Debt–the other ugly four-letter word. It’s time to take a look at your finances and see where to declutter. Here are some questions and answers with Dawn Starks from SimpleMoney to help you on your path to debt elimination.

How do you define debt?  

Debts come in all shapes and sizes. People like to characterize debts as “good debts” and “bad debts.” To me, no debt is good. But certainly, some debts are better than others, and knowing the difference can help you prioritize debt elimination.  

The worst  debt is consumer debt like credit cards. Credit cards and other high-interest rate debts should be first on your elimination list. Student loans and mortgages can be tackled after all consumer debt (including car loans) and medical debts are eliminated. 

What is the biggest cause of debt clutter?  

People tend to accumulate debt readily by living beyond their means. Ideally, considerable thought should always be given to any decision to acquire a new debt. Too often people jump first and ask questions later. This is common with student loan debt, for example. It is wise for students to examine the job market and their income potential before taking on significant debt for their studies.

 Another example is credit card debt. Many people use credit to finance a lifestyle they cannot afford.  Instead, credit cards should be viewed as tools — a way to manage your monthly budget in a way that is convenient and allows you to track your expenditures easily. Borrowing on credit cards to pay for expenses without the ability to pay the bill in full each month is a recipe for financial trouble.

What are three mistakes people make when managing debt?  

The biggest mistake people make managing their debt is making only minimum payments. Depending on the interest rate and the size of your principal balance, it can take decades to pay a credit card debt off if you only pay minimums. In the worst situations, the terms of the credit cards are so bad, you’ll never pay it all off.

The next biggest mistake when managing debt is when people tack a little bit of extra payment on several debts at once. But Dawn, you said not to pay only minimums! But if you pay extra across several debts, you are diluting your efforts. Payoff will still be slow, and frequently you’ll lose momentum. Instead, prioritize your debts and pay minimums on ALL your debts except the number one debt on your list.

When that one is eliminated, move on to the next one.

The third most common debt-payoff mistake can be categorized as disorganization. Missing payments can be deadly when it comes to eliminating debt. Late charges and additional interest accumulate, and you lose ground. Be organized and make sure you are timely with every single payment.

What are the first three steps to decluttering debt?

  1. Acknowledge – Make a thorough list of all your debts, including current balance, interest rate charged, and minimum payment.
  2. Order – Take your list and order your debts. You can order from smallest to largest, from highest rate of interest to the lowest, or a combination of the two.  In any of these scenarios, leave your mortgage for last. 
  3. Plan – Plan to pay only the minimum on all debts except number one on your list. Also decide where to trim your budget to free up extra funds to apply toward debt elimination. Apply ALL extra funds to the number one debt until it is eliminated. Once your primary debt is paid, roll the entire amount you were paying on number one into paying off the number two debt and keep going. Snowball your debt decluttering!  

What is the debt-to-income ratio, and why does it matter?  

To compute your debt-to-income ratio, add up all your monthly debt payments and divide the total by your monthly gross income. This results in a fraction. Honestly, this ratio only matters if you are seeking to acquire additional debt, such as a mortgage.

Lenders have parameters for how much debt is too risky for a borrower. If your aim is to declutter your debt, don’t worry about debt-to-income ratio. Instead, get laser focused on debt elimination. 

Who is the best professional to hire if you need help managing your finances?

If you find you need guidance in improving your financial life, I would make two recommendations. One is to seek education at a local non-profit agency such as Consumer Credit Counseling Services. If you get counseling and education only, there is no impact on your credit score for using their services. I would NOT suggest a paid-service for debt consolidation. That should only be a last resort.

The second recommendation is to seek out the services of a Certified Financial Planner™. A CFP® will examine your whole situation and provide guidance on how to improve what you are doing. Remember, buying products isn’t necessary. You are after advice.

What is your favorite book for decluttering debt?  

Dave Ramsey’s books are all rock-solid when it comes to advice about debt elimination. He does, however, approach things from a Christian worldview, and that perspective may not be for everyone. But his advice is smart, and his books are worth the read. 

I have also enjoyed “You Need a Budget” by Jesse Mecham. But my all-time favorite book about personal finance is “Your Money or Your Life” by Vicki Robin.  It’s a must-read, in my opinion. 

What is your best advice to plan for an abundant financial future?  

The best thing you can do is commit to having an abundant financial future. Commitment must come before action. Once you understand “why” you are going to secure an abundant financial future and have firmly committed to doing what is necessary to get there, put your nose to the grindstone and do the work. It’s not easy, but it is simple: spend less than you earn, pay off your debts, and save money for the future. 

Simple, right?


Dawn Starks is a CERTIFIED FINANCIAL PLANNER™ practitioner, homeschooler, writer, blogger, and podcaster in Asheville, NC.  You can find her at  If you like what you read, subscribe to her free weekly newsletter.  This will keep you up to date on the week’s blog posts and podcast episodes, but also includes content only available to subscribers!  


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