How to Effectively Pay Down Debt

Managing debt can be extremely overwhelming. Adviser Haley Tolitsky helps you get started and move forward.
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By Haley Tolitsky, CFP

Managing debt can be extremely overwhelming. Don’t know where to begin? This article is for you! Get started by listing out all debt you have, including the type, balance, interest rate and monthly payment. Don’t forget to check your credit report to help determine what you owe. Organize your list from the highest interest rate to the lowest.

Haley Tolitsky

Haley Tolitsky, C

Make sure you have a solid understanding of your income and expenses, so you can determine how much additional money you can put toward your debt each month. You may need to make small sacrifices during your debt payoff journey by cutting unnecessary expenses, such as eating out multiple times a week and online shopping, but you don’t have to give-up what you enjoy doing and making fun memories to reach your financial goals!

Before you start making additional debt payments, ensure you have an adequate emergency fund. Start with one month of living expenses in a high-yield savings account, and then, work your way up to at least 3-6 months of living expenses. You do not want to go into additional debt when an emergency arises because you did not have any funds set aside!

Next, make sure you are contributing enough in your employer’s retirement plan to get the full employer match, which is essentially free money. If you are unsure what you need to contribute to get the full employer match, reach out to your HR department or plan contact.

Now, we tackle your high interest debt, aka credit cards, which have an average APR of 15-25%. While continuing to make the minimum payments on all debts, contribute any additional funds you have each month towards your highest interest rate card. Once paid off, transfer that monthly amount to the next highest rate credit card. Try to pay off all credit cards as quickly as possible to avoid losing a lot of money to interest and to free up cash flow in your budget.

Once your credit cards are paid off, take those monthly payments and allocate them towards your next highest interest debt, while increasing your retirement contributions. If you have student loans and/or a mortgage, you need to invest for retirement while paying these off. The earlier you start investing, the more time your money has to grow and compound. This does not apply to credit cards because their interest rates are so high.

You may also consider a credit card balance transfer or debt consolidation, but make sure you do your research before moving forward with either option. Getting a second job, starting a side hustle and/or selling unwanted clothes and items can also increase your income, which you can use to become debt-free earlier on. There are many great spreadsheet tools that can help you track your progress along the way.

The key is to understand all debt you have and strategize your repayment plan. Don’t fall back into old habits and reward yourself when you pay off an account. Your journey to debt-free living starts today!

About the author: Haley Tolitsky, CFP®

Haley Tolitskty, CFP®, is a CERTIFIED FINANCIAL PLANNER™ with Cooke Capital in Wilmington, NC, providing highly personalized financial planning and investment management services. She is passionate about financial empowerment, specifically for women and the next generation, and loves the opportunity to motivate and guide others to take charge of their financial lives. Haley can be reached at htolitsky@cookecapital.com.

Financial advisory services offered through Acorn Financial Services, Inc. (AFAS), a Registered Investment Adviser. Securities offered through The Strategic Financial Alliance, Inc. (SFA), a registered Broker/Dealer. Haley Tolitsky is a Registered Representative of SFA and Investment Advisor Representative with AFAS. Cooke Capital is otherwise unaffiliated with AFAS and SFA. Supervising office (703) 293-3100.


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