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7 Best Financial Planning Strategies for Becoming Debt-Free

Have you thought about where you want to be financially in five years? What about ten, fifteen, or twenty years? If you currently have a lot of debt, you may be hoping to be debt-free by then.


In this guide, I have put together my seven best financial planning strategies for becoming debt-free so that you can start planning your way to a debt-free life.



  • Snowball Payments
  • Avalanche Payments
  • Zero-Based Budget
  • 80/21 Method
  • 50/30/20 Method
  • 3-Bucket System
  • Envelope Method


A critical step toward becoming debt-free is to establish a financial plan. Individuals may be dubious about how to repay their debts without a financial plan.


According to CNBC, the United States is at a record high for household debt. Also, there is a 40% chance the United States will enter a recession in 2023. Many believe that the recession has already started due to the first two quarters of 2022 showing a decline in GDP.


Now is the perfect time to start a financial plan with high inflation and interest rates. Don’t be astray like millions of other Americans. Put effort into a financial plan and watch your efforts be rewarded.


Why have a financial plan?


There are several reasons why you should utilize a financial plan.

  • Increased savings
  • Cash Flow
  • Financial security
  • Investing
  • Wealth building
  • Decreased spending
  • Pay debt faster


The simple answer is you will have more control over your money. Also, you will have more money at your disposal. More money means you can put yourself in a stronger position financially. Being uncertain about your finances is not a great feeling.


Take control of your finances with a financial plan and put it to work. You won’t regret it.


Here are my seven best financial planning strategies for becoming debt-free that you should try.


1. Snowballing Payments


The first financial strategy on this list is to snowball payments. This means you are eliminating your smallest balance debts first to reduce the number of monthly minimum payments. These small victories can be very satisfactory.


Note: Be sure you have paid all other monthly minimum payments before using the additional income to snowball your smaller debts.



  • Faster payoffs
  • Easy implementation
  • Quicker satisfaction
  • Reduce the number of payments quicker



  • Pay more interest
  • May take longer to pay all debt.
  • Commitment
  • Discipline


This strategy works great to eliminate additional monthly payments quickly.


The biggest con to this strategy is the lowest balance liability may not be the liability accruing the most interest. Therefore, it may not be the best option if you try to minimize the interest you end up paying.


That is where avalanche payments come into play.


2. Avalanche Payments


Unlike snowballing payments, avalanche payments prioritize your highest interest rate debts.



  • Minimizing interest paid
  • Saves time becoming debt-free
  • Easy implementation



  • Commitment
  • Discipline
  • Discretionary income required constantly
  • Not minimizing the number of monthly payments


No matter which of these first two options you choose, the concept remains the same. Make the minimum payments for all your liabilities, and then select a debt to make additional payments towards to accelerate paying it off.


The purpose of these two approaches is to narrow the focus to one liability at a time. That’s because the faster you pay off personal debt, the quicker you no longer pay interest on it and eliminate the additional payment. Your goal is to pay the debt off quickly.


The biggest con to an avalanche payment is the patience required. You won’t get that quick satisfactory feeling that you will with snowballing payments.


An easy way to remember these two options is that snowballs are smaller than avalanches. Snowballing debts pay off the smallest balances first, and debt avalanches pay your most significant interest balances first.


3. Zero-Based Budgeting


Why not put every penny you own to use? The zero-based budget strategy is budgeting your monthly income into expense categories until nothing is left over.


Expense categories may include:

  • Food
  • Debt
  • Emergency
  • Investing
  • Bills
  • Vacation
  • College
  • Retirement
  • Fun Money


This strategy aims to use every penny of your income towards something to equal zero. I don’t mean go out and spend your money-raising debt; instead, put your money towards something beneficial.



  • Organization
  • Mitigates unnecessary spending
  • Puts every penny to work



  • Track every expense
  • Commitment
  • Plan a budget each month


For this strategy to work, you must keep track of your spending and budget a plan each month. Not everyone has the patience for this. You can diversify your spending and utilize every penny efficiently if you track your spending.


Planning out all your other expenses and putting the rest towards debt will help you become debt-free faster.


4. 80/20 Method


Is tracking your spending too much time and effort? An alternative financial strategy to a debt-free life is the 80/20 strategy (pay-yourself-first).


This strategy is simple, keep 20% of your money in your savings account and use the remaining 80% to cover everything else. Also, avoid taking on any new debt. It’s that simple.


This method is perfect for individuals and families who can deviate from spending money on items they want but don’t need.



  • Simple setup
  • Minimal planning required
  • Money in savings



  • Not the fastest method to become debt-free
  • Avoiding new debts
  • Minimal time spent on tracking expenses
  • Not much ROI sitting in a savings account


This method is excellent due to its simplicity. The minimal amount of effort required makes this an appealing manner to individuals and families that are busy. Whether it’s laziness, kids, or work taking up the most time, this strategy doesn’t require you to plan out every penny.


The biggest pitfall to this strategy is that you are not tracking your spending completely. Also, you are not utilizing your money as efficiently as possible. This strategy can work if you are confident that you can remain committed to this method and not take on additional debt.


5. 50/30/20 Method


The 50/30/20 method is another pay-yourself-first method that divides your income into three categories. 50% goes towards needs, 30% towards wants, and 20% towards savings. The difference between this one and the 80/20 method is the needs and wants are being tracked individually.


A benefit to this pay-yourself-first method is that you can still utilize your extra money for needs and wants without taking on new debt. If your budget fits buying that new pair of shoes, this method will allow you to make that purchase without needing to use a credit card and rack up debt for the money you don’t have.


For the 80/20 and 50/30/20 pay-yourself-first methods, The Balance has a great piece that goes over each of these in more detail. These strategies can work for you if you don’t have much time and can avoid taking on new debt.


6. 3-Bucket System


Are you wanting to plan for retirement while also focusing on becoming debt-free? The 3-bucket system financial strategy is a great one for you then.


As the name states, there are three buckets that your money is evenly split towards.

  • Expenses
  • Financial goals
  • Retirement


First, you never know when an unplanned expense may occur. Whether it’s a trip to the emergency room, a car breaking down, etc. Having a backup plan is critical for unforeseen circumstances. It will do wonders to cover these expenses out of pocket instead of taking on new debt with the expenses bucket.


The second bucket focuses on those financial goals you have outside of retirement. Some of those goals might include:

  • Specific vacation plan
  • Child’s college
  • Paying off all debt
  • Investing


Lastly, the retirement bucket. Even while you are working towards being debt-free, it never hurts to start planning for retirement. The more money you can put towards retirement, the better. Even if you only had a Roth IRA or contributed to a work 401k, you are utilizing your money towards something more valuable than unnecessary spending.


Here are the pros and cons of the 3-bucket system:



  • Long-term financial planning
  • Easy planning
  • Minimal spending tracking



  • Not the quickest method to become debt-free
  • Must minimize spending on wants you don’t need.


This strategy works great for individuals and families looking at life beyond the point of becoming debt-free. It also works if you have the patience and are not focused on how fast you can become debt-free. This can lead to a happy retirement.


7. Envelope Strategy


The final strategy in my 7 Best Financial Planning Strategies to Become Debt-Free article is the traditional cash-based envelope strategy. This is as hands-on as it gets with budgeting.


However, this strategy is the last on the list because it assumes you already have the money to budget. This may not be the most beneficial strategy for individuals or families living paycheck to paycheck.



  • Minimize spending
  • Avoids new debt



  • Strict expenses tracking
  • Monthly planning
  • Available cash
  • Discipline
  • Commitment


As discussed here, the envelope strategy is a slam dunk strategy if you put in the work. The other challenge to this strategy is no longer using cards or apps for payments (unless cash is not accepted). It’s challenging not to pull out your card or phone to make a purchase.


In the post-Covid era, many businesses no longer accept cash as payment. You may be forced to use a mobile app or credit card.


The final challenge with the envelope strategy is remaining committed to it. For example, grocery shopping can be tough to budget for. But if you go above your budget, you must put items back. It’s tough during high inflation times.


But if you can make this strategy work, you can efficiently manage your spending.


Nick Miller

Website Founder

Nick Miller

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