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Tackling your debt

Updated: Nov 17, 2021

The first step to tackling your debt is understanding how much you have and how much interest you are paying on your debt.

Different types of debt impact your finances in different ways. It is the high-interest debt that can have the biggest impact: payday loans, credit cards, store cards, car loans. Low-interest debt such as student loans and mortgages are less of a priority as you are not having to pay high interest on the loan.

Paying off debt is no easy task, especially if you just pay the minimum amount due each month. To get free and clear, you often have to accelerate payments.

Focus your extra money on one debt at a time

To get free and clear, you often have to accelerate payments. There are two distinct strategies to settle outstanding balances in this way: the debt snowball method and the debt avalanche method.

Debt snowball method

List all of your debts from smallest to largest and pay the minimum amount on all of them except the smallest. Ramp up the payments on your smallest debt as much as you can. Once that’s wiped out, you use the extra cash to pay the next smallest balance and so on.

The snowball method means that easy victories early on will keep you motivated. Every time you cross a debt off your list it’s a celebration. The idea is that you’ll keep chasing that feeling of satisfaction as you move on to the bigger debts.


  • Builds motivation by settling debts fast

  • Easy to implement


  • Incurs more interest — more expensive overall

  • Can take longer to become completely debt-free

Debt avalanche method

Another strategy for tackling your debt is using the avalanche method. The avalanche method is when you pay off your highest-interest debt first. Then, when that’s out of the way, you aim your repayments at your next highest interest debt. Keep going until you’ve knocked them off and they all come down in an avalanche.


  • Minimises the amount of interest you pay

  • Lessens the amount of time it takes to get out of debt


  • Takes discipline and commitment to pull off

  • Requires constant amount of discretionary income

While both are useful strategies to get debt out of your life, one method might be easier for you to stick with and make a bigger impact on your finances.

No matter what strategy you use to get out of debt, the hardest part of getting out of debt is often just starting. But with determination and planning, you can turn your debt mountain into a molehill.

If you need immediate financial help and you’re in New Zealand, you can call the free financial helpline Moneytalks on 0800 345 123 or text 4029. Moneytalks connects people and whānau with their local foodbanks, helps them find their way through Work and Income processes and entitlements and supports people to manage their money.

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