Debt
Getting ahead of debt
Creating a plan you can actually follow
12 min workbook
Why this matters
Debt is not simply about how much you owe.
The bigger questions are: what does it cost, how much of your monthly income does it consume, are payments current, is debt preventing you from saving, and are you borrowing again to cover regular expenses?
The goal is not shame. The goal is clarity and control.
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Build your debt snapshot
Start with a complete list. One page with everything on it is often the first time the full picture is visible.
My debts
Fill in as many rows as you need. Totals update as you type.
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Row 8
Don't choose a payoff strategy yet. A strategy chosen before the list is complete is a guess.
First determine the problem
Three situations look similar from the outside and call for very different first steps.
Payoff problem
There is room in the budget
Cash flow is sufficient, but you need a strategy for directing extra money.
Cash-flow problem
Income is already spoken for
Regular expenses already consume most or all of your income, so a payoff strategy alone won't hold.
Delinquency problem
Accounts are behind
Payments are late or accounts are in danger of default. Addressing status usually comes before optimizing interest.
Two common payoff approaches
- Debt snowball
- Focus additional money on the smallest balance while maintaining required payments on other debts. Potential benefit: faster psychological wins.
- Debt avalanche
- Focus additional money on the highest-interest debt while maintaining required payments on others. Potential benefit: may reduce interest expense.
Neither approach is universally best. People often stay with the one that matches how they stay motivated.
Key terms
- Interest rate
- The cost of borrowing, expressed as a percentage of the balance.
- Minimum payment
- The smallest amount a lender requires each period to keep the account current.
- Secured vs. unsecured
- Secured debt is backed by collateral such as a car or home; unsecured debt is not.
- Delinquent
- An account with a payment that is past due under the agreement.
What you've heard vs. what you should know
What you've heard
“All debt is the same.”
What you should know
Different debt can have very different rates, terms, collateral and consequences.
What you've heard
“I need to pay everything off before I save anything.”
What you should know
Depending on circumstances, having some emergency savings while reducing debt may help prevent new borrowing after an unexpected expense.
What you've heard
“If I can't make huge payments, there's no point.”
What you should know
Consistent progress matters.
Where am I today?
Check anything that's already true
Start here
Create your complete debt list.
Do not begin by guessing which debt to attack. Begin with knowing exactly what you owe.
30-day WORKWELL challenge
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Your next step
With the full list in front of you, pick one account and one action for this month — nothing more.
If the list points to a cash-flow or delinquency problem, a conversation may help you sort out the order of steps.