Debt Payoff Strategy

Not necessarily. Your primary strategy should be to pay down the highest interest debt first. This approach reduces the total cost of your debt over time and accelerates your overall progress far more effectively than simply eliminating smaller balances.

Credit cards typically carry the highest interest rates of any common type of debt. Far higher than the long-term returns you can reasonably expect from investing. Because of this, credit card balances grow quickly and become increasingly expensive over time. Eliminating high-interest debt first is one of the most effective ways to improve your financial stability and long-term outcomes.

Debt interest often costs more than what you can earn on your savings or investments. When the interest rate on your debt is higher than the return on your money, keeping the debt becomes more expensive over time. Paying down high-interest debt first is usually the most effective way to improve your financial position.

This depends on both your comfort with carrying debt and current economic conditions. As a general guideline, excluding a home mortgage, we encourage clients to accelerate payoff on any debt with an interest rate of 6% or higher. Higher-rate debt erodes financial flexibility and typically costs more than you can reliably earn through savings or investments.