Young woman in coffee shop looking out window happily.

How to take control of your debt to achieve your goals.

If you’ve got debt, you’re not alone. But you alone have certain things you’re trying to achieve. Debt is just one part of your financial picture, yet it can affect your other goals. Whether you’re thinking of going back to school, buying a house or saving for a trip, you may be wrestling with how debt fits into your plans. To help you figure that out, here are some steps for balancing paying off your debt with other goals:

Start by knowing what you owe.

Pull together all of your debt, including student loans, car loans, bank credit cards and store credit cards. Write down the balance, interest rate and monthly payment for each. This gives you a solid grasp of what you owe, which account has the highest interest rate and the monthly payments you need to be paying on time to avoid added charges.

Identify your goals.

What are you hoping to do, and by when? List your short- and long-term financial goals, from paying off your debt to buying a house or going to graduate school. Estimate the cost for each, and assign dates for when you’d like to hit each goal. Depending on your timeline, calculate how much you’d need to put toward each one monthly. Be sure to make saving for an emergency fund a goal, which can prevent you from going further into debt if a large unplanned expense comes up.

Set some priorities.

Depending on your situation and timeline, you may need to focus on one goal more than the others. In general, it’s a good idea to pay off high-interest debt first. Paying interest ties up your money and keeps you from applying it to savings or other goals. We recommend making your emergency savings account your next priority, followed by saving for the long-term goals you listed. You may need to adjust your timeline depending on your priorities and what you can realistically afford. Commit to paying a certain amount toward your goals each month – whether that’s credit card payments or deposits to your savings account.

Reduce your interest rates.

Look into options for lowering your interest rates to free up more cash flow. You can consolidate debt into a personal loan, which allows you to focus on a single monthly payment and may save interest fees in the long run. You may be able to lower your interest rate even more by setting up automatic loan payments from your checking or savings account. With a balance transfer, you can move your balance to a credit card that offers a lower interest rate for a certain number of months. Use that time in the promotional period to get the balance paid off, and start focusing on other debts.

Use the “snowball approach” to pay down debt faster.

Select your debt with the highest interest rate as your first target for elimination and follow these steps:

  • Make at least the minimum monthly payments on all of your accounts, but pay as much as you can afford each month on your target debt. By making a larger monthly payment, you’ll pay off the balance faster.
  • Once that’s paid off, identify the next target debt.
  • Combine the money you were paying on the first debt with the amount you’ve been paying on the second target debt, and apply that toward the balance.
  • Repeat the process for each debt.

Be intentional about your spending.

The key to meeting your goals is making the payments and savings deposits you’ve committed to each month. To do that, you’ll need to be disciplined and make sure you’re not spending too much. Review your monthly expenses and look for areas you can trim — like the gym membership you rarely use, eating out one time less per week, or switching to a lower cost cable or mobile phone provider. Also consider putting any extra income, like bonuses or tax refunds, toward your target debt and goals.

It can be hard to know where to start, but clarifying your situation, goals and priorities provides valuable perspective for tackling your debt. If you’ve got debt, you’re not alone. Your banker can help by discussing your situation and figuring out a plan for achieving your goals.