Prerequisites

• Optimized budget
• 1 month emergency fund
• Bills paid in full
• Employer-matched retirement account

1. High-Interest Debt

   Debt is a difficult matter to handle. It's mentally draining, but very simple to manage. It will take time, but with a solid plan, you will be able to eliminate it.

   High-interest debt is defined by any debt with an interest rate of 10% or higher. The two debt eliminating methods we will cover are the Avalanche and Snowball methods.

   The avalanche method focuses on paying off the higher interest debt first and can help reduce your total debt cost over time. This is similar to finishing the hardest task first then moving on to easier ones.

   The snowball method prioritizes the smallest amount debt first. This can be mentally supportive since more debt will be paid off more quickly. This is similar to finishing numerous small tasks in a short amount of time before tackling the hardest ones.

2. Increasing Emergency Fund

   AFTER you have paid off all of your high-interest debt (10% or higher), look to increase your emergency fund to 3 to 6 months worth of living expenses. Your monthly living expense is the total cost of the needs category in your budget. Contribute to your emergency fund until you are comfortable with the amount set aside. This should be atleast 3 months, but not exceeding 6 months, worth of living expenses.

3. Moderate-Interest Debt

   Moderate-interest debt is defined by any debt with an interest rate between 4% and 10%. Repeat the same strategy you used to pay off your high-interest debt to pay off your moderate-interest debt.

Continue to make minimum payments on, but do not worry about paying off, low-interest rate debt (under 4%). If you can get a 4% or greater return on your money than it is more valuable to invest your money elsewhere.

You got this. Consistency is key.