How to crush your debt easily with 3 simple steps in 2020

To most people, like me, keeping New Year’s resolutions is difficult. Some people even hesitate to make new year’s resolutions at all. But some people responsibly follow each resolution they make on the occasion of New Year.


Of all types of resolutions, managing finances is one of the most common of all that is usually broken. People mostly fail to get debt relief due to their negligence towards financial matters.


Make sure 2020 is the year when you are definitely going to keep your get out of debt resolution. If you can follow these 3 basic steps to crush your debt, you can reach your goal to become financially free in 2020.


1. List all of your debts from lowest to the highest amount


Relax and take a deep breath. Now you are going to prepare a list of every outstanding debt you owe, a.k.a. your total debt balance. This may include:


  • Credit card debts
  • Payday loans
  • Personal loans
  • Mortgage payments
  • Student loans
  • Auto Loan Payment


Once you make the list of all your debts, sort out the unsecured debts from that list and create a new final list of debts to start your quest. Practical mortgage and car loan payments will be off that list as they secure debts with collateral.


*Do not forget to list every balance with their interest rates and creditor names. Now you have a clear picture of what you owe and to whom.


2. Decide which debt to crush first


Professionals might suggest you focus on the debt with the lowest balance first because it’ll be easier to crush such debts due to the low balance. You may even get out of debt quickly if the entire balance of a particular account is small enough.


But if you ask me, I’d always target the debt with the highest interest rate. The best way to crush your debt is to target your highest interest debts first. This is because the highest interest debt can continuously generate more debt into your account. Normally, payday loans and credit card bills have the highest interest rate compared to other loans.


In some situations, the circumstances related to your debt may push you to pay it first. For example, if you have taken out a loan against your retirement plan and somehow facing issues in your work life, it is better to pay off that debt as soon as possible. To support your quest, you can engage in multiple income streams like doing any side hustle. If you live in a friendly neighborhood where you can arrange a good old-fashioned garage sale, do it. It is the easiest and a low-cost option to clear your unwanted commodities and make a profit out of those things. Once it is done, use the money to pay off your debts.


Once you have determined which debt to target first, analyze your basic expenses again before starting the quest. Starting from the current month, make minimum payments on other debt accounts, and invest as much money as possible to make a payment on the target debt, which is the lowest one.


If you are confused about how to save money from your monthly budget and make debt payments, it is suggested that you should use the 50/30/20 budget strategy. Keep basic, important expenses on top priority, like housing costs, and engage 50% of your income for that. Then engage 30% for other requirements, and use 20% for savings and debt paydown. You can even use the 20% to repay the debt if you can.


3. ‘Snowball’ or “avalanche” your remaining debts


Once you’ve made the list, now is the time to choose your debt payment strategy.


You primarily have 2 options:


a) “Snowball” – List your debts as per their amount, from the lowest to the highest. Engage most of the income to repay the debt with the lowest amount. Make sure to make minimum payments to other debts. Once it is paid off, target your next debt account on your hit list. Again, follow the same strategy on the next debt with the lowest amount and make minimum payments to other debt balances.


b) “Avalanche” – Just like the previous method, you need to make a list. But this time list the debts as per their interest rates, from highest to lowest. Make minimum payments to your other debts and focus on the one with the highest interest rate. Once it is paid off, choose the next with the highest interest from your kill list. This is my favorite debt payoff strategy so far.


You need to take care of your credit score. Making extra payments each month on your debts can also lower your credit utilization ratio, which can improve your credit score. You may also think about the option of debt consolidation. You may tackle your credit card debts by choosing one of the most popular debt consolidation methods, a.k.a. the balance transfer method. You may also take out a debt consolidation loan (a personal loan) to consolidate multiple debts into one.


The more you pay off your debts, the better your credit score will be.




These are the 3 basic steps to crush your debt. Once you gather debts, you should try to get rid of them as soon as possible. Remember, you can’t get debt relief in one night. If you follow these financial steps properly and keep your patience, you’ll definitely progress in your quest to crush your debts.