conversation: User (LindyRyan): "Tl;dr I made a lot of financial mistakes in my early twenties and am slowly working on rectifying it. \n\nhttps://imgur.com/EUcqAXW\n\nMuch like a lot of the folks here, I was never taught money management by my parents. Though by no means am I blaming them for my slight, perhaps if had been taught how to better manage my finances, I wouldn't be in such a pickle now. \n\nWith all that being said, I've been working on putting together a couple of spreadsheets to both help me visualize my budget but also to help me gauge a timeline for paying down my total *current* debt (I would like to buy a house sometime in my thirties). \n\nHopefully this also serves as a platform to improve my credit because it's pretty terrible and I'd like to not be subject to the stigma of low credit forever. \n\nEverything that’s listed in the spreadsheet are projections with what I currently make. After basic living expenses, insurance, food, savings, etc, I only have about $600 a month to put towards debt. That number very well could change with my income in the future. \n\nFeedback, suggestions, constructive criticism is super welcome! This spreadsheet was inspired by another Redditor whose similar spreadsheet I can't find. If I find the post, I'll link it for reference. "
  Self: "A couple of things: \n\n1. When you finish paying off one debt, roll over the payment to that debt to the next debt. (You seem to be doing this, sort of, but not the exact amounts that you can stop paying)\n2. Focus on the debt with the highest interest rate. If you have any extra money, put it towards the debt with the highest interest rate.\n3. Celebrate your milestones. When you pay off a debt and for example also when you reach "only" $20k debt total, $15k debt total, etc...\n\nGood luck!"
  User (LindyRyan): "That’s definitely what I’m working on. The first small debt I’ll be able to pay off is my payday loan, which is a cost of $56 a month. I split that cost up into a few of my different collections accounts. \n\nHonestly, I have no idea what my interest rates are but that will be my next task of figuring out where I need to focus those funds. I felt motivated today to not be stuck in a constant state of debt and worry (and hopefully not repeating the financial mistakes my parents did). \n\nShould I focus strictly on highest interest rates? I’ve read that one method of tackling debt is to work on the smallest debts first and then “snowball” those payments towards the larger ones. "
  Self: "I think I was about your age when I started getting serious about money, too. I really turned things around. I hope that you'll be able to do the same thing, too. \n\nThe mathematical best thing is to focus your payments on the debt with the highest interest rate. Of course, pay the minimum required amounts on all debts. But when you have done that and still have money left, then pay down the debt with the highest interest rate. This is called the avalanche method, and what it will do is make you debtfree soonest with the least amount of interest paid.\n\nThe other method that you describe (pay off debts from smallest to largest) is called the snowball method and is suboptimal: it will most often mean that you'll be paying for longer and that you'll pay more interest. However, sometimes it works better psychologically, because right at the beginning you get a few "wins" when you pay off a debt. That might help to keep you motivated. One other advantage of this method may be that if you do have some small debts and a few big ones, then paying off the smaller ones may reduce your monthly required payments and thus may give you some breathing room in your budget.\n"
  User (LindyRyan): "My "dirty thirty" is coming up next year and I would really like to start my thirties with some semblance of a long-term plan. My Dad has spent his entire life in poverty and running from his debt. If at all possible, I'd like to not repeat his mistakes. \n\nThat makes a lot of sense and I can see why the "snowball" method is more appealing. Chipping away at those larger payments, the ones with the higher interest rates, seems insurmountable. \n\nThank you for the feedback. I really, really appreciate it! Hopefully I can continue this level of diligence and learn some better money management from here forward. "
  horizons190 (horizons190): "It _seems_ insurmountable but it is worth noting that you _will_ be in debt for _longer_ (as well as pay more) with the “snowball method” than by paying the highest interest first, for whatever that is worth."
  User (LindyRyan): "That’s what I keep hearing. Once I’ve figured out what my interest rates are, that’s my plan is to tackle the biggest interest stuff first. While I think it will be less psychologically fulfilling, especially given my lack of financial responsibility up to this point, it will be better for me in the long run. "
  chh2tx (chh2tx): "Just keep in mind that when comparing interest rates your often talking small differences in %. That likely means the difference in order paid off is negligible in the grand scheme of how much your debt is. \n\nI’d take the route that provides you the motivation and some initial flexibility. Just be disciplined to put that flexibility back into the other debts unless it’s an emergency and not put it back into spending."
  