Michele Cagan

All of these will help you reduce spending without sacrificing the things you want. The trick is to only buy what you had planned to buy ahead of time, even if you see a killer deal on something else.

RANK YOUR DEBT
Going from Worse to Bad

The best way to understand and tackle your debt is to rank it. There are two factors at play here: debts that are most important to your life and debts that are most harmful to your net worth. In most cases, the most important debt and the most harmful debt will not be the same, so these two lists usually look very different. Still, categorizing your debts in both these ways offers critical insights into the best ways to manage your overall debt.

RANKING YOUR DEBTS BY HARM TO NET WORTH
When it comes to debts, the ones that do the most harm to your net worth come with the highest interest rates. These are most often debts that aren’t attached to a valuable asset. Instead, they’re usually for everyday purchases, consumable items, and services—things that don’t add to the asset side of the equation. And because of their heavy interest burden, these debts are much harder to pay down.

When you’re working toward paying off your debt, these are the types of debt you want to get rid of first. Rank these debts by the highest interest rate to the lowest, regardless of the amount you owe. Once you’ve paid them off, the money you’ll save on future interest payments will now go toward growing your net worth.