Today we are going to show you how to use the 80/20 principle to crush debt fast! The 80/20 principle works for almost everything in life, including paying off debt. When you focus on the most important 20%, the other 80% falls into place. Let’s break it down step by step with real examples.

The 80/20 Rule and Debt

Think of losing weight. Exercise helps, but 80% of weight loss comes from eating habits. The same idea applies to debt. Paying it off isn’t just about making extra payments—it’s about lowering the cost of your debt first.

Example: The Weight Loss Struggle

Mike tried to lose 15 lbs over three months. He hit the gym, worked hard, and stayed consistent. But he only lost 4-5 lbs. The problem? His eating habits. He still ate chips and chocolate, making his progress slower and more frustrating.

Debt works the same way. If you don’t tackle high interest rates first, your payments feel like running uphill.

Step 1: Get Into Better Debt

Before making extra payments, make your debt easier to pay off. Lower your interest rates first.

Example: High-Interest Credit Cards

Imagine you have $10,000 in credit card debt at 24% interest. That means you’re paying $2,400 in interest every year. But what if you move that debt to a home equity line at 8%? Now you only pay $800 in interest, saving $1,600 a year. That’s money you can use to pay off debt even faster.

Step 2: Choose a Repayment Strategy

Once you lower your interest, pick a strategy that works for you. Snowball or avalanche—both help, but lower debt costs make them more effective.

Example: Credit Card Balances

• Card 1: $7,500 at 24%
• Card 2: $7,500 at 19%
• Card 3: $5,000 at 15%

Your total payment is $500/month. Using the snowball or avalanche method, adding $100/month will take 3 years and 8 months to pay off. Plus, you’ll pay $8,000 in interest on a $20,000 balance.

Step 3: Refinance or Transfer to Cheaper Debt

A lower rate makes everything easier. Options include home equity loans, 0% credit card transfers, and debt consolidation.

Example: Home Equity Loan vs. Credit Cards

If you roll your $20,000 credit card debt into a home equity loan at 8%, your monthly payment stays around $600. But now, you pay off the loan in 3 years instead of 3 years and 8 months, saving $5,000 in interest. That’s money back in your pocket!

Step 4: Use 0% Credit Card Transfers

Some credit cards offer 0% interest for 12-18 months. There’s a small fee (3-5%), but it’s still cheaper than paying 24% interest.

Example: 0% Balance Transfer

If you transfer $20,000 to a 0% credit card with a 4% fee, you pay only $1,500 in fees over two years instead of $8,000 in interest. That’s a huge savings!

Step 5: Mix and Match for the Best Results

You don’t have to choose just one method. Combining strategies can work even better.

Example: Hybrid Approach

• Move $20,000 to a home equity loan at 8%.
• Keep paying $650/month (same as before).
• Now, your monthly payment drops to $540, giving you an extra $110 per month for other expenses.
• Over three years, you save $4,000+ in interest while freeing up cash each month.

Make Debt Easier to Crush

Debt feels overwhelming because high-interest rates make it harder to escape. The 80/20 principle says to fix the big problem first—the cost of your debt. Then, paying it off becomes much easier.

Ready to take control? If you’re looking for a home equity loan or line of credit, check out SmartWithDebt.com for resources to help you find the best option.

Let’s crush debt—fast!

Watch our most recent video to find out more about how to: Use the 80/20 Principle to Crush Debt Fast!