A smart runner entering their first marathon does not simply lace up their shoes and show up at the start line on the day of the race. They prepare for the marathon through daily training runs. Often, they will compete in smaller distance races – maybe a 10K or a half-marathon – to help their body become acclimated to the rigors of running long distances.

The same principle can be applied to eliminating debt. Getting rid of debt is often the no.1 goal when someone wants to manage their money with Christian principals. Dismantling the debt in baby steps is often a necessary task.

Like a runner preparing for a long distance race, debt needs to be attacked in stages. Nothing good is accomplished in paying off so much debt at once that it forces you to go without basic necessities like food and clothing. Cash flow should always be an important part of the debt reduction equation.

Not all debt is equal. When deciding how much debt you need to pay down, there are a few questions that you should always ask yourself.

How big is your debt?

Small debts are easier to eliminate without having a negative effect on your cash flow. In this situation, it makes sense to pay off the remaining balance right away. You’ll save money by avoiding interest and it will not be too difficult to replenish your cash flow. If your debt still requires more than a year to pay off, wiping out your savings to pay it all now can cause problems down the road – especially if an emergency arises.

How high are your interest rates?

The interest rates on your accounts can be a major determining factor in how quickly you pay down a loan balance.

If the interest rate is low enough that paying it off quicker results in negligible savings, it makes more sense to just make smaller loan payments that fit within your monthly budget. You might want to approach high interest accounts before lower ones, especially when it is a 0% interest rate.

If your interest rates average 13% or higher, you might greatly benefit from our Christian debt relief programs.

How much on-hand cash do you have available?

If you do have large cash reserves, paying off a loan rather than continuing to pay interest makes more sense. The rule of thumb for an average household is to have a savings account with enough cash to cover your monthly budget for 3 to 6 months. If you have surplus savings on top of that amount, reducing the debt right away may make the most sense.

Proverbs 27:12 counsels that “The prudent sees danger and hides himself, but the simple go on and suffer for it.” Planning ahead is the smartest thing you can do to balance debt reduction efforts with your cash flow needs. Anticipate major expenses – car repairs, household costs, medical bills – and set aside enough money in your monthly budget to cover these things.