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How To Pay Off More Than One Debt

If you’ve only got one debt hanging over your head, paying it off isn’t rocket science: you pay as much as you can every month until the sucker is gone. But if you’ve got more than one debt to worry on, how do you prioritize them?

No New Debt

Before you even think about how to pull yourself out of a debt hole, you’ve got to stop digging the hole! Stop acquiring debt. Don’t use your credit cards if you’re carrying a balance on them from month to month. Use a debit card instead. If you’ve got some fancy home equity line of credit, don’t draw anymore from it. If you can’t stop acquiring new debt, you won’t be debt free. If you’re having trouble making ends meet without using debt, you need to drastically change something in your life.

What can you drastically change to stop acquiring debt? That’s something you have to figure out for yourself, but I can tell you what I did: I had to drop out of college for nine months and vow not to buy anything unless it was used (except food). Hopefully you won’t need to take as drastic of measures, but I’ll tell you something: it worked! I’m debt free now, except for my low-interest student loans.

Write Down Your Debts

No matter what theory of debt pay-off works for you (see below), each of them starts off the same way: making a list of all of your debts, including the total balance of each debt, the interest rate, the minimum payment, and a little something I like to call the “annoyance factor” of each debt. The annoyance factor should be a number, and it doesn’t matter on what scale (1-5, 1-10, 1-100, whatever!). Just as long as a bigger annoyance factor means the debt is more “annoying” to you than a debt with a lower annoyance factor.

There’s a spreadsheet below for entering all of this information into. First, here’s a quick explanation of the debt repayment theories.

The Three Theories of Debt Repayment

Lowest Balance theory: Pay off your debts in order from lowest balance to highest. This is best if you have a very emotional relationship with money, and you want to see progress quickly. If you would get frustrated and give up if it took you too long to pay off the first debt, this is the theory for you.

Highest Interest Rate theory: Pay off your debts in order from the highest interest rate to the lowest. This makes the most mathematically sense, and works well for number-oriented people. If you want the most dollar-for-dollar efficient method, this is the theory for you.

Annoyance theory: Pay off your debts based on how annoying they are to you, or how pressing it is to pay them off. If you have a debt from a company you really hate, or personal debts to family you want off your back before you deal with any other debts, this is the theory for you.

Free Debt Snowball Worksheet

Debt Snowball Spreadsheet on Google Docs

Open the spreadsheet in Google Docs (it’s free and totally awesome, don’t worry)

Click File, then chose “Make a Copy” (this is very important – if you do not do this, you will not be able to edit the spreadsheet)

In your copy, you can now edit the spreadsheet and put your own debts in. Don’t forget to replace the “Example” with a debt of your own!

Now comes the fun magic of Google Docs. If you hover your mouse over the gray bar underneath any of the headings (Balance, Interest Rate, or Annoyance Factor), you’ll see that it turns orange and says “Sort.”

  • For the Lowest Balance theory of debt payoff, click the arrow on “Sort” under “Balance” and choose “Sort A > Z”
  • For the Highest Interest Rate theory, click the arrow on “Sort” under “Interest Rate” and choose “Sort Z > A”
  • For the Annoyance theory, click the arrow on “Sort” under “Annoyance Factor” and choose “Sort Z > A”

And now your debts are cleverly sorted for you, based on the payoff theory you’ve chosen. So all you have to do now is throw as much money as you can manage at the debt that’s sorted onto the top, and make the minimum payments on all the debts listed below it.

When your first debt is paid off in a few months (or, in some cases, years), you just have to open the spreadsheet again, delete the paid-off debt, and start throwing as much money as you can at the new top-dog debt!

The great thing about this is you don’t have to stick to any one of the theories if it isn’t working for you. You can start out with Lowest Balance, and if you decide to change to Annoyance later, you can just re-sort the spreadsheet and adjust your payments. See – who said change isn’t easy?

27 responses to “How To Pay Off More Than One Debt”

  1. Miranda

    I hadn’t ever really heard about the “annoyance factor” when it comes debt repayment. But I can see how it makes sense. Get rid of what’s been weighing on you and destroying your peace of mind first.

  2. Paying Off Debt: Annoying Debts First? : Bizzia - Business News and Commentary – Finance and Business Tips

    […] work for you. But there is another method for deciding what to pay off first that I read about at Poorer Than You: How annoying the debt […]

  3. Financial Samurai

    Hi Stephanie – I like the methodology you provide your paying down multiple debts.

    I was just wondering after reading to the bottom and catching a glimpse of the NetWorth widget… what was it again that caused a reversion back down? Was it a technical reason where you paid off your car insurance 6 months in advance or something?

    Best, FS

  4. Credit Card Chaser

    The “Annoyance Factor” is a good non numerically measured idea to keep in mind. I like it. Some people just simply sleep better at night when things are a certain way. Definitely not something to discount.

  5. Financial Samurai

    Sounds good Stephanie, exciting! I’m going to start a Samurai PF Net Worth Index to gauge the community and see how we’re doing. I’ll be happy to include yours!

    I still have no idea what kind of income successful PF blogger can make b/c I haven’t bothered to monetize my site. Given you are doing so well with your readership, would it be safe to say you are picking up some good spending money from this site?


  6. Abigail @ Essay Writing

    You really have the worksheet huh for your debts. Well, that’s a good idea. I never thought like that. I try that one….. I think its really a great idea.

  7. Angie

    Another factor I’d consider is what I call the ‘flexibility’ factor. Pretty much if you want to pay down the debt so you will have less monthly payments in the case of job loss. I calculate this as the (monthly payment)/(remaining balance). The highest percent would provide you the most bang for your buck in terms of reducing minimum required payments per month.

    An example where this could come into play. Currently my minimum payments are 1780 for loans. If I sell my car and have 10k available, I could apply this to the highest interest (and have no reduction in payments). But if I’m planning for a life change like switching jobs I’d probably pay off a combination of smaller loans. Which can free up some money monthly.

    Just a thought. I seem to have way overly complicated spreadsheets though. I get Excel happy about my debt.

  8. Lawrence

    I’ve never heard of the “annoyance factor”. Very interesting idea but I have to say… It makes good sense!

  9. David @ Money Under 30

    I just have to say that I love the “annoyance factor” idea, too! In fact, that’s exactly how I prioritized my debt repayments—I paid off the companies I hated the most and the “stupidest” debts first. Fortunately, they also had some of the highest interest rates. Great post!

  10. Jack @ Master Your Card

    Hear, hear on the annoyance factor. I think part of taking control of your debt is making eliminating debt gratifying – and nothing’s more gratifying than getting certain jerks out of your hair.

    Great post

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  12. Kate

    People sometimes forget how much psychology plays a roll in personal finance. Everybody has a nemesis, and mine happens to be American Honda Finance. As far as I’m concerned, it may as well be the devil incarnate and those little statements may as well be covered in thorns. That’s why I always try to pay over the minimum amount, to reduce the “annoyance factor.” Nothing says stick it to the man like seeing the ‘Total Balance Due’ at $0! Now I just have to hope I can keep paying in advance before my car dies on me…I’ve already got 70k miles on it!

  13. Jerry

    When we paid off our consumer debt we did it according to the highest interest rate, which made sense at the time. It still does lead to the best outcome, strictly looking at it from a financial point of view. However, this “annoyance factor” cannot be overlooked! I think it is brilliant, because paying off an annoying bill is probably ten times as satisfying as paying off another one, and it offers some emotional insurance to keep you on the path. I like this idea a lot, unless the annoying bill is too large to pay off in a reasonable time frame… too frustrating then.

  14. chakru

    wow you do have a lot of theories in your mind to clear off the debts. Interesting indeed, I like the whole idea and like anyone I myself hate debts and I make sure I don’t get in to one prevention is better than cure you know 😉

  15. Douglas

    There is also the Debt Tsunami, made famous by ManVSDebt. I like that one, or my version being the War on Debt.

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  17. Roger

    More good stuff, Stephanie. I do like your ‘annoyance factor’ method, although the mathematician in me means I’ll end up paying off the highest interest debts, even if they don’t bother me that much.

  18. Kerri

    There’s a new site called DebtSpark ( that provides a simple snapshot of debt with income and expenses….it allows you to enter figures monthly and charts changes over time. It’s step one for getting an understanding of your debt and general financial picture.

  19. Rob From Debt Relief USA

    Our members have reported great results following the snowball method as mentioned in your post. By making a list of all your debts, and then focusing all your attention on paying off the smallest debt first people quickly see results and so are more likely to stick to the plan. Once the smallest debt is settled, move on to the next smallest debt and so on until all your debts have been paid off.

  20. Jackson

    Nice just came across this post. That snowball method seems like an effective approach for taking action yourself before resorting to credit counseling services or debt settlement companies.

  21. Craig@Debt Support Trust

    A structured plan is always the best option. Creditors will generally complain if they are being left till last to be paid. The correct way is to contact all creditors and make a pro-rata payment. By communicating with the people you owe money to you can resolve many creditor problems before they arise.

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