Debt Payoff Strategies That Actually Work

Struggling with debt is one of the most common financial challenges many people face today. Whether it’s credit card balances, student loans, or personal loans, carrying debt is stressful and financially limiting. Getting out of debt feels overwhelming, but having a clear strategy to tackle it can make all the difference. In this blog entry, I’ll discuss three proven debt payoff methods -- the Snowball, Avalanche, and Hybrid. Implement the one best fit for your situation.

The New York Fed released data in 2024 stating the average American per U.S. adult is $66,772. Student loan borrowers average $38,290. New grad CRNAs are averaging far more than that…probably in the $150,000 to $300,000 range.

Fortunately for CRNAs, the total debt burden of training is less than or equal to one year’s salary. I’m not saying costs should be this high, but when looking for a profession, this ratio should be a major consideration.

Understanding Your Debt

We can get into the good debt vs bad debt discussion. Good debt would be the investment to become a CRNA. This investment allows for you to have a substantial income.

Good debt generally allows you to arbitrage the interest rate. Whatever you are purchasing with the debt will pay for itself. Debt on an asset with a low interest is considered good.

Bad debt encompasses pretty much everything else. Debt with an interest rate above 6% is generally bad. This is too significant of an interest rate to overcome. It’s tough to build wealth when paying 6% (especially if it’s amortized).

Student debt from expensive universities is bad debt. The return isn’t there. Debt on liabilities is bad debt. Things like cars, boats, campers, and lake homes.

Your personal residence falls in a gray area. Due to the opportunity cost, I don’t view a personal residence as an investment. The debt is tolerable with some of the tax advantages regarding personal real estate, but it leaves a lot to be desired.

Take away with housing is that it counts towards your net worth, but not towards your FI number unless you plan to sell upon retirement.

Before diving into payoff strategies, it’s crucial to understand the specifics of your debt. This quick review includes the following:

Types of debt: Credit cards, student loans, mortgages, auto loans, etc. 

Interest rates: The percentage you are charged annually on the outstanding balance. 

Balances: How much you currently owe on each debt. 

Minimum payments: The smallest amount you must pay monthly to avoid penalties.

Knowing these details allows you to develop an informed payoff plan tailored to your unique financial picture.

The Debt Snowball Method

Popularized by Dave Ramsey, the snowball method focuses on paying off your debts from smallest to largest regardless of interest rate. Here’s how it works:

1. List your debts from smallest to largest balance. 

2. Make minimum payments on all debts except the smallest. 

3. Throw any extra money toward paying off the smallest debt as quickly as possible. 

4. Once that debt is paid off, move to the next smallest, adding the previous payment amount to your new target.

Psychology > Math

Dave is all about the mental game. This strategy works because you are winning with progress. You have 10 debts and eliminate one after just 1 month. BOOM. Cross it off!

Accomplishing the goal of paying off that first debt feels good. Dopamine release gives you the energy to attack the second smallest debt. These early wins encourage you to keep going. The list shrinks from 10 debts to 6 very quickly.

Pros:

• Builds momentum through quick wins 

• Simple and easy to follow 

• Motivates sustained progress

Cons: 

• Mathematically Inefficient

The Debt Avalanche Method

The avalanche method prioritizes paying debts with the highest interest rates first. It works like this:

1. List your debts by interest rate, highest to lowest. 

2. Make minimum payments on all debts except the one with the highest interest rate. 

3. Throw any extra money toward paying off the highest interest debt as quickly as possible. 

4. Then move to the next highest interest debt, and so on.

By attacking the costliest debts first, you minimize the amount of interest you pay overall, which can speed up the total payoff period and save money.

Pros:

• Mathematically advantageous

• Shortest payoff timeline

Cons:

• May hang on to small debts for a while

• Requires patience and discipline 

For the average consumer, the debt snowball and debt avalanche methods have significant overlap. For example, high interest debt typically has low lending limits. This places payday loans and credit card debt at the top of both lists. Larger loans such as auto loans commonly have a lower interest rate. The loan value and rate would move this down a bit.

The Hybrid Method

The Hybrid approach combines the best aspects of both snowball and avalanche methods. Start by paying off one or two of your smallest debts quickly for early wins and confidence. Think of this as cleaning and consolidating.

This blog is primarily read by high income earners. You guys and gals are bringing in $20,000+ per month. You guys are receiving sign-on bonuses nearing (or exceeding) six-figures. Lock it down and bust out the small debts in the first month to tidy your financial house.

Then switch to the avalanche method to tackle the remaining debts with the highest interest rates, reducing overall costs. Being mathematically efficient is more advantageous as the debt burden increases. Those borrowing hundreds of thousands of dollars qualify.

This hybrid method addresses the psychological need for quick progress while also optimizing financial savings. It shows you how quickly debt disappears with a CRNA income shovel.

Anyone who wants motivation, flexibility, and efficiency, this is for you.

How to Choose the Right Method for You

Choosing the best debt payoff method depends on your personality, financial situation, and goals. Ask yourself:

• Are you motivated psychologically or mathematically?

• What does your liability sheet look like?

• If you hold low interest debt, will you ACTUALLY invest?

Here’s the Deal…

As a CRNA or other high-income earner, you income shovel is more than adequate. Put those dollars to work and make it happen. For anyone who says I can’t relate because I graduated without $200,000 of student debt, just know I paid off the debt in advance with a Registered Nurse income.

It’s not enough to list your debts and decide which should be paid first. It’s a matter of balancing your income and expenses to create sufficient cashflow to pay off your liabilities on a timeline that works for you. None of this…keeping student debt for 10 years at 7% hoping the government forgives my loans.

Keep Expenses Low…or Average

The average family of 4 in the United States earns $80,000 annually and lives on $72,000. A CRNA earning $250,000 should have significant cashflow.

• Gross Income - $250,000

• Net Income - $187,500

• Cashflow - $115,500

The reason $200,000 of debt stays around for 10 years is because you allow it. If you refinanced down to 1.5%, sure. I’d hold it too. For those of you going through school in 2025, I’m sorry to say your loans will be 6-8%. This simply inhibits wealth building.

Get that Bread

Do what is necessary to build a stable financial base. Maximize your efforts early in your career. Overtime and locum work are financial jet fuel.

My first year of practice, had a 3 weeks on, 1 week off schedule. I worked my off week increased my annual income by 70%.

Working just 1 extra shift per month (just 12 shifts per year) is an extra $20,000 annually. Trade your 6 weeks of PTO for locum work at $15,000 per week to see an extra $90,000 annually.

Debt Considerations

IRS debt goes to the top of the list. Don’t be on their bad side.

Fund a starter emergency fund before going wild with cashflow.

If you are a W-2 employee and have an employer retirement match, prioritize that after IRS debt. This may be a 3% match of your $250,000 salary -- $7,500. Contribute your $7,500, then off to the debt paydown method of your choice.

If you carry significant debt on liabilities such as $40,000 vehicle loan at 8%, sell it. It doesn’t matter if you are upside down on the purchase. Cut your losses and eliminate the debt overnight.

Same goes for boats, campers, UTVs, and the like. This is a great way to cross debts off the list quickly. If you net worth can support the purchase, pay it off quickly. If not, clean up your financial framework and re-purchase these things when your net worth supports it.

Student loan debt is a tricky one. As high-income earners, don’t expect any favors from the government. And rightfully so. You borrowed the money AND have the means to repay it. Just make it happen.

Don’t assume PSLF. It’s okay to follow the PSLF track while aggressively investing. Essential note here is being certain your cashflow is going towards investments, not liabilities while awaiting PSLF. About 95% of PSLF applicants have been denied for a number of reasons. Do with this what you will.

Tax-advantaged accounts have an annual contribution limit. That means if you focus all of your cashflow on debts and do not fill retirement accounts, those are contributions you can’t get back. That being said, take what you can get.

Depending on your situation, it may be advantageous to contribute to your retirement account and hold debt at 4-5%. The tax-advantages and annualized return will likely create an edge over purely prioritizing debt paydown.

Mrs. TFC and I contribute $162,500 into our tax-advantaged accounts. For most CRNAs, this doesn’t leave much cashflow for paying down debts. Find a balance. Maybe max your 401(k) and forgo the IRA and HSA for a few years while cleaning up debt.

Personal finance is personal. Do you prefer the psychological advantage of debt elimination ASAP? Do you prefer the mathematical advantage (and accompanied complexity) of working in retirement contributions simultaneously?

Don’t think that delaying retirement contributions 2 or 3 years will set you back significantly. If anything, proving to yourself that you can accomplish a financial goal will have you caught up with the use of brokerage accounts in no time.

Debt Free Status

We can talk psychology vs mathematics all day. I know people of all ages and professions that are debt free. Some debt free excluding the mortgage, others 100% debt free. The common theme is that NONE of them…literally 0% in my study…regret becoming debt free.

You can discuss their potential investment returns and all of the other potential situations. The peace of mind was worth it to each and every one of them. Tough to relate if you were raised in a household that carried debt. And when you have carried personal debt since you were age 18.

Great news, if you achieve debt free status and don’t like it, you can always borrow money again.

Underlying Message

Personal debt at today’s interest rates inhibits wealth building. A CRNA determined to pay off their personal debt, including student debt, could do so in 2-3 years. If desired, the mortgage could be paid off shortly thereafter. It’s about creating a plan, increasing cashflow, and execution. Select a method and begin.

Debt payoff doesn’t have to feel impossible. The best strategy is the one you can commit to consistently. Whether you choose the motivating quick wins of the snowball method, the cost-saving avalanche method, or a flexible hybrid approach, the key is to start today and keep moving forward. Every dollar paid off brings more financial stability and peace of mind. Thanks for reading!