If you are currently in the process of eliminating debt… what strategy are you using? I’m not going to debate about whether or not which strategy is the best (although I DO have an opinion about that), because if it’s working for you, then keep doing it!

As I see it… there are FOUR main strategies that I can name off the top of my head. If you have a different strategy for eliminating debt, I’d love to hear it.
For the record, I don’t consider bankruptcy a debt elimination strategy. Let’s assume that you are current on all your accounts and you don’t qualify for debt settlement.

Here are the strategies:

1. Highest Interest – This entails paying off your accounts in the order from of highest interest rate to the lowest interest rate. A lot of people like this strategy because mathematically, it is the method that saves you the most money.

2. Biggest Balance – This strategy is for those who like to tackle the “Biggest” problem first. Once the bigger obstacle is gone, the smaller ones will fall by the way side. The interest rates are not a factor in choosing the order of debt payoff.

3. Smallest Balance – This strategy is a popular one because a person might be able to pay off 2 or 3 small debts within the first year. This motivates them because they have fewer checks to write as each debt gets eliminated.

4. The HIT LIST – With this strategy neither the interest rates nor the balances matter. This strategy is based solely on which creditor pissed you off the most. Maybe they treated you badly on the phone or they were uncaring when you asked them to waive your first late fee. Whatever the reason, a person with this strategy gleans enormous satisfaction when they make the final payment on each of their bills.

My own personal method I used was a variation of #3 above. What I did was figure out which debt was going to be paid of first anyway if I didn’t add any extra money into the mix. So conceivably, a $1200 account might get paid off before an $800 account. That’s really OK in my book, because BOTH are getting paid off one after the other so it didn’t really matter to me which came first.

So there you have it, the common used strategies to eliminating your debts one by one. If you haven’t created a debt elimination plan yet, does one of these stand out for you? Conversely, if you have a plan, how is it working? What are you doing to stay motivated?

Hope this helps!