Step 4: Eliminate High-Interest Debt

Phase 1: Build a Foundation · Step 4 of 12

One debt at a time, like a laser.

In short

Pay the minimums on everything, then put every extra dollar on one debt until it's gone. Sort your debts into buckets by interest rate and start with the ones above 10%. Inside that bucket, smallest balance first: the quick wins keep you going.

Why this comes now

High-interest debt quietly eats your surplus. With a month of expenses set aside, you can attack it without borrowing again when something breaks. Each debt you pay off frees up its minimum payment, which rolls into the next one, so progress speeds up as you go. Most households take one to three years.

How to do it

1. List every debt with its balance, interest rate and minimum payment.
2. Sort them into three buckets: high interest (above 10%), low interest (below 10%) and the mortgage. Only the high-interest bucket belongs to this step. A 0% promo card counts here; it won't stay 0%.
3. Inside the high-interest bucket, order debts from smallest balance to largest.
4. Pay the minimums on everything. Near month end, send the whole surplus to the first debt on the list.
5. When it's gone, roll its minimum payment plus your surplus into the next one.