A 5-Step Strategy to Reduce Debt

Getting out of debt means getting out from under a massive burden of guilt. This strategy can help church members earn their freedom…

Christians are morally obligated to reduce their debt burdens. This is because people who amass large amounts of debt are spending beyond their means. This is short-sighted. Christians are called to long-term thinkers. Future orientation promotes thrift and savings.

The biggest sources of debt in the lives of most people and their average balances in 2019 were

  • Mortgages ($203,296)
  • Student loans ($35,620)
  • Car loans ($19,231)
  • Credit card balances ($6,194)
  • Home equity loans ($45,191)
  • Personal loans ($16,259)


Insurance company Northwestern Mutual published an article that lays out a 5-step plan for paying off debt. It is worth following. The first step is to make a list of all your debts:


You can’t prioritize debt until you know how much you owe and to whom. Start by creating a list of all your debts, along with the following information:

* Name and contact information for each debt

* Type of debt (credit card, student loan, mortgage, personal loan, etc.)

* Total balance owed

* Interest rate

* Due date

* Minimum payment

* How long it would take to pay off the debt at the current payment (you might find this info on your billing statements)

* Potential benefits (like mortgage or student loan interest you may be able to deduct on taxes)

Starting with a list of all debts gives you the “lay of the land.” You can’t plan out a solution path until you know how big the scope of the problem is.


Now that you’ve got a view of everything you owe in one place, look to see if you might be able to lower the amount you pay in interest. Some of your loans might have a fixed rate you can’t negotiate, but you may be able to lower the annual percentage rate (APR) on your credit cards, for example, simply by calling and asking. This can be particularly fruitful if you have a good credit score.

Another way to lower interest rates on existing loans is to transfer the balances to credit cards with lower rates (ideally, introductory rates of 0 percent) or to consolidate them with personal loans. But don’t neglect the balance transfer fees. It doesn’t make sense to lower the rate if the balance transfer fee will consume the potential interest savings.


This will involve taking a look at your current budget and figuring out how much more of your take-home pay you can comfortably put toward debt without shortchanging important goals like your retirement contributions, emergency savings or things that are important to you today. If you want to free up even more money, you could also revisit your expenses and see what you can trim that 

When a person or family commits to a debt-reduction plan, they should pause retirement and emergency savings contributions and redirect that money into their debt payoff. They can also take on side jobs. There isn’t a lot of money in Uber or Lyft, but it is extra and better than nothing. The increased self-discipline that develops from working extra jobs to achieve a debt-reduction goal is a reward in itself.


After you’ve updated your list with any newly lowered interest rates, put the debt with the highest interest rate at the top. It typically makes the most sense to focus your payment efforts on the debt with the highest interest rate first, because you pay more in interest every month that balance remains high. Most high-interest debt will likely be associated with credit cards.

However, you still need to pay at least the minimum amount due on all your other debts, so put those bills on autopay. Then devote any extra money to overpaying the highest interest rate debt first. Once you’ve paid off that debt, use the money you were putting toward it for the next highest interest rate loan or line of credit you have, and so on. (This strategy is known as the “avalanche method.”)

I personally disagree with the “debt avalanche” method of debt repayment. I think the psychological benefit gained through quick wins by paying off the smallest debt first (debt snowball) is more valuable than the money saved in interest payments. We want people to stick to a plan over the long-run. Interest savings may not be enough to motivate them (unless the savings can be shown to be truly substantial).


Once you have a solid repayment plan in place, you’ll want to do everything you can to avoid getting yourself into debt again. By determining what led to the debt in the first place, you can get to the root of the problem and come up with a plan. If it was overspending , because you’re struggling to live within your means, it may be time to revisit your expenses and commit to sticking to a budget. If it was unexpected expenses, like a medical bill or a leaky roof, then it might be time to beef up your emergency fund so you don’t have to resort to credit cards in a jam.

After all, you’re doing the hard work of paying down debt — so it’s important to know how not to build it back up again.

It is appropriate that the final step in this sequence has to do with avoiding debt in the future. That’s because the fifth and final point of the Biblical covenant model is Inheritance. Over the long run, avoiding debt leads to an accumulation of wealth. The point of going on a debt-reduction plan in the first place is to eliminate your debt and then avoid it for the rest of your life.


The five steps presented here offer a good strategy for developing a debt reduction plan. Deacons can use this strategy as a guideline when helping church members pay down their debts.

Mortgage debt should be the last debt to be paid off. It is substantially higher than all other debts. It will take years of focused debt reduction to pay off a mortgage early, and that money might be better spent in developing a large emergency fund instead.