Pay off strategies mid payoff

This happens most often because you hear Dave Ramsey, read a blog or talk to your friends who have paid off debt.  They say, “Don’t do it that way, the best way is this way.”  Choose your debt to be paid off and stick with it.  Changing mid course will only cause frustration and decrease your motivation.

Debt Payoff Strategies

There are four major debt payoff strategies.  I will list them in no particular order and list their benefits and who they would work best for.  This will help you choose which debt to pay off first and in what order to pay off the rest of your debt.  Don’t forget to pay the minimums on all other debt and pour everything extra into the one debt you choose!


This is the strategy popularized by Dave Ramsey.  It says list your debt in order of lowest balance to highest balance and pay off the lowest balance first.  Then pay off the next lowest balance and so on.


This strategy allows you to get a quick win and stay motivated in paying off your debt.

Who Benefits?

People that have trouble staying motivated and need to see quick and monumental debt reduction.


This is the strategy that Suze Orman prefers.  It says list your debts in order of highest interest rate to lowest interest rate and pay off the highest interest rate first.  Then you pay off the next highest interest rate and so on.


This strategy allows you to pay off the debt that is costing you the most money because of the high interest rates.

Who Benefits?

People that are very motivated to pay off debt and people that have debt with varying and high interest rates.

Highest Payment

This strategy is favored by “Rich Dad, Poor Dad” author Robert Kiyasaki.  It says that you list your debt in order of highest payment to lowest payment (excluding real estate) and pay off the highest payment first.


This strategy frees up the most money by paying off the highest payment first.

Who Benefits?

People with varying payment amounts and people that don’t have real estate in the debt portfolio.

Emotional Baggage Pay off

This is our own debt payoff strategy creation.  This says that some people look at one debt and feel really yucky about it and the one that really causes an emotional reaction is the one you should pay off first.  For example, if you have 3 credit cards all with $5000 dollars on them but one was the card you paid your attorney for your divorce.  Pay off that one first.  It will reduce so much stress and stop you reliving a bad decision.  Ignore interest rates and payment amounts.


This frees up debt along with reducing stress of looking at a payment you just sent and reliving the negative emotions you relive with each check you sign.

Who Benefits?

People who look at a single debt and feel yucky or get angry every time they pay it.

Like I said, if you are paying off debt you are doing it right.  There is no right or wrong way to pay off debt.  Each person has to choose what fits their life and their personality best.  Stick with it and throw all your extra money at that one debt you choose (after saving for random expenses) and you will get there!  Good luck!

Click the link below to schedule for a free 15 minute debt pay-off mini-session with expert financial coach, Jill Emanuel, to learn which debt payoff strategy is right for you:

 Schedule Appointment



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