Do You Have a Debt Repayment Plan?

Debt Repayment Plan
Can you imagine living without debt or does even that thought seem foreign and unattainable to you? Debt has unfortunately become an American way of life. According to the Federal Reserve Bank, at the end of 2020, American’s owed roughly $14.35 trillion in debt. This is $14.35 Trillion in number form to give you some perspective on how big that number is…$14,350,000,000,000! That same study lists the average debt in the US equals $52,940 per household. That number includes things like mortgage debt, car loans, credit cards, student loans and other personal loans. Depending on where you live, that number can change dramatically. In West Virginia, the average household debt is $31,000 compared to Washington DC, where it skyrockets to $91,200, almost three times as high!

Do you know where your debt number fits into those averages? Do you have a plan to lower or even reduce your debt completely? We hope this article will help educate and encourage you to create a plan and get started working on your goals for financial freedom!

Get Organized


  • What do you owe? – List the total amount you owe including the dollar amount of each debt, the interest rate and the minimum monthly payment.  You can even rank each debt in order of their size or the interest rates you are paying.
  • Cash flow – Do you understand exactly how much money is coming in and how much is going out each month and where each dollar is being spent?  If you don’t, we encourage you to do your own cash flow study.
  • Budget – This seems like an easy one, but the average American does not have a budget and if they do have one, they rarely stick with it.  A budget is just an organized way for you to plan how you will use and spend your money each month. You need to know where every dollar is going so you can maximize your debt repayment plan and achieve the goals you have set for yourself.  It is always smart to look for areas where you can reduce spending and brainstorm ideas of how you can potentially bring home some additional cash.
  • Avoid additional debt – When you are struggling to get out of debt, taking on more credit and loans is like going to your favorite burger restaurant everyday when you are trying to lose weight.  It’s not going to work, and you will just be digging your hole deeper and deeper. 
  • Know your credit – Do you know how your credit is doing?  Credit card companies and banks make mistakes all of the time. Checking your credit report regularly can ensure those errors get caught and corrected and you aren’t stuck paying for more than you should!


  • Highest interest rates first – Interest is basically the cost you pay for renting your money. You don’t own it, you just get to use it for a while, but that usage comes at a price.  Knowing this, it make a lot of sense to focus on getting rid of the debt that is charging you the most rent.  Lets assume you have three debts:  Debt A is at 12.5%, Debt B is at 10% and Debt C is at 6%.  With this strategy, use the majority of your money to pay-off Debt A until it is eliminated.  Once that is done, take that same amount you were paying against Debt A, and the other payments you were making against Debt B, and pay both towards Debt B.  Once Debt B is gone, combine the money you were paying towards Debt B and Debt C, and put it all towards Debt C.  
  • Smallest balance first – So why the smallest balance and not the largest one first you might be asking?  Well, if all of your debt is charging you interest, or rent, if you can completely eliminate a source of rent, it can be a big relief and help towards your debt repayment goals.  Again we will assume you have three debts:  Debt D is $1000 at 10%, Deb E is $2,500 at 12% and Debt F is $18,500 at 9%.  This time you start with Debt D and you dedicate as many additional funds as you can towards paying it off.  Once Debt D is in the rearview mirror, combine your Debt D and Debt E payments fully to Debt E.  Debt E has now bit the dust, so now you can throw everything you have at Debt F.  This strategy can oftentimes allow you to see progress more quickly and might encourage you to stick with your plan. 
  • Minimum payments on all debts – This is the option your credit card companies and banks would love for you to listen to.  Why?  They make the most money off you with this strategy!  Yes, you can technically pay off your debt by making the minimum payments, but it will be the most expensive and lengthy option for you. 
  • Debt Consolidation – Unlike the minimum payment plan, this strategy would most likely be your banks least favorite option (unless they were the bank giving the consolidation loan!).  Debt consolidation involves taking out one larger loan or line of credit, in order to payoff all other debts so you only have one payment to worry about.  This will make it easier to manage your payments, but often times it results in a longer payback period and more interest being paid out in the long run.
  • Other ideas – Some debtors choose to focus on paying back a certain loan type like auto loans or credit cards before focusing on the others.  Consider setting up automatic payments so you can make the repayment process easier and avoid late fees and hikes in your interest rates.  Having an emergency fund is a great idea so you can avoid having to use your credit cards for unexpected expenses. 


The federal government makes some resources available to all borrowers that you can look into as well.  

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