I’m in the middle of paying off debt. I’ve been married now for 18.5 years, and, unfortunately, debt is still a way of life around my house.  I had the head knowledge of why being debt free was a good idea, but the heart wasn’t interested in doing what my mind wanted. It’s only been in the past year that I finally got serious about being debt free. Today I wanted to make a blog post addressing the payment of debts.

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Here are the two main strategies of paying off debt that seem to be the most popular:

1. Smallest to Largest:

This is mostly known as the Dave Ramsey way (aka the snowball method). For anyone who hasn’t heard of it, it involves saving $1000 in an emergency fund. Then you look at all of your debts, from smallest to largest. You pay off as much as you can on the smallest debt while paying minimum payments on the other debt. Then when the smallest is out of the way, you apply that amount to the new smallest debt on the list.

2. Highest Interest to Lowest Interest:

Then there’s the Suze Orman method. Other people since have mentioned it, but she’s the first one who introduced me to the concept, so I’m giving her credit for it. In this one, you pay off the debt with the highest interest rate first while making minimum payments off the others. When you knock out that specific debt, you tackle the debt with the next highest interest rate.

I’ve tried both of these over the years, and neither worked for my personality. I discovered I’m not motivated by either method.

In my last post, I talked about not taking advice from other people, and I think this is an area where this fits. Just because some people are motivated by the Dave Ramsey or Suze Orman method of paying off debt, it doesn’t mean all of us are.

When you are looking for a strategy that best fits your life, here are some things to consider:

1. How much of a financial risk can you afford to take?

The question that often pops up is, “Should we save first or pay off debt first?”

In my opinion: it depends on your situation. I know this isn’t helpful on the surface, but let me explain my reason for this answer.

I think we need to use the method that is tailored specifically for us and our comfort levels. Some people may not be comfortable with a $1000 emergency fund. They may want one that is $5000. Some people may even want more than that.

If you’re an author who is living off of your writing income, you’re self-employed. If you have no one to help pay the bills, you may want to have at least 3-6 months of living expenses in your savings account before taking care of debt. By the way, most self-employed people take on a much higher risk in general because if they don’t sell their product, they don’t get paid. On the other hand, people who work for someone else will get the paycheck as long as they don’t get fired.

Also, whether or not you live alone plays a factor into the level of risk you have. If you’re living alone, you are responsible for all of your financial bills. Or, if you aren’t living alone, you might be the only one bringing home any money. That puts additional pressure on you to make sure you can provide for everyone. If you have a spouse who is bringing in money, then you have some buffer in case you can’t make enough money to pay your bills anymore. In my opinion, the more sources of income you have coming into your home, the better off you are. So if you have multiple sources of income, you can afford to have a lower savings amount before you start paying off the debt.

So consider how much you want to risk before starting off with paying off debt (or continuing to pay off debt if you’re in the middle of doing this already).

2. What motivates you the most?

I think motivation is more important than anything else when it comes to paying off debt. If our hearts aren’t in it, then it’s going to be hard to commit.

If watching your debt list quickly grow smaller because you’re paying off the smallest ones first “wows” you, then you would probably like the Dave Ramsey plan. If you like knowing you’re getting rid of the highest interest rates, then you’ll probably like Suze Orman’s plan.

I actually fall into neither camp. I hate both of those plans. They never motivated me. I found out that I’m more motivated by knocking out the debt that takes out the biggest chunk of my income every month. The more cash flow I have each month, the easier it is for me to relax. I have discovered that I’m best motivated when I focus on paying off the debt that takes out the biggest chunk of my household income every month.

For example, years ago I had a truck payment that was $726 a month. That is insane! (We never paid off cars and kept trading them in on others, so a lot of our car debt just rolled into the new loan. Do NOT do this. I know I said don’t take advice, but seriously, this is a trap and it will bite you in the end.) I had about five credit cards, and another car loan  at the time. My husband was active duty military, and we were barely getting by because his income kept going into all of the debt. I had been trying to get through the Dave Ramsey plan, and I just couldn’t get into it because I was taking care of the smallest debt first. I realized if I paid off the truck, I would have $726 a month to buy good quality groceries with. Whereas if I only paid off the smallest debt, I’d only free my cash flow by $50. I was tired of peanut butter, ramen noodles, and other cheap stuff for me and my family. I wanted to eat well. So that’s what I did. And I didn’t roll the $726 into other debt. I used it for food. When you have six people in a family, food is a huge part of the monthly budget.

So, this is what I’ve been ever since. I’ve been paying off the debt that takes out the largest chunk of my household monthly budget first. I don’t know if anyone ever came up with my particular method, but I discovered this on my own after trial and error.

My point to all of the rambling is this:

If you find a way to pay off debt that excites you, you’re much better off than following someone else’s strategy. Don’t be afraid to try different techniques. Don’t be afraid if you end up failing while trying one strategy. It just means that strategy didn’t fit your personality. Don’t feel guilty just because someone else could do it a particular way and you can’t. I think we beat ourselves up too much over this kind of thing. Person A’s debt strategy plan was a good fit for Person A. It might not be a good fit for you. We don’t have to pigeon hole ourselves into someone else’s box. We are free to explore other ideas. As long as you’re paying off debt, that’s what matters, right?

What are your thoughts? Is there a different way you’re paying off debt that I didn’t mention?