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How to set and prioritize debt elimination goals

Kelly Kowalski, Cliff Noreen, and Bronwyn Shinnick

Posted on December 29, 2023

Our executives and experts team up to write educational articles, covering a variety of financial topics such as life planning, college savings, and retirement.
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Tell you why setting a goal for debt elimination is a crucial step for your long-term financial plan.

Note that not all debt is bad, so you have to prioritize what kind of debt to eliminate.

Point out that proper financial planning is a balance between borrowing and saving.

Many Americans today are struggling to keep up with their debts. Credit cards, student loans, and personal loans are all contributing to what many feel is an overwhelming situation: living paycheck to paycheck with no relief in sight.

Indeed, total household debt in the U.S. stood at $17.96 trillion in 2023.

Setting a debt elimination goal: 20 years?

And debt can quickly spiral out of control, affecting your financial goals and putting all your plans in jeopardy. The key is to find the proper balance between debt, income, savings, and retirement as part of an overall financial strategy.

Often, you can start to find that balance by viewing the elimination of your debt as a long-term financial goal — one that is planned for, reviewed, and assessed regularly. (Related: Budget essentials)

Consider creating a debt management plan with a completion date of no more than 20 years (excluding a long-term mortgage). If you can eliminate your debt sooner, even better.1

Indeed, your debt elimination plan can fit into an overall 5-10-15-20 strategy for financial goal setting. This is where your 20-year goal on debt can fit with other goals, including:

Hammering out your debt plan is a fundamental part of the strategy.

Good debt vs. bad debt

Start developing your debt payment plan around “good debt” and “bad debt.” Good debt is that which can provide value over the long term, such as a student loan. Another way to define “good debt” is if it helps to generate income or increases in worth.

Bad debt, on the other hand, is debt incurred for things that will lose value over time – or not increase in value – like consumable goods charged to your credit cards. The “bad” in this type of debt is often compounded through higher interest rates and the inability to pay the credit card balance in full each month. (Related: Good debt versus bad debt)

Identify how much of your debt is good, and how much is bad. Then focus first on paying off the ‘bad’ debt – which is often associated with higher interest rates (and therefore more expensive).

Other ways to manage debt are:

  • Target one debt at a time, tackle it, and move on to the next.
  • Pay more than the minimum balance due whenever you can.
  • Take advantage of balance transfers onto lower rate credit cards.
  • Halt new credit card spending.

Light at the end of the tunnel

While 20 years may seem like a long time, that’s roughly how long, on average, it takes a college graduate to pay off his or her loans, according to research by educational services company Cengage.2

The goal is to have a clear path toward debt elimination, one that gives you the opportunity to balance your obligations and your goals. Start developing your debt pay-down plan with a 20-year horizon, then shorten the time frame as appropriate and as you are capable.

Bottom line: You want to have a light at the end of the debt tunnel —one that helps you become free of debt by the time you retire.

Discover more from MassMutual:

3 ways to jump-start your financial wellness plan

Managing debt in a balanced way

Achieving financial well-being through financial wellness

This article was originally published in December 2016. It has been updated.


1 MassMutual and its subsidiaries, its employees and representatives do not offer services or advice related to debt management.

2 Cengage, “2019 Cengage Student Opportunity Index,’ May 2019.

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