Managing personal or business finances often comes down to making smart, strategic decisions. One of the most effective steps you can take toward financial stability is prioritizing the payoff of high-interest debt. It’s a simple concept—but one that can have a huge long-term impact on your financial well-being.
Why High-Interest Debt Is So Costly
Not all debt is created equal. Some debts—like mortgages or low-interest business loans—can be part of a healthy financial plan. But high-interest debt, such as credit cards or certain personal loans, can quickly spiral out of control if left unmanaged.
Here’s why:
- Interest adds up fast. A credit card with a 20% interest rate can rack up hundreds (or thousands) of dollars in interest annually if you’re only making minimum payments.
- Monthly payments barely make a dent. When a large chunk of your payment goes toward interest, it takes much longer to reduce your actual principal balance.
- Financial flexibility is reduced. Carrying high-interest debt limits your ability to invest, save, or take advantage of new opportunities.
The Benefits of Tackling High-Interest Debt First
Paying off high-interest debt before lower-interest obligations is often called the “avalanche method.” It’s a smart strategy for a few reasons:
- You pay less over time. By reducing the amount of interest you’re charged each month, you’ll ultimately pay less overall.
- You free up cash faster. Once that high-interest payment is off your plate, you can redirect that money into savings, investments, or other financial goals.
- You reduce stress. Knowing you’re not burning money on interest charges brings peace of mind—and a sense of control over your finances.
How to Get Started
If you’re ready to tackle high-interest debt, here’s a simple step-by-step plan:
- List all your debts with balances, interest rates, and minimum monthly payments.
- Identify the one with the highest interest rate.
- Continue making minimum payments on all debts, but put any extra money you can toward the one with the highest rate.
- Once that’s paid off, move to the next highest, and so on.
This method can accelerate your journey to debt freedom—and help you keep more of your hard-earned money.
Need Help with a Debt Payoff Strategy?
Whether you’re managing personal debt or trying to streamline your business’s finances, Basso & Guida is here to help. We offer financial planning and accounting services that go beyond just taxes—we’re all about helping you make smarter money moves all year long.
Let’s talk strategy and set you up for long-term success. Contact us today to schedule a consultation.
