Tips on Climbing Out of Debt

Maybe your spouse has had that “Come-to-Jesus” talk with you about the bills that are piling up on the counter.  Or maybe you’re screening your calls from the debt collectors hounding you on the phone.  Or maybe you’re just tired of working so hard to get ahead and are still living paycheck to paycheck.  It doesn’t matter.  The hardest part is over: you’ve admitted that you have a problem and that you need some help.  The two most effective ways to “dig yourself out” are the debt snowball method and the debt avalanche method.  Join me below as we discuss both of these along with a few ideas as to which is better suited to your particular situation.

Debt Snowball Method

Are you the kind of person who seems to “get in your head” too much whenever you set a goal?  Maybe you tell yourself every New Year’s Day that you are going to exercise an hour every day and that you will never eat chocolate again and that you will never again yell at your kids.  You know where that got you, but you’ll be back at it again next year.  Please don’t misunderstand; we all have a little of that “all-or-nothing” mindset in us.  But if it’s your “go-to” to get discouraged easily and the thought of sticking to a budget makes your stomach ache, perhaps the debt snowball method is the hack for you.  It celebrates small, frequent wins and can make the whole debt elimination process more palatable.  Let me describe how it works.  If you’re single, this is a lone exercise, but if you are married or are in a committed relationship, you absolutely need to do this together.

Write down all your non-mortgage debts on a piece of paper including lender/credit card company, current balance, monthly minimum payment and interest rate.  Starting this month, pay as much extra as you can scrape together from foregoing your daily latte habit, brown-bagging your lunch, cutting back on dinners out, etc., etc. on your lowest balance credit card.  Pay the minimum payment on all the other credit card debt and make your car payments.  Every month, follow the same exercise: challenge yourself to trim your expenses wherever you can and direct those funds towards chipping away at your smallest credit card bill.  When you get that one paid off, celebrate in a small way: toast yourself with a special beverage, serve a special dessert for dinner or buy a small token like a favorite candle or a bouquet of flowers for the house.  Next month, repeat!

Attack the remaining lowest balance credit card and advance the same plan of attack until all the credit cards are paid off.  Once they’re all paid off, save the card with the lowest interest rate and cut up the others, but do not cancel them.  Your credit rating is based on the ratio of debt used as compared to the amount you have available and if you cancel cards, you impact that available amount and could harm your credit score.

Please, please, please, going forward, only use that card if you know you will have the funds to pay it off every month or if it is a true emergency.  The next step is to set your mind to your car payments.  Believe it or not, lots of people think a car payment is just something everybody has.  Not true.  Pay off that car or cars early so you can free up money to save more for retirement, pay for college or go on a vacation.  Employ the same strategy and start hacking away at the car payment with the lowest balance.  You can take it from there.

Avalanche Method

On the other hand, maybe you’re the sort who always picks up the pennies from the parking lot, would never get in the position where they would need to pay a late fee and who turns the thermostat down to 67 degrees in the winter to save on heating and who tells the “haters” to put on a sweater.  These folks don’t want to be “psyched-out” with wins; they just want the “down-and-dirty” of making the debt go away as efficiently and as inexpensively as possible.  If I’m describing you, the debt avalanche method is your ticket.  Please proceed with the same aforementioned practice of committing all your debts to paper.  Rather than paying down your lowest balance credit card first, your strategy is to maximize your extra monthly payment on the credit card with the highest interest rate.  By doing this, you’ll save the most money in the long run.  Please know, this is many times the harder method as many people carry their highest balances on the cards with the highest rates.  It may take your longer to knock out your debts.  If you have the willpower to do it, though, you’ll be putting more money back in your own pocket over time.

Regardless of which debt reduction method you pursue, consider hiring a qualified investment advisor in the Quad-Cities. Other questions about debt, investments or financial planning? Visit my financial blog to learn more.



Heidi Huiskamp is a certified investment advisor serving the Quad-Cities. She has her B.A. in Business Administration and a minor in Economics from Augustana College, and her masters degree from the Graduate School of Banking at the University of Wisconsin/Madison.  She has worked in a financial advising capacity for over 35 years. If you’d like to learn more about investments and financial planning, Heidi can be reached at or call her at 563-949-4705.

Securities offered through J.W. Cole Financial, Inc. (JWC) Member FINRA/SIPC.  Advisory services offered through J.W. Cole Advisors, Inc. (JWCA).  Huiskamp Collins Investments, LLC and JWC/JWCA are unaffiliated entities.