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We humans like to take the easy road. We might notice the healthiest options on the menu, then order the fried everything. Or stare down a mountain of bills, then continue the same spending habits.

So how do we snap ourselves out of it? Committing to reducing debt can be kind of like committing to a healthier lifestyle. Because if you think about it, it is a healthier lifestyle.

But just like a diet probably won’t reduce your waistline overnight, a debt management plan isn’t likely to work magic on your finances right off the bat. If you tailor your plan to fit your life, however, it’s possible to see long-lasting changes.

Creating a Debt Management Plan

Laying Out Your Debt

You probably have questions. What is a debt-management plan? Simply put, it’s a way to get control over your debt. Does a debt-management plan work? That answer is up to you.

The first step toward defeating your debt could be to lay it all out on the table, and we mean ALL of it. The average total household debt in America, including credit cards, mortgages, car payments, and everything else, hovered at $101,915 in 2022, according to Experian. For some, that total number could be a real slap in the face. (It’s okay to ugly cry.)

One way to get to your total debt amount is to gather every statement, every bill, and every outstanding balance and input them all in one place, such as a spreadsheet or a spending tracker.

You might be painfully aware of your major debts. But are there others that could be slipping beneath the radar? Potential one-off or occasional debts can include financed household purchases, medical bills, or quarterly insurance payments.

One helpful way to make sure you’re looking at all your debts could be to scroll through your bank statements to look for recurring payments, especially if they’re set up on auto-pay. Another is to compare your list of debts to your credit report.

Categorizing and Conquering

Next, you may want to break it down even more by categorizing and prioritizing your debts. Generally speaking, there are two types of debt: secured and unsecured.

Secured debt includes things like mortgages and car payments that are tied to a physical asset. Unsecured debt isn’t tied to anything tangible, so it can include most credit cards and other types of loans.

Beyond that, you can group your debt by categories, such as high-interest, low- or zero-interest, fixed-rate, variable-rate, or even large balances and small balances.

As you start to list your debts, you could consider common elements such as each creditor’s name, the total balance, your monthly payment, the interest rate, and the expiration date for any promotional interest rates. For an added layer of insight, you could use a credit card interest calculator to understand how much total interest each might incur over time.

It might also be a smart move to prioritize your debt, putting those that could send you tumbling into the bad-credit abyss if you get behind on payments. For homeowners, that could be the mortgage. For commuters, car payments and insurance could be high on the list as well. You could ask yourself which of your debts absolutely must, without fail, be paid on time and in full each month, and put them at the top.

Putting Your Debt in Context

The final piece to your financial puzzle could be to look at your debt in context with the rest of your expenses, such as monthly bills, the grocery budget, gas, and retirement contributions, as well as your monthly take-home income.

Seeing everything together can help give you a solid feel for how much you’re spending (or overspending), and how much you can reasonably start to budget toward debt repayment. And remember that even if it’s only a few dollars to start, it’s still a start.

Picking the Right Debt-Management Plan

Financial gurus have developed a number of methods for getting out of debt, and have even given them fun names that can read like the financial version of A Song of Ice and Fire.

The Snowball, the Avalanche, and the Fireball

The snowball method: This strategy calls for paying the minimum on all your debts, but putting extra toward the smallest balance first. When that’s paid off, you could apply that entire payment to the next-smallest balance on top of the minimum. It’s one way to help get some quick wins and start to check balances off your list.

The avalanche method: This one is similar but focuses on interest rates instead of total balances. With the avalanche, you would pay the minimum on all your other debts but put extra toward the highest interest rate first and work your way down. This could work to save money on interest in the long run.

The fireball: This strategy is a mix of the others, and works for some by separating debt into “good” — which is generally considered to be fixed-payment, low-interest debt that’s on a set repayment schedule — and “bad” — such as credit cards and other unsecured loans. Then, using either the snowball or the avalanche, you could start burning through the “bad” debt first.

One way to narrow your choice is to research the pros and cons of all three methods, then pick the one that fits your style and personality. Or, since we’re talking DIY debt management, you could also pick the parts you like from each one and make it your own.

Once again, it’s kind of like physical fitness: Some people may struggle to lose weight because they haven’t found a diet their body likes. But once they make that connection, they might find it a lot easier to crush their goals.

And speaking of goals, they apply to your debt-management plan, too. You might want to plan a strategy that speaks not only to you, but to your endgame. Are you hoping to save enough to afford an electric car? Will you need to pay for daycare in nine months or so? At the end of the day, you can think about your debt payoff strategy as a way to get you where you want to go, when you want to get there.

The Snowflake Method

Another approach to consider is the “snowflake method,” which works by throwing any additional money that comes your way toward debt, including work bonuses, side-hustle income, or selling things you no longer need or use.

The snowflake’s stricter cousin, the “spending fast,” takes the concept a step further by encouraging users to live as austerely as possible. Instead of eating dinner out, for example, you could cook at home and put aside the money you would’ve spent toward debt payoff. Coffee shop stops? Nope. Make your own and put that $5 toward debt instead.

These two methods could either work on their own or as tactics to complement one of the larger strategies.

Consolidating Your Debt

Paying fees for late payments or overdrafts doesn’t help anything when the goal is reducing debt. If you find it difficult to keep track of what’s due when, combining all your separate payments into one credit card consolidation loan could be a way to focus on one monthly payment.

Consolidating your credit card debt might also include a number of other benefits, but it isn’t a magic cure-all. A loan will not erase your debt, but it might help you get to a fixed monthly payment and reduced interest rates.

It’s important to compare rates and understand how a new loan could pay off in the long run. If your monthly payment is lower because the loan term is longer, for example, it might not be a good strategy, because it means you may be making more interest payments and therefore paying more over the life of the loan.

Keeping Yourself on Track

The best strategy in the world may not lead to progress if you lose track of it after a few months. One way to stay on the right track could be to set up a bill payment calendar to remind you of what’s due when. You could write it down with old-fashioned pen and paper, or use something like SoFi Relay spending tracker for notifications and easy digital payment options.

If willpower is your challenge, you might want to consider enlisting the help of a debt buddy to help get you through the rough spots. It could be a trusted friend or family member who’s been in your shoes and succeeded. You could schedule regular check-ins, and maybe even challenge each other to a debt-payoff duel to spark a little competition.

Another option is to identify your weaknesses and put barriers in place that could save you from yourself. For example, if you tend to make in-app purchases to level up on phone games, you could block them.

Reducing debt is a big deal. And even if it takes years to reach your ultimate goal, be patient with yourself — and be sure to celebrate milestones along the way.

The Takeaway

When you’re creating a debt management plan, it helps to first lay out everything you owe. Next, you may want to categorize and prioritize all of your debts before selecting a debt management plan. Some options include the snowball method, the avalanche method, the fireball method, and the snowflake method. Another strategy is to combine all separate debts into one consolidation loan. While this won’t erase your debt, it could help you get to a fixed monthly payment and, potentially, reduced interest rates.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Debts fall into two broad categories: secured debt and unsecured debt. Though both types of debt share some similarities, there is one key difference. Secured debt is backed by collateral, and unsecured debt isn’t.

It’s important for borrowers to understand how secured and unsecured debt work. That’s because the type of debt you choose could impact such things as loan terms and interest rate and whether you can get credit, and can be one tool to help you determine the order in which you’ll repay the debt.

What Is Secured Debt?

Secured debts are backed, or secured, by an asset, such as your house. This asset acts as collateral for the debt, and your lender is what is known as the lien holder. If you default on a secured debt, the lien gives your lender the right to seize the asset and sell it to settle your debt.

Mortgages and auto loans are two common types of secured debt. A mortgage loan is secured by the house, and an auto loan is secured by the vehicle. You may also encounter title loans, which allow you to use the title of your vehicle to secure other loans once you own a car outright.

What Are the Possible Benefits of Secured Loans?

Because lenders can seize an asset to pay off the debt, secured loans are considered less risky for the lender than unsecured loans. “Low risk” for a lender can translate into benefits for borrowers. Secured loans generally offer better financing terms, such as lower interest rates.

Secured loans may also be easier for borrowers to qualify for. For example, secured loans may have less stringent requirements for credit score compared to unsecured loans, which generally rely more on the actual credit and income profile of the customer.

What Are the Stakes?

The stakes for borrowers can be pretty high for secured loans. After all, consider what happens if you stop paying these debts. (Timeframes for secured loan default can vary depending upon the type of secured debt and lender terms.) The bank can seize the secured asset, which might be the house you live in or the car you need to drive your kids to school or yourself to work.

Failing to pay your debt, or even paying it late, can possibly have a negative effect on your credit score and your ability to secure future credit, at least in the shorter term.

What Is Unsecured Debt?

Unsecured debt is not backed up by collateral. Lenders do not generally have the right to seize your assets to pay off unsecured debt. Examples of unsecured debt include credit cards, student loans, and some personal loans.

What Are Some Benefits of Unsecured Loans?

Unsecured loans can be less risky for borrowers because failing to pay them off does not usually result in your lender seizing important assets.

Unsecured loans often offer some flexibility, while secured loans can require that you use the money you borrow for very specific purposes, like buying a house or a car. With the exception of student loans, unsecured debt often allows you to use the money you borrow at your discretion.

You can buy whatever you want on a credit card, and you can use personal loans for almost any personal expense, including home renovations, buying a boat, or even paying off other debts.

What Are the Stakes?

Though unsecured loans are less risky in some ways for borrowers, they are more risky for lenders. As a result, unsecured loans typically carry higher interest rates in comparison.

Even though these loans aren’t backed by an asset, missing payments can still have some pretty serious ramifications. First, as with secured loans, missed payments can negatively impact your credit score. A delinquent or default credit reporting can make it harder to secure additional loans, at least in the near future.

Not only that but if a borrower fails to pay off the unsecured debt, the lender may hire a collections agency to help them recover it. The collections agency may hound the borrower until arrangements to pay are made.

If that doesn’t work, the lender can take the borrower to court and ask to have wages garnished or, in some extreme cases, may even put a lien on an asset until the debt is paid off.

Managing Secured and Unsecured Debt

Knowing whether a loan is secured or unsecured is one tool to help you figure out how to prioritize paying off your debt. If you’ve got some extra cash and want to make additional payments, there are a number of strategies for paying down your debt.

You might consider prioritizing your unsecured debt. The relatively higher interest typically associated with these debts can make them harder to pay off and could end up costing you more money in the long run. In this case, you might consider a budgeting strategy like the avalanche method to tackle your debts, whereby you’d direct extra payments toward your highest-interest rate debt first. (Be sure you have enough money to make at least minimum payments on all your debts before you start making extra payments on any one debt, of course.)

You can also manage your high-interest debt by consolidating it under one personal loan. A personal loan can be used to pay off many other debts, leaving the borrower with only one loan — ideally at a lower interest rate. Shop around at different lenders for the best rate and terms you can find.

Be cautious of personal loans that offer extended repayment terms. These loans lengthen the period of time over which you pay off your loan and may seem attractive through lower monthly payment options. However, choosing a longer term likely means you’ll end up paying more in interest over time.

The Takeaway

Secured debt is backed up by collateral, such as a house. Unsecured debt doesn’t require collateral. The type of debt a borrower chooses may impact things like the cost of a loan and whether they can get credit. It can also help determine the order in which debt is repaid. Since unsecured loans could have higher interest rates or fees, you may decide to consider prioritizing paying down that debt first. A budgeting strategy like the avalanche method may make sense, as it calls for directing extra payments toward highest-interest rate debt first. Consolidating high-interest debt under one personal loan, ideally at a lower interest rate, is another strategy.

If you are thinking about taking out a loan to consolidate your debt, a SoFi unsecured personal loan could be a good option for your unique financial situation. SoFi personal loans offer competitive, fixed rates and a variety of terms. Checking your rate won’t affect your credit score, and it takes just one minute.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Whether you’re thinking about a small bump-out or a full-blown two-story addition, increasing the size of your home can make it more functional, look more attractive, and increase its resale value. The trouble is, additions tend to be big, time-consuming, and expensive projects — and they can easily go wrong if you don’t plan them right. Read on to learn six key steps that will help you complete an addition on time, on budget, and with the least possible amount of stress.

How to get started with a home addition

Home additions can boost the value of the home while enhancing aesthetics and functionality. In fact, home additions and renovations can be among the most effective ways to increase your home’s value, and you can tailor the construction to fit your needs and wants.

To transform your home addition ideas into a completed project, there are a few steps to consider first:

•  Create a plan

•  Set a clear budget

•  Work with trusted professionals

•  Decide what parts of your home addition you can do yourself

•  Research and obtain permits

•  Fund your project

Create a Plan for Your Home Addition

Perhaps you’re adding an extra bedroom and bathroom to the back of your house so you have a place for guests to stay. As part of the process, you’ll need to first make sure that the addition will fit within your property lines. You’ll also want to check with your local government to see how closely codes in your city allow you to build next to someone else’s property.

While creating your home addition plan, also ensure that any construction will not interfere with utility lines or pipes, as well as whether the structural changes you’re considering will fit into the framing and foundation of your building.

As you design the addition, think about them from two perspectives: first, how these rooms will add value to your living space; then, how the construction will impact the outside of your home, architecturally speaking.

You’ll also need detailed plans drawn up by an architect or builder that describe the scope of the work and the materials needed. To consider how home additions may increase the value of your home, you may want to use an online home project return on investment (ROI) calculator.

One strategy for approaching home additions is to create your dream list, then have alternate choices in mind if your budget, material availability, or other external factors create a need to alter the project down the road. For example, you may love the look of marble flooring, but its price point might be higher than you’d initially estimated — or perhaps it doesn’t blend in with the rest of your house once you’ve started laying out the plans. Having a back-up plan — and one that’s cost-efficient at that — could help keep your budget in check.

The cost for an addition will depend on the size and type of addition, as well as where you live, but you can expect to pay somewhere in the neighborhood of $150,000 to $250,000 to add 1,000 square feet to a house.

Also keep in mind that if you want your addition to blend in with the rest of your house, you also may need to plan for improvements in existing rooms.

Set a Clear Budget for Your Home Addition

To come up with a budget for your home addition, it’s a good idea to obtain bids from three different contractors, adding in 15% to 20% to the overall project price given by the contractor to cover unforeseen costs.

If the ballpark figure is too high and doesn’t align with your budget, then you might want to look at alternative choices for materials that will still give you the general renovation you desire. You could also scale back on your plans or save some of the more costly home addition projects for the future when your budget allows.

If you intend to work with a specific contractor, then your chosen company may be able to help you find lower-cost options — for example, replacing granite countertops with laminate ones — and offer creative solutions gleaned from years of industry experience. Or, you may want to look at reducing the scope of your project to a smaller addition or even asking the contractor for competitive pricing for the off-season.

Work with Trusted Professionals

Whether you do some of the home addition work yourself or plan to have the professionals build the entire addition, it’s crucial that you hire the right contractor for your needs. Tips for working with contractors include:

•  Get three to six bids, then research companies that seem like good matches. You can check for information about these contractors at LinkedIn, Angie’s List, and the Better Business Bureau . Have any complaints been filed at your state’s contractor board? (You can find state-by-state licensing requirements for contractors here .)

  For contractors who interest you, you may want to reach out to references they provide for personal experiences from past clients.

•  Be wary of suspiciously low bids. If a quote comes in significantly lower than that of the other contractors who bid your home addition project, it’s possible that the contractor did not understand exactly what you want; this can lead to significant problems if you hire this company without clarifying specifics.

•  Hire a contractor who you think you can work well with, but don’t base your decision largely on emotion.

Decide What Parts of Your Home Addition You Can Do Yourself

Say the home addition ideas you have are necessary to solve space problems, perhaps you’re having a baby, or maybe your mother is moving in with you — but you’ve got to find a way to contain the costs of the addition. In this case, it might make sense to figure out what you can do yourself.

If you’ve got the experience needed to do the demo work safely without damaging load-bearing walls, electrical wires, and the like, this can save you some money on labor. If you’ve got professional-level skills in plumbing or drywall, you might talk to your contractor about taking on those tasks yourself and further reducing the cost of labor. Or you can attempt to do the finish work, such as sanding walls, painting, and general cleanup.

Research & Obtain Permitting Requirements

Unfortunately, a home addition isn’t as simple as deciding what you want to do, saving up, then paying for the work. You also need to make sure your home is appropriately zoned for the home addition or remodel. Depending on the scope of the project, you may or may not need a permit.

For example, if you want to build a deck in some states, you need a permit if you intend for it to be more than 30 inches off the ground. Getting to know your local codes can help surmount significant hurdles as the project unfolds, which often will save time and money for homeowners.

Strategically Fund Your Project

To find materials for your home addition on a budget, you could shop at stores like a Habitat for Humanity ReStore , attend auctions, or explore similar options to find salvaged materials. If you’re employing a contractor, however, you’ll want to make sure they are willing to work with recycled materials and ones that may not be standard size.

For a higher-priced project, it might be tempting to use credit cards to pay for expenses. If you’re doing this to maintain a record of your spending or to take advantage of credit card reward points, this can be a good strategy provided you can pay off the balance quickly, ideally within a single billing cycle.

But when you can’t pay off the balances, it can be easy to get caught up in a spiral of debt, and credit card debt is especially challenging. Why?

Credit card interest rates are notoriously high. What’s more, credit card companies typically compound daily, which means they calculate the interest you owe daily and add that to the card’s balance. You then pay interest on your balance, plus any accrued interest, until you pay your balance off in full.

Getting a Home Improvement Loan for Your Home Addition

If you don’t have enough cash to pay for your addition in full and up front, and don’t want to run up credit card debt, you might consider getting a home improvement loan. This is essentially an unsecured personal loan that is used for home upgrades and renovations. Unlike a home equity loan or line of credit, you don’t need to have any equity built up in your home, or use your home as collateral for the loan.

With a home improvement loan, you receive a lump sum up front which you can use to pay for your addition; you then repay the loan over a set term, often five to seven years, with regular monthly payments. Interest rates are typically fixed.

The Takeaway

A home addition can increase the value of your property while also allowing you to retrofit your house to your current lifestyle. There are many factors that figure into a big decision like a renovation, and it’s important to consider it from as many angles as possible.

If you’re interested in getting a loan to finance your home addition project, SoFi could help. SoFi’s home improvement loans offer competitive, fixed rates and a variety of terms. Checking your rate won’t affect your credit score, and it takes just one minute.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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When you’re in a crisis and economic circumstances feel anything but normal, you may wonder if you should rethink the way you’re using your credit cards. Here are some ins and outs of using — and rethinking how to use — credit cards during an emergency.

Is It Smart To Use Credit Cards During a Crisis?

Even during a crisis, credit cards aren’t magical “buy anything and worry about it much, much later” tickets. Many of the basics for using a credit card are in effect no matter what’s happening around you: Don’t make purchases just to get reward points, report missing or stolen cards immediately, be in the habit of checking your statements every month, etc.

That said, sometimes certain accommodations are made during a crisis. During the Covid-19 pandemic, for instance, many banks and lenders offered relief in the form of new policies to ease the burden for card holders who were struggling with their payments. Some waived fees, offered payment deferral or forbearance, or increased credit lines — some banks even offered these three forms of support, and more.

Of course, it’s unwise to assume a bank or credit card company is focused on looking out for you during an emergency situation. The better option might be to contact your card issuer for information and any fine print. And keep in mind that while the ability to increase your credit line might sound good, it could also cause more headaches down the road.

Making minimum payments on credit cards can cost you substantially more money over time. The interest — especially compounding interest, which is essentially interest on interest already due — can often be a big challenge with credit cards. But there are ways to potentially avoid interest on credit cards, such as paying off a balance in full each month.

During a crisis, it’s a good idea to continue using your credit cards responsibly. Of course, sometimes financial situations change, and you may need to use a credit card to pay for your daily essentials. While carrying some debt from one month to the next isn’t necessarily something to be thrilled about, it might be worth it if it means getting the things you need to live.

Planning for the Future — Starting Now

Conversations about using credit cards are often about responsible saving and spending. There is no blanket yes or no answer to whether it’s a good idea to use credit cards during a crisis, although it’s certainly possible to be a little wiser about using a credit card.

If you’re feeling spread thin financially during a crisis, however, it might be worthwhile to hunt for credit cards that can offer more reasonable rates than your current cards. A good place to start might be with your current card issuers and see if they can lower the interest rate.

Another alternative might be to consider a cash-back credit card that offers cash rewards in a small percentage back on each transaction. Depending on the issuer, the card might offer higher rates for certain categories of purchases, so it might be worth doing some research and strategizing if there is a big purchase you had already planned on making.

There are also balance-transfer credit cards, or a card you would transfer existing card debt to, usually at a lower annual percentage rate (APR). The rationale and incentive for these cards is to hopefully lock your credit card debt in at a lower rate than it would be currently, to therefore make it less burdensome to work on paying it down.

There can be wrinkles to employing this strategy, however, so be sure to read the fine print to avoid balance transfer fees or other charges. The idea is you can pay off that balance with no interest on a more compressed timeline. However, that lower rate might change after the introductory period, and you may be saddled with an APR that could be even higher than the one you had to begin with.

Putting the Cards Down — For Now

If the idea of getting more plastic feels more like a problem than a solution, you may want to consider taking out an unsecured personal loan. This type of loan is not backed by collateral and is likely to have higher interest rates and lower loan amounts than secure loans. They also typically require a higher level of creditworthiness than a secured personal loan does.

There are common uses for unsecured loans, including:

•   Paying off credit cards

•   Consolidating debt

•   Paying medical bills

•   Covering home renovation projects

The Takeaway

Dealing with a crisis can be unsettling, especially if your finances are less than stable. You may wonder if it makes sense to use your credit card to pay for everyday essentials. While there’s no one-size-fits-all answer, it’s important to continue using your card responsibly, whether you’re in an emergency or not.

If you’re stretched thin financially, there are strategies you can consider. One idea is to try to negotiate a lower interest rate with your current card issuer. Another option is to explore a cash-back credit card or a balance-transfer credit card, both of which could help increase your purchasing power during a crisis. Or you may also want to consider taking out an unsecured personal loan, which could help you get the funds you need to pay bills or consolidate debt.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Americans are carrying record levels of credit card debt. And, with the average credit card annual percentage rate (APR) for purchases now averaging 24.59%, the interest on debt can be as crushing as the balance alone.

Getting out from under high-interest debt can seem like a daunting prospect. The good news is that there are ways to make the process more manageable and a lot less overwhelming. While it can take some time, using a mix of smart paydown strategies can help you reduce your debt, lower your interest rates, and put you on the road to debt-free living. Here’s a look at some of the best ways to reduce your credit card debt.

Start by Creating A Budget

If eliminating credit card debt is the destination, creating a budget is like the road map that gets you there. While it may sound like a complicated process, it doesn’t have to be. These simple steps will get you started.

1.    Gathering financials. It might be a little painful to comb through bills and account statements, but the more information you have from the start, the easier it will be to set up a realistic budget. Try to collect the last three months of these statements in digital or paper form:

◦   Mortgage/Rent

◦   Utilities (water, gas, heat, internet, cable, HOA, etc)

◦   Pay stubs

◦   Credit card and auto loan statements

◦   Student loans or other miscellaneous recurring loans and bills

◦   Subscription services (Amazon, Netflix, Spotify, etc)

Taking the time to gather these documents can give you a clearer picture of what you’re spending each month. It can also help you suss out easy places to cut back, such as a gym membership you no longer use or a streaming service you rarely watch.

2.    Determining expenses vs. income. Once your finances are all laid out, you can tally up your average monthly income (after taxes) as well as your average monthly spending. Hopefully, the amount you spend each month is less than the amount you bring in each month. You’ll also want to make a list of your usual expenses and divide them into essential and nonessential monthly expenses.

3.    Implementing budgeting guidelines. A budget is simply a plan for how you will spend your money. Once you see how you are currently spending your money, you may realize that your spending doesn’t necessarily line up with your priorities. There are many ways to look at budgeting, but one easy framework is the classic 50/30/20 budget. It doesn’t require complicated spreadsheets or tricky apps to get started. The 50/30/20 method simply stipulates:

•   Half a person’s take-home pay should go towards “essential spending.” This includes housing costs, health insurance, groceries, utilities, minimum payments on debt, and anything else you need to pay each month.

•   One-third of a person’s post-tax pay should be tagged for “discretionary spending.” This is spending you could cut back on if needed, such as meals out, entertaining, clothing, or a gym membership.

•   Finally, 20% of post-tax income should be set aside for saving and debt payoff. The rest of a person’s paycheck is ideally reserved for retirement, emergency savings, and making debt payments beyond the minimum.

The 50/30/20 budgeting method can work well for beginners because of its simplicity and flexibility. Trying to adhere to the percentages can sometimes show budgeters their blind spots, or perhaps highlight areas where they might need to improve. But, it can also be flexible. Depending on the cost of living in your area and your priorities, you may want to play with the percentages.

Recommended: How to Stop Spending Money

Paying More Than The Minimum

When you have multiple credit card accounts racking up charges and interest, it can sometimes feel overwhelming. You might be unsure which, if any, to prioritize for payoff, and end up just paying the minimum due on every card each month.

But, if you just make the minimum payment due you might be surprised to learn how much more you end up paying in interest as the account balance accrues. Paying more than the minimum amount owed each month could lead to saving in the long run since there’s a smaller balance to charge interest on. SoFi’s credit card interest calculator can give you a general idea of how much you could possibly save on interest by calculating different repayment options.

Debt Payoff Strategies

Paying off more than the minimum each month is great, but coming up with a payoff strategy could offer a better outcome in the long run. Employing a method that works for your lifestyle could result in things like building momentum, alleviating stress, possibly making it simpler overall to conquer debt.

There are a number of simple debt-paydown strategies but here are two popular ones to consider.

•   Snowball Like a snowball rolling down a hill, this method starts with the smallest debt balances first, then builds towards the larger balances. You start by listing your debt balances from smallest to largest, without considering interest rate. You then put extra cash toward the smallest bill, while paying the minimum on all of the others. Once that bill is eliminated, you put extra cash toward the next-smallest bill. You keep the pattern going until all debt is gone.

The snowball method sometimes gets a bad rap because focusing on small debt balances first could mean paying more interest in the long run. But this method can actually have a positive psychological effect. Wiping away smaller debts can give you a sense of accomplishment that helps you power through the rest of the debt repayment process.

•   Avalanche If small wins off the bat don’t matter much, then you might turn to the avalanche method. This strategy starts with paying down the biggest interest rate debt first, paying minimums on all other debts. You contribute all free cash to the bill with the highest interest rate until it’s paid down or off. Continue, paying down debt with the next highest interest rate. Keep going until all debt is gone.

This method allows you to save on interest payments over the life of each credit card balance. The downside is that it takes longer to see any “wins.” But, once things start moving, it should have an avalanche effect, with each loan toppling.

Consolidating Multiple Debts

Having multiple bills, due dates, and accounts can lead to confusion over amounts due, resulting in missed payments and late fees. For some, a credit card consolidation loan might help to cut through the confusion by rolling all their revolving debt into one unsecured personal loan.

How can a personal loan possibly help? If you have outstanding amounts owed on multiple cards, you may be able to consolidate all the debt into one personal loan with a single fixed rate payment.

What’s more, unsecured personal loans often come with a fixed interest rate that’s lower than the average credit card rate, which means less interest charges could accrue each month.

Depending on how quickly you pay off a personal loan, you could save money on interest over the life of the loan with a lower fixed APR. Streamlining debt can also lead to more peace of mind, as can having a set term with a final payment date, instead of a revolving debt like a credit card. Rather than having multiple open-ended debts of differing amounts with varied APRs, you end up with one payment a month, with one rate and a payoff date.

Unsecured personal loans aren’t for everyone. While their APRs are generally lower than credit cards, not everyone will qualify for the lowest possible rates. And taking out a personal loan is still taking out additional debt, so it’s important to weigh the ramifications of adding a loan to one’s credit history.

The Takeaway

If you’re struggling with high-interest debt, know you’re not alone. Also know that there are a number of ways you can tackle the problem. A good first step is to look at your current income and expenses, set up a budget, and select a payoff strategy (such as the snowball or avalanche method).

You might also consider consolidating your debt to simplify repayment and, ideally, lower your interest rate. If you’re curious about this option, SoFi can help. With a low fixed interest rate on loan amounts from $5K to $100K, a SoFi personal loan for debt consolidation could substantially lower how much you pay each month. Checking your rate won’t affect your credit score, and it takes just one minute.

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