The Debt Monster Under the Bed: How to Prioritize Which Bills to Pay Off First

Picture this: It's late at night, and you’re lying in bed, trying to drift off to sleep. But instead of counting sheep, you’re counting debts—credit card balances, student loans, car payments, and that mysterious medical bill from 2019 that you swear you paid (but did you?). The Debt Monster is real, folks, and it loves to keep you up at night. But here’s the good news: with a solid strategy, you can tame that beast and even kick it out of your bedroom for good.

So, how do you decide which debts to tackle first? Grab a cup of coffee (or something stronger, we won't judge) and let's break it down together.

Step 1: Take Stock of Your Debts

Before you can decide which debts to pay off first, you need to know what you’re dealing with. This step is kind of like cleaning out your closet—you might find some things you forgot about, and it’s not always a fun process. But trust me, it’s necessary.

List out all your debts, including:

• The total amount owed
• The interest rate (this one’s key)
• The minimum monthly payment

This is where things might start to feel a little overwhelming, but hang in there. Once you’ve got everything laid out in front of you, it’s time to start sorting.

Step 2: Identify the High-Interest Culprits

Imagine you’re in a sinking boat (a charming analogy, I know). You’ve got multiple leaks, but one of them is a gaping hole that’s letting water in faster than you can bail it out. That gaping hole? It’s your high-interest debt.

High-interest debts, like credit card balances or payday loans, are the financial equivalent of a hole in your boat. They’re the most expensive debts you have, and they’re the ones that can do the most damage over time. The interest builds up faster than you realize, making it feel like you’re paying and paying but never making a dent.

For example, let’s say you have two debts:

• A $1,000 credit card balance at 18% interest
• A $5,000 student loan at 4% interest

Paying off the credit card first is like patching up that gaping hole. Sure, the student loan might be bigger, but it’s not as urgent because the interest rate is much lower. Once you’ve dealt with the high-interest debts, you can move on to the next priorities.

Step 3: The Snowball vs. Avalanche Debate

Now, let’s talk about two popular debt repayment strategies: the Debt Snowball and the Debt Avalanche. Both of these methods have their merits, and like a good pair of shoes, the right one depends on your personal style.

The Debt Snowball Method: This strategy is all about momentum. You start by paying off your smallest debt first, regardless of the interest rate, while making minimum payments on the rest. Once that smallest debt is gone, you take the amount you were paying on it and apply it to the next smallest debt, and so on.

Why it works: The Debt Snowball method gives you quick wins. Knocking out small debts feels good—like crossing things off your to-do list. It builds psychological momentum and can keep you motivated.

Example: You have four debts:

1. $200 medical bill
2. $1,500 credit card balance
3. $3,000 car loan
4. $10,000 student loan

Start with the $200 medical bill. Pay it off as quickly as possible, then take that payment and apply it to the $1,500 credit card. It’s like a game of whack-a-mole, but instead of pesky moles, you’re eliminating debts.

The Debt Avalanche Method: This method is the mathematically optimal choice. You start by paying off the debt with the highest interest rate first, regardless of the balance. Once that’s gone, you move on to the next highest interest rate, and so on.

Why it works: The Debt Avalanche method saves you the most money in interest payments over time. It’s a smart choice if you’re less concerned about quick wins and more focused on long-term savings.

Example: Using the same debts as before, you’d start with the $1,500 credit card balance (assuming it has the highest interest rate). Once that’s paid off, you move on to the next highest rate debt.

So, which method is better? It depends on what motivates you more: the thrill of quick victories or the satisfaction of knowing you’re saving the most money in the long run. There’s no right or wrong answer here—just the one that works best for you.

Step 4: Don’t Forget the Essentials

Before you go all-in on paying down debt, remember to cover your essential living expenses first. This might seem obvious, but it’s worth repeating: Don’t skip paying your rent or mortgage, utility bills, or groceries to put extra money toward your debts.

Think of your budget like a layer cake. The base layer is your essential expenses—housing, food, transportation, insurance. The next layer is your minimum debt payments. Once those are covered, any extra money can go toward paying down debts more aggressively.

Skipping the essentials might help you pay off a credit card faster, but it could also lead to bigger problems, like eviction or an empty fridge. And nobody wants that.

Step 5: Consider the Consequences

Some debts come with more severe consequences if you fall behind on payments. For example, missing a mortgage payment could put your home at risk of foreclosure. Missing a car payment could lead to repossession. On the other hand, a missed credit card payment might just ding your credit score and rack up some late fees.

When prioritizing which debts to pay off first, consider the potential fallout of falling behind. It might make sense to prioritize debts with more severe consequences, even if they have lower interest rates.

Step 6: Avoid the Debt Spiral

One final note of caution: Avoid taking on new debt while you’re trying to pay off existing debt. It’s like trying to lose weight while eating a pint of ice cream every night—not impossible, but definitely counterproductive.

If you’re struggling to make ends meet, look for ways to cut back on expenses, boost your income, or negotiate with creditors for lower payments. But whatever you do, resist the urge to open new credit accounts or take out loans. The goal is to get out of debt, not shuffle it around.

Wrapping It Up: You’ve Got This

Paying off debt can feel like an uphill battle, but with the right strategy, it’s absolutely doable. Start by listing out your debts, then prioritize based on interest rates and consequences. Choose a repayment method that works for you—whether it’s the quick wins of the Snowball Method or the long-term savings of the Avalanche Method. And above all, make sure you’re taking care of your essentials and avoiding new debt.

Remember, the Debt Monster isn’t as scary as it seems. With a little planning and a lot of determination, you can send it packing—and finally get some sleep. So take a deep breath, make a plan, and get ready to tackle that debt one step at a time. And if all else fails, there’s always coffee (or that stronger something) to keep you going.

Now, who’s ready to say goodbye to the Debt Monster?