In many respects, paying back debt is a fact of life. No matter how you got there, the fact remains that paying things back is a financial obligation. Your ability to handle credit and loans can affect your credit score and your ability to finance bigger things in the future, like a house or car.

Now is an excellent time to reassess your situation and see if you can refine your debt repayment strategies. Here is a quick primer on what you can do when managing loans, credit card bills, and other forms of debt.

It’s Time To Revisit Your Budget

By now, you’ve probably noticed that we talk a lot about budgeting and the various strategies you can use to make a budget that works for your life. Budgeting is a critical component of managing loans and debts.

There’s a good chance you already have a budget in place. Now’s a good time to revisit it. Update it according to your current financial situation, and take stock of all of the debt you owe. Sources of debt might include:

• Mortgage
• Student Loans
• Auto Loans
• Personal Loans
• Credit Card Statements
  

Knowing where your debt is coming from lets you stay grounded and minimizes the chances of surprises.

Now that you know how much you owe, compare it to your other financial obligations and how much money you might make within a given period, like a month. Many financial professionals like starting people off with the “50-30-20” rule, meaning half of your income goes to living expenses, 30 percent goes to “discretionary” spending, and 20 percent is committed to savings and outstanding debt.

This is where you determine how much money you can spare towards debt repayment. A quick hack you can do is to take portions of your discretionary funds and apply it to your debts.

Have unused streaming subscriptions or see that you’re visiting one coffee shop too many? It’s time to start canceling and choosing cheaper alternatives. The money you’ll save through the next billing period can go towards paying things down.

Adopt a Repayment Strategy

Now that you’ve taken note of all your debt and committed to a budget, it’s time to choose a payment strategy. In its simplest terms, this means choosing which balances to pay down first. Two of the most popular options include:

• Focusing on your smallest outstanding balance
• Focusing on the balance with the highest interest rate
  

Paying the smallest outstanding balance is known as the “snowball method.” Take the portion of your budget dedicated to repayment and use most of it toward paying down the smallest balance. Meanwhile, continue making the minimum payments on other accounts.

After settling the smallest balance, take the money you initially budgeted for that debt and apply it towards the next-smallest account—on top of what you were already paying. The idea is to ride the momentum of clearing away debts, motivating you to continue.

Since you’ve already dedicated a portion of your budget to debt repayment, it’ll eventually become easier to use that money on the remaining balances as the smaller ones get paid off.

The endgame is for your payments on the last remaining accounts to be significantly larger than when you started on the smallest account. This approach is how the “snowball method” gets its name: starting small and rolling into something bigger.

Alternatively, the “avalanche method” may be more your style if your priority is to minimize spending on interest. For this strategy, focus on paying down the account with the highest interest rate. Beyond that, it’s nearly identical to the snowball method: pay down an account and move on to the next one.

Why consider the avalanche method? Credit cards, for example, are notorious for having higher interest rates than other loans. If left unchecked, most monthly payments towards these debts will never get a chance to pay down the principal, causing an unending debt spiral.

The avalanche method is a sound strategy if you are more concerned with accruing interest on your debts. After all, interest as a concept is paying “extra” for a service you have already used, which can undermine saving for other, more interesting things in your life.

So, which repayment strategy is right for you? There isn’t a simple answer. Depending on your total debt, the accounts you manage, and your budgeting style, one strategy may have more advantages than the other. It all comes down to your personal preference.

All in all, the best strategy is the one that will help you pay more than the minimum and that you can continue repaying sustainably until you’re at a comfortable point. The key is to find a way that works for your situation.

Use These Tips To Keep Motivated

No matter how much you owe, paying off debt can be challenging. Finding ways to stay motivated as you tackle balance after balance is important. Here are a few ways to reduce the chances of adding more to your debt and maximizing the chances of your success.

Halt your credit card use. The more you use a credit card with a balance, the more you need to pay off. It wouldn’t hurt to put away some credit cards for a while as you work on clearing debts.

Work with your card issuer to freeze a card. Lock away the plastic in your filing cabinet. Unlink your card information from online retailers and subscription services. Be careful about closing unused credit cards, which can impact your credit score.

Of course, some of your cards might have rewards programs, which may still appeal to you. You can still experience the thrill of earning points on some checking accounts. Your financial institution may offer a rewards checking account with a debit card with similar functions. Consider making the switch.

Be honest with your inner circle. In times of hardship, we often count on our family, friends, and neighbors for support. Take this opportunity to update your “inner circle” about your finances to the extent that you’re comfortable.

Having honest conversations about your situation lets others know what you are going through. Your friends might be able to provide advice on how to proceed. Talking it out also allows everyone to plan outings accordingly and be mindful of one another’s situations.

Change Your Habits—But Be Yourself. Overspending is one of the critical factors in getting into debt. Many sources will tell you that cutting out luxuries (eating out, doing “retail therapy,” etc.) will allow you to free up more money to pay off your balances.

There is truth to that. At the same time, it also doesn’t hurt to give yourself a break occasionally. There’s a reason you set a budget, after all, and budgeting is meant to guide you on what you can do within your means.

Instead of buying a video game the moment it comes out, wait until it goes on sale. Let your child grab a candy bar at the checkout line this once, but also be open to making that transaction a teachable money moment for them. The point is that you and your loved ones can still enjoy things while meeting obligations.

Debt is daunting, but it shouldn’t rule your life. By assessing your situation, making earnest changes to your lifestyle, and being mindful of the big picture, it’s possible to overcome these challenges.

If you’re staring down a pile of debt and need guidance, First Florida Credit Union can point you in the right direction to get back on track. Visit your local branch to begin discussing your options. You may also want to speak with a financial counselor about other strategies, like debt consolidation and financial planning.